AMBASSADOR'S FIRST MEETING WITH CANDIDATE LUGO

C O N F I D E N T I A L ASUNCION 000099 SIPDIS SIPDIS E.O. 12958: DECL: 02/15/2028 TAGS: PREL SNAR PGOV PA SUBJECT: AMBASSADOR'S FIRST MEETING WITH CANDIDATE LUGO Classified By: Ambassador James C. Cason; reasons 1.4 (b) and (d). -------------- SUMMARY -------------- ¶1. (C) In his first meeting with bishop-turned-presidential front-runner Fernando Lugo, Ambassador delivered a strong message that the United States wants good relations with whomever becomes Paraguay's next president, and we have numerous opportunities to work together toward common interests. Ambassador emphasized U.S. neutrality in the April 20 elections, and conveyed our interest in a free and fair process. Both Lugo and his running mate responded favorably to the idea of U.S. electoral observation assistance, and inquired about the MCC Threshold Program and USAID assistance. Franco sought the Ambassador's views on Paraguay's military, police and judiciary. Lugo asked, if elected, if the Embassy could send some of his ministers to the United States before the August inauguration. Lugo believes he will pick up the votes of disaffected Colorados, which may tip the balance in his favor. While Lugo did not discuss his own place in opinion polls, he asserted Oviedo is polling at only 12-15 percent. Lugo reported he met with Castiglioni to prepare the ground for a coalition government to include "the best people from other political parties." Lugo was vague about how he would govern with a fractured Congress. Though friendly, open, and engaged throughout the meeting, Lugo revealed little about his priorities or plans for governing. Lugo was grateful for the Ambassador's briefing and offers of assistance, and the meeting was a positive first step toward cementing a good relationship, but we still know little about Lugo, his ideology, or how he would govern. Our assessment continues to be that Lugo has strong leftist inclinations, that he will have an uphill battle in forming a government and holding together a diverse coalition, and that due to his inexperience, he is vulnerable to outside influences. END SUMMARY. ¶2. (C) Following eight months in which he did not meet with any presidential pre-candidate, the Ambassador issued separate, simultaneous invitations to all four (now official) presidential contenders for a private meeting (no press) at the residence. The Ambassador offered to meet with each candidate plus one at the residence in the order in which the invitation was accepted; Lugo was the first to accept. (NOTE: Lino Oviedo was the second, and will meet with the Ambassador February 14; Pedro Fadul will meet with the Ambassador February 26. Both will be reported septel. END NOTE). Pol/Econ Chief attended as notetaker. -------------- WE'RE HERE TO HELP -------------- ¶3. (C) In an hour and a half meeting with Patriotic Alliance for Change presidential candidate Fernando Lugo and his Liberal Party running mate, Federico Franco, February 12, Ambassador delivered a strong message that the United States wants good relations with Paraguay's next president and that we have numerous opportunities to work together toward common interests. The Ambassador provided an overview of U.S. assistance to Paraguay, including the MCC Threshold Program (recently extended for a second phase),USAID assistance (democracy, economic, health and environmental programs), military assistance, INL assistance (counternarcotics and intellectual property rights),Treasury Department assistance via a team of four advisors embedded in the Finance Ministry and Central Bank, public diplomacy programs (including English language scholarships),and humanitarian assistance. Ambassador emphasized the July 31 deadline for submission of the new government's Threshold II proposal, and the importance of assembling a team now to begin preparing it. If you're elected President, Ambassador told Lugo, we stand ready to respond to your requests for assistance, ranging from structuring your government to training your security detail. ¶4. (C) Ambassador Cason emphasized U.S. neutrality in Paraguay's April 20 national elections, and conveyed U.S. interest in a free and fair process. The Ambassador informed Lugo of U.S. plans to organize a team of international and domestic observers, who would arrive in Paraguay in February to meet with all political parties, and who would remain in country until the final election results are announced. Ambassador Cason also shared U.S. support for a parallel vote count to strengthen transparency and voter confidence in the democratic process. He made clear that the Embassy would not be involved in either initiative, other than to provide funding. ¶5. (C) Both Lugo and Franco responded favorably to the idea of U.S. electoral observation assistance, and asked questions about the Threshold Program and USAID assistance. Franco stressed the importance of a long-term observation mission to observe the vote-counting process following April 20; Lugo suggested that the local NGO Saka participate in domestic observation. Both expressed interest in the Threshold Program's anti-corruption focus, as well as USAID's work to find markets for the export of Paraguayan goods (Paraguay Vende). (COMMENT: While Franco was familiar with the Threshold Program (known locally as Plan Umbral),Lugo did not appear to be briefed on it or the majority of U.S. assistance. END COMMENT). -------------- REACHING OUT FOR US ASSISTANCE -------------- ¶6. (C) Franco sought the Ambassador's views and advice on Paraguay's military, police and judiciary. "You must have information on the current state of our military," Franco said. Lugo's only point of reference to the military was his own military service in the cavalry as a young man, and that at that time, only one of 16 tanks had a battery. The Ambassador said the military continues to be underfunded and noted widespread corruption within the police forces, as well as institutional weaknesses within the military. However, the Ambassador also highlighted the Armed Forces' generally good leadership and U.S. support for the DCEI, Paraguay's new Joint Rapid Response Force. Ambassador said the military needs funding and training, and that the next government should develop a national security strategy. Ambassador Cason also shared our concerns regarding judicial corruption, and signaled that there are few ministers on the Supreme Court with whom we work regularly, but emphasized U.S. support for select lower-level judges and prosecutors, and particularly those who work on economic crimes and corruption. ¶7. (C) Lugo inquired whether, if elected, the Embassy could send some of his ministers to the United States between April and August, when the new government would take office. Lugo said "we (the opposition) haven't had the chance to govern in 60 years, and we'll need training." The Ambassador responded that if Lugo is elected, we would entertain his requests and try to arrange for a familiarization trip/training in the United States for select ministers (NOTE: If Lugo is not elected, post will make sending him personally to the United States a priority. END NOTE). Lugo commented that he has visited the United States twice -- he visited Chicago when he was president of the Latin American Episcopal Council (CELAM),and visited Washington in June 2007. Lugo volunteered that he enjoyed his meeting with WHA Assistant Secretary Shannon while in Washington. He also told the SIPDIS Ambassador he is traveling to Uruguay February 12 to see how Uruguayan President Tabare Vasquez managed his transition to government. -------------- ELECTORAL POLITICS -------------- ¶8. (C) Lugo believes there will be a three-way split of votes that went to Colorado Luis Castiglioni in the Colorado primary between Lugo, Colorado candidate Blanca Ovelar, and abstentions. Franco said the Liberals traditionally lose national elections by 10 percent. If they gain votes from disgruntled Castiglioni voters, thus reducing the Colorado votes that would normally go to Blanca Ovelar, they think they can win by around 20 percent. Lugo mentioned his campaign advisor is Carlos Ljubetic, a former electoral court official who worked with the OAS electoral mission in Venezuela, who will be aided by two unidentified Costa Ricans. ¶9. (C) While Lugo did not discuss his own place in opinion polls, he asserted that Oviedo is polling around only 12 to 15 percent. He implied that Oviedo isn't as strong politically as he was ten years ago, and said that in the department of Paraguayi, Oviedo supporters are defecting to Lugo's camp. Lugo and Franco also referred to an "agreement" that surfaced between President Duarte and Oviedo in late 2007 that purported to set out a political deal between the two. Though both Lugo and Franco agreed that the "agreement" is likely a fake, they commented that it appears that both Oviedo and Duarte are implementing it. (NOTE: The written agreement provides that Duarte would guarantee Oviedo's freedom, reinstate his title and pension, and give him a quota of positions in Ovelar's cabinet in exchange for Oviedo's continued candidacy (to split the opposition vote), his support for Ovelar in the December 16 Colorado primary, and his party's support for Duarte's senate presidency candidacy). END NOTE). -------------- FORMING A GOVERNMENT -------------- ¶10. (C) Lugo reported that he recently met with Luis Castiglioni in order to prepare the ground for a coalition government to include "the best people from other political parties." Lugo indicated he plans to keep on board the government's best technocrats if elected. Ambassador specifically pitched retaining personnel working in Embassy-supported units within the government, including SENAD (the anti-narcotics secretariat),UTE (special intellectual property police),and economic crimes prosecutors. Lugo told the Ambassador he has not yet started putting together a cabinet, but mentioned that former Finance Minister Dionisio Borda would be his principal economic advisor (COMMENT: Borda was the architect of President Duarte's economic plans, and is a serious and experienced hand in economic matters. He resigned in 2006 frustrated that Duarte didn't support his aggressive plans to promote growth and include hidden revenues from Itaipu Dam in the national budget. He has publicly criticized the Colorado Party for being one and the same with the Paraguayan state. END COMMENT). Lugo and Franco agreed that they would not divvy up the government using a quota system for the different parties in Lugo's coalition. Instead, Franco emphasized that all of Lugo's ministers will answer to Lugo, not their own party. ¶11. (C) The Ambassador asked Lugo how difficult it will be to govern with what we believe will be a fractured Congress; Lugo responded with a non-sequitur about the importance of citizen participation before asserting that there will be consensus within Congress "on the big issues." Lugo discussed corruption within the judicial sector and the need for constitutional reform, and quietly listened to the Ambassador's concerns on counternarcotics. Lugo told the Ambassador that his program for governing is based on six points, agreed to by the parties with the Alliance; Lugo gave Pol/Econ Chief a glossy pamphlet at the end of the meeting which he said contained same. (NOTE: The pamphlet cites only five points: 1) state-promoted development, security and economic and social stability; 2) Sustainable economic growth with social equity and employment creation; 3) support and expansion of social rights; 4) modernization of the public sector and institutional development; and 5) international projects and sovereignty in energy. END NOTE). -------------- COMMENTS -------------- ¶12. (C) COMMENTS: Lugo's demeanor was friendly and open, and he remained engaged throughout the meeting, although he revealed little about his priorities or plans for governing. For the first time in our interactions with Lugo, he wore a suit instead of his typical casual pants with Birkenstock-type sandals. He brought no prejudices or ego to the meeting, but also failed to take full advantage of the opportunity to ask extensive questions about U.S. policies or assistance, leaving most of the questions to Franco. On two occasions, Lugo revealed his religious roots, complimenting the Ambassador on a cross displayed in the entry of the residence and calling Pol/Econ Chief "daughter" in Spanish, as a priest would. Lugo's relationship with Franco appeared to be cordial, but in response to the Ambassador's questions, Lugo admitted that he and Franco had not discussed major issues (like campaign strategy and the makeup of Lugo's cabinet). Their cooperation appears to be more tactical than strategic. ¶13. (C) COMMENTS (CONTINUED): Lugo responded with gratitude to the Ambassador's briefing and offers of assistance, and the meeting was a positive first step toward cementing a good relationship. But we still know little about Lugo, his ideology, or how he would govern. The Ambassador gave Lugo and Franco written materials on U.S. assistance and two books -- a Spanish version of Malcolm Gladwell's "The Tipping Point" and an English version of "Paraguay and the United States: Distant Allies" by Frank Mora and Jerry Cooney. Lugo set the stage for the meeting by stating publicly late February 10 that "Paraguay will set the pace, the seriousness of its international relations, with Lula, Bush, with whomever." Post's next meeting with Lugo (as yet unscheduled) will delve into more controversial topics, including alleged Venezuelan support for Lugo's campaign. In the meantime, our assessment continues to be that Lugo has strong leftist inclinations, that he will have an uphill battle in forming a government and holding together a diverse coalition, and that due to his inexperience, he is vulnerable to outside influences. END COMMENT. Please visit us at http://www.state.sgov.gov/p/wha/asuncion CASON