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).

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SUMMARY
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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.

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WE'RE HERE TO HELP
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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).

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REACHING OUT FOR US ASSISTANCE
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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.

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ELECTORAL POLITICS
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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).

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FORMING A GOVERNMENT
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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).

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COMMENTS
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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.

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CASON