LUGO AND HAMED FRIENDLY WITH A/S SHANNON BUT LIGHT

C O N F I D E N T I A L ASUNCION 000606

SIPDIS

WHO/FO CKELLY, CMCMULLEN, WHA/BSC MDRUCKER, CCROFT, MCC FOR
MHARRINGTON

E.O. 12958: DECL: 08/29/2028
TAGS: PGOV ECON PREL SNAR PA
SUBJECT: LUGO AND HAMED FRIENDLY WITH A/S SHANNON BUT LIGHT
ON SUBSTANCE

Classified By: Acting DCM John Beed; reasons 1.4 (b) and (d).


1. (C) SUMMARY: In his August 28 meeting with President Lugo,
Assistant Secretary Shannon reinforced Secretary Gutierrez'
message to Lugo about U.S. interests in strengthening
commercial ties, and also expressed support for Lugo's social
agenda. Above all else, Lugo said he wants to strengthen
Paraguay's democracy. He described the Millennium Challenge
Corporation Threshold Program as "the main course" of U.S.
assistance to Paraguay and promised to continue to improve
Paraguayan institutions. A/S Shannon assured Lugo that the
United States stands ready to explore a wide range of
assistance. Lugo admitted that Chavez is a "controversial
figure," but said that Venezuela is important for Paraguay,
and that while Chavez won't always be around, Venezuela will.
A/S Shannon's visit, along with the U.S. delegation to Lugo's
inauguration and the Ambassador's multiple encounters with
Lugo, have underscored U.S. interest in strengthening our
long-standing close relations with Paraguay, and in
supporting Lugo's administration. END SUMMARY.

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LUGO TELLS SHANNON HE FEELS CLOSE TO THE US
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2. (C) In his August 28 meeting with President Lugo, WHA
Assistant Secretary Tom Shannon reinforced Secretary
Gutierrez' August 14 message to Lugo about U.S. interests in
strengthening commercial ties, and also expressed support for
Lugo's social agenda. Lugo was joined by Vice President
Federico Franco, Foreign Minister Hamed, and Paraguayan
Ambassador to the United States James Spalding. A grateful
Lugo said U.S.-Paraguayan relations shouldn't be disrupted by
a change in Paraguay's government and that presidents are
only "administrators." Lugo alluded to Paraguay's long
history of friendship with the United States, referring to
childhood memories of strong bilateral relations.


3. (C) Above all else, Lugo said he wants to strengthen
Paraguay's democracy. He said Paraguayans want to be
protagonists --to participate in their country's transition.
Lugo said Paraguay needs a "mature tolerance," and that he
and his Patriotic Alliance for Change value diversity. Lugo
lamented the current Congressional crisis, which he said is
"part legal, part political," and "not helpful" for his
country. Lugo affirmed his desire to make Paraguayan
institutions work. He said he wants to offer security -- not
just to Paraguayans -- but to foreigners who want to invest
here. Lugo said "there is much to learn from the United
States," and that he is open to doing so. "But it's our
process," he said, "which we hope all will respect, too."


4. (C) Lugo described the Millennium Challenge Corporation
Threshold Program as "the main course" of U.S. assistance to
Paraguay and promised to continue to improve Paraguayan
institutions. Lugo acknowledged his country's institutional
weaknesses and said he is very hopeful that, as the song
goes, "all is not lost." Lugo regretted Paraguay's
international reputation, and remarked that the Duarte
administration made good progress countering corruption under
Phase I of the Threshold Program. He also hoped for close
collaboration with the United States on counternarcotics to
stem the growing transit of illicit drugs through Paraguay,
including in his home department of San Pedro. He mentioned
the lack of state control and the need for radar to track
incoming/outgoing air traffic along Paraguay's borders, and
expressed hope that Congress would pass a pending bill to
address this "failure." "With U.S. cooperation," Lugo said,
"I know we can improve."


5. (C) Assistant Secretary Shannon assured Lugo that the
United States stands ready to offer a wide range of
assistance, including on counternarcotics and trade. Shannon
hoped that Lugo will visit Washington in October, where he
promised Lugo would find great interest in Paraguay and in
Lugo personally. Shannon conveyed U.S. good will -- not only
from the executive branch, but also from Congress and
international institutions. Lugo responded that he wants to
go to Washington, and that he would be finalizing his travel
schedule in coming weeks.


6. (C) Lugo admitted that Chavez is a "controversial figure,"
but said that Venezuela is important for Paraguay, and that
while Chavez won't always be around, Venezuela will. Lugo
assured Shannon that he doesn't want to lessen Paraguay's
relations with the United States. "To the contrary," he said
"I want to strengthen them. I feel very close to the United
States."

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TWO MEETINGS WITH HAMED IN TWO DAYS
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7. (C) Foreign Minister Hamed received A/S Shannon separately
August 28 in a friendly meeting that included his Vice
Foreign Minister, Jorge Lara Castro, and Ambassador Spalding.
Hamed opened the meeting by confiding to A/S Shannon that he
would prefer a more relaxed life, but that "things are always
difficult at the beginning." Hamed underscored Paraguay's
desire for close relations during this historic transition
with all of its friends, including the Untied States, which
Hamed called a "long-time friend of Paraguay." A/S Shannon
told Hamed the United States is optimistic about what we can
accomplish together, and conveyed our desire to play a
positive role in Paraguay's transition.


8. (C) A/S Shannon inquired about Hamed's priorities and
messages that Shannon could carry to Washington; Hamed
responded with a blank stare before he turned to Ambassador
Spalding. Spalding mentioned improved access to U.S.
markets, increased U.S. investment, cooperation on
counternarcotics, and the upcoming Joint Council on Trade and
Investment, which the United States is hosting this year. VM
Lara suggested that the U.S. increase commercial exchanges
with Paraguay, and expand cooperation on biofuels (citing
Paraguay as the largest producer in region after Brazil).
Hamed mentioned that he is starting to focus on Brazil and
Argentina (noting good will from Argentina on Yacyreta),and
that then he would work his way through the rest of
Paraguay's neighbors. "We're on a good path," he said,
solidifying regional relations.


9. (C) Hamed inquired about the best mechanism to discuss
bilateral issues; A/S Shannon said we would be happy to
schedule a bilateral meeting, and that the MFA could begin
work with the Embassy. Shannon also urged the Foreign
Minister to formally accept President Bush's invitation for a
meeting with President Lugo in Washington. Shannon
emphasized U.S. interest in consolidating democratic
institutions, investing in people, and countering
non-traditional threats. Shannon repeated that the United
States is not concerned with ideology, but our partners'
commitment to democracy. Shannon referred to Secretary of
Commerce Gutierrez' visit and confirmed U.S. interest in
expanding Paraguay's access to U.S. markets. Hamed
acknowledged that increased access would be a "big door" to
open for Paraguay, and expressed his gratitude for what the
United States can do to help Paraguay in that regard.


10. (C) Prior to the Hamed-Shannon meeting, the Ambassador
paid her initial courtesy call on the Foreign Minister August

26. In that meeting, Hamed did not articulate any priorities
for the bilateral agenda, and offered few for the MFA in
general, saying that he is still "putting his house in
order." Hamed told the Ambassador he wants to expand
Paraguay's diplomatic presence by opening embassies in Africa
and (including Angola) and Asia and by strengthening ties
with the Middle East. Hamed said Latin America and the Middle
East know little about each other, and cited an upcoming
conference in Dubai which will bring the two regions
together. Hamed expressed interest in the Bush-Lugo meeting
in Washington, but mentioned that Lugo may attend a regional
meeting in Chile and the Ibero-American summit in El Salvador
around the same time. (Resident ambassadors from Brazil,
Colombia and Mexico also told A/S Shannon late August 28 that
they are working on Lugo meetings with their respective
presidents in the same time frame, and already have firm
dates). Hamed did not yet know who would travel to UNGA in
New York. He told the Ambassador that he hopes to advance
Lugo's agenda "with your help."


11. (C) COMMENT: Assistant Secretary Shannon's visit, along
with the U.S. delegation to Lugo's inauguration and the
Ambassador's multiple encounters with Lugo in her first two
weeks in country, have underscored U.S. interest in
strengthening our long-standing close relations with
Paraguay, and in supporting Lugo's administration. While our
interactions have not delved deep into foreign or domestic
policy, they have offered Lugo an overview of how we can help
him with some of his key challenges, including on the
corruption front (Threshold program),the health sector
(USAID and DOD assistance),and poverty reduction (USAID
assistance and commercial ties). END COMMENT.


12. (U) Assistant Secretary Shannon cleared this message.

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