PARAGUAY'S CIVIL AVIATION - SIGNS OF HOPE

UNCLAS ASUNCION 000408

SIPDIS

STATE FOR WHA/BSC MDASCHBACH, COMMERCE FOR DOC/ITA
LMARKOWITZ, FEDERAL AVIATION ADMINISTRATION FOR FAA/WHO
ASABELLA

E.O. 12958: N/A
TAGS: EAIR ECON EINV ETRD PA
SUBJECT: PARAGUAY'S CIVIL AVIATION - SIGNS OF HOPE

REF: ASUNCION 0671


1. (SBU) Ambassador Ayalde called on Paraguay's new National
Aviation Secretariat (DINAC) President Ceferino Farias June
18 to discuss DINAC's plans to improve aviation safety and
expand international carriers' service of Asuncion. Farias
explained that DINAC is implementing an action plan based on
recommendations from the ongoing audit of the International
Civil Aviation Organization (ICAO). Farias highlighted that
the most critical observation from ICAO was about
irregularities in the flight operational certifications
issued to local carriers Aero Regional Paraguay and Fly
Paraguay (reftel). Farias observed that he immediately
addressed ICAO's concerns by revoking the certifications.
DINAC is now working with the local carriers to guarantee
that they comply with security and safety standards.


2. (SBU) Farias asserted that DINAC will address the ICAO's
recommendations and be ready within six months for a full
International Aviation Safety Assessment (IASA) from the
Federal Aviation Agency (FAA). Farias emphasized that one of
his priorities is regaining Class 1 certification for
Asuncion's international airport Silvio Pettirossi, and asked
for Ambassador's support in moving this objective forward.
Farias said that DINAC is receiving technical assistance from
ICAO, and would be interested in FAA assistance to comply
with all the safety and security requirements. Farias noted
that DINAC's long-standing procurement of communications
equipment, including a radar (outstanding since 2005) will
soon come to fruition, as the Spanish company that won the
bid for equipment valued at close to USD 16 million has
agreed to adjust technical specifications to account for
technological changes. Farias said he is putting the most
competent people in key areas, trying to fix "political
assignments" of non-technical people to critical positions.
(NOTE: Farias comes from within DINAC: an insider with over
20 years in the institution, he is known for efficient and
pragmatic management. END NOTE.)


3. (SBU) Farias shared his concern regarding the Paraguayan
law that mandates a six percent commission to travel agents
on all airline tickets (the tourism bill). He said the bill
not only violates Paraguay's Open Sky agreements, but is one
of the key deterrents keeping international carriers from
operating in Paraguay. He explained that conditions are now
more favorable to modify the bill, and said DINAC will take
the lead in lobbing for a change. Farias remarked that he
personally briefed President Lugo about the bill's
implications for international carriers. Ambassador Ayalde
emphasized that bringing U.S. carriers to Paraguay is one of
our commercial priorities, and encouraged Farias' efforts in
promoting a modification of the tourism bill. (NOTE
American-Paraguayan Chamber of Commerce (AMCHAM) President
Victor Gonzalez confirmed to Econoff June 28 that DINAC is
engaging the private sector on modifying the tourism bill.
END NOTE). When asked about the prospect of concessions,
Farias was cautious, and said the DINAC is part of a
multi-agency commission led by the Ministry of Public Works
assessing the concessionary model. Farias explained that in
other countries concessionaires have been given control of
all airport operations, except for navigation, and DINAC is
in a good position to be a regulator.


4. (SBU) COMMENT: DINAC has been undermined by operational
inefficiencies due to a well-organized cadre of politically
connected and unqualified civil servants. Paraguay's
commercial air traffic is growing at an average of 12 percent
a year, but Asuncion remains the only capital in South
America without a direct flight to the U.S. Farias faces a
difficult task in improving airport operations and safety,
but his experience and knowledge could prove to be an useful
asset in moving forward. END COMMENT.

Please visit us at http://www.state.sgov.gov/p/wha/asuncion

AYALDE