WHA DAS MCMULLEN VISITS PARAGUAY

C O N F I D E N T I A L ASUNCION 000042

SIPDIS

SIPDIS

E.O. 12958: DECL: 01/16/2028
TAGS: PREL PGOV PA
SUBJECT: WHA DAS MCMULLEN VISITS PARAGUAY


Classified By: DCM Michael J. Fitzpatrick; reasons 1.4 (b) and (d).


1. (C) SUMMARY: During his January 9-11, 2008 visit to
Asuncion, WHA DAS Chris McMullen co-led the USG delegation to
the Three-Plus-One meeting (septel),and also conducted
separate meetings with the Paraguayan Foreign Ministry,
Brazilian diplomatic representatives, and business sector
leaders. All meetings were characterized by a cooperative
and collegial tone. The Paraguayan Foreign Ministry
proposed the initiation of regular (twice a year) bilateral
law enforcement cooperation meetings following the
Three-Plus-One model. The Brazilians maintained that
fundamentally nothing has changed in the two decades since
the fall of Stroessner as regards Paraguayan political
mechanisms, personalities and dynamics. Business leaders
said their fortunes have improved in concert with Paraguay
macroeconomic gains in the last five years, and predicted
that political instability within the Colorado Party may lead
to a Lino Oviedo presidency but without wider social
upheavals. END SUMMARY.

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FOREIGN MINISTRY WANTS ONE-PLUS-ONE LIKE THREE-PLUS-ONE
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2. (C) In addition to Three-Plus-One interventions and
activities (septel) during his January 9-11 visit to
Asuncion, WHA Deputy Assistant Secretary (DAS) Chris McMullen
met with Paraguay's Vice Foreign Minister Antonio Rivas
Palacio and four other Foreign Ministry officials working on
bilateral issues. Restating Paraguay,s position enunciated
at the Three-Plus-One forum, Rivas maintained that there are
no indications of terrorist activities in the Tri-Border Area
(TBA),but expressed concern that "an image problem"
(presumably resulting from USG and press interest in the TBA)
has negatively affected tourism and business activity there.
To improve the situation, Rivas proposed the initiation of
regular (perhaps twice a year) bilateral law enforcement
cooperation meetings following the Three-Plus-One model or
its existing two-party consultation and cooperation
arrangement that Paraguay has with Colombia. DAS McMullen
and Ambassador Cason warmly received the suggestion. The
Ambassador suggested such institutionalized, regular meetings
could rely principally on USG law enforcement representatives
from the Embassy team.


3. (C) Rivas, DAS McMullen and the Ambassador all expressed
enthusiasm regarding Phase II of the Millennium Challenge
Corporation (MCC) Threshold Program in Paraguay. Ambassador
Cason told Rivas of plans to inform all of the Paraguayan
presidential candidates about the MCC Phase II process once
the parties, respective nominees are designated, an action
which will further demonstrate USG impartiality in the
upcoming elections and a willingness to work with whomever
the Paraguayans elect. The Paraguayans responded that they
see protecting intellectual property rights as critical for
their own citizens, and expressed interest in including
action on this transnational threat within their MCC phase II
proposal.


4. (C) DAS McMullen and Rivas mutually agreed upon the
importance of ongoing programmatic efforts such as Peace
Corps, exchange programs and increasing higher education
opportunities for Paraguayans in the U.S. Ambassador Cason
noted mission efforts to increase Paraguayan beef exports to
the United States, along with stevia, sesame oil and other
products for which Paraguay possesses the potential for
significant inroads into the U.S. market.


5. (C) When asked about regional concerns regarding political
instability in Bolivia, Rivas said Paraguay is watching
developments closely but feels comfortable with its existing
two plus two mechanism of regular consultations between the
Paraguayan Foreign Minister and Minister of Defense and their
Bolivian counterparts. Pointing to deep-seated regional and
indigenous divisions within Bolivia, however, Rivas admitted
the situation could spill over with serious repercussions for
Paraguay. McMullen and Ambassador Cason thanked Rivas for
GOP promises to forego visa requirements on the border in the
event Peace Corps Bolivia volunteers need to be evacuated
from Bolivia.


6. (C) Rivas said Paraguay supports Venezuela's entry into
Mercosur given its importance in energy production. Moving
to biofuels, Rivas noted that Brazil has comparative
advantages over Paraguay but that the GOP is investigating a
joint venture with Brazil for genetic engineering
improvements to enhance production levels.

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BRAZILIAN TALKING HEADS: "SAME AS IT EVER WAS"
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7. (C) DAS McMullen met with Brazilian Ambassador to Paraguay
Walter Pecly Moreira and DCM/Political Counselor Antonio da
Costa Silva for a discussion focused on Paraguayan politics.
Ambassador Pecly noted that he had worked as Political
Counselor at Brazil's Embassy in Asuncion from 1990-1993
(immediately after Stroessner's 1989 overthrow) in addition
to his now more than three additional years here as
Ambassador (since 2005). In sum, Pecly said, "nothing has
changed in 18 years." The manner of political
decision-making is the same, and many of the political
players active 18 years ago are the same. Pecly shared
anecdotes of Brazilian assistance and development programs
that had received major funding allocations yet languished
and died on the vine due to lack of Paraguayan institutional
follow-through over a three-year period. The meeting
featured an overall sense of common concerns and frustration
in regards to Paraguayan institutional realities.


8. (C) Pecly said Brazil, like the United States, has no
favorite candidate in Paraguay,s presidential elections.
Brazil does believe the Colorado Party will again triumph,
but could not predict whether the next president will be
Castiglioni, Blanca Ovelar or a reconstituted Lino Oviedo.
While Brazil has "no real objections" to a Fernando Lugo
presidency, Pecly said he was thoroughly unimpressed with
Lugo and his lack of preparedness and leadership ability.
Echoing a rising chorus among political observers here in
recent weeks, Pecly said Oviedo,s newly moderate tone and
emphasis on his Colorado Party roots may likely result in his
eventual coronation through the ballot box. At bottom, the
Brazilians expressed neither concern nor surprise at the
current political circus now underway in Paraguay, accustomed
to it all as "business as usual."

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BUSINESS SECTOR ANALYSTS ON ELECTIONS AND SCENARIOS
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9. (C) Meeting with four leading members of Paraguay,s
business sector at the Ambassador's residence, DAS McMullen
heard a similar analysis of the Paraguayan political
situation -- that political instability within the Colorado
Party may likely resolve itself with an Oviedo presidency but
without wider social upheavals. There is wide consensus
among the business sector that former vice-president Luis
Castiglioni did, in fact, win the Colorado party presidential
primary, but no one could forecast with any certainty how the
situation would resolve itself. There was no undue concern
that some other mechanism such as a backroom deal would
determine the eventual party nominee. All four business
leaders agreed that a Lugo presidency would be a disaster for
business interests, but discounted a Lugo victory as a likely
scenario.


10. (C) Business leaders said their fortunes have improved in
concert with Paraguay,s macroeconomic gains over the last
five years. Unpredictable peasant upheavals, demonstrations
and road closures common six years ago are virtually unheard
of now, they said. There were complaints all around about
the giant MERCOSUR partners, non-tariff-barriers to exports
from Paraguay. Despite emigration and migratory outflow from
Paraguay to Europe and elsewhere, these business leaders were
positively bullish regarding Paraguay,s future. Their net
worth is increasing and their businesses are booming despite
small setbacks and continuing frustrations with MERCOSUR and
internal institutional weaknesses, they said. Without saying
so directly, the business leaders, attitude suggested that,
akin to the attitude of the Brazilian diplomatic
representatives, more of the same political circus under the
Colorado Party would be perfectly acceptable to them.

WHA/DAS Chris McMullen clears cable.


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