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DE RUEHAC #0624/01 2491858
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O 051858Z SEP 08
FM AMEMBASSY ASUNCION
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7225
INFO RUCNMER/MERCOSUR COLLECTIVE PRIORITY
RHEHNCS/NSC WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHMFISS/HQ USSOUTHCOM MIAMI FL PRIORITY
RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY
RHMFISS/USSOCOM MACDILL AFB FL PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

C O N F I D E N T I A L ASUNCION 000624 
 
SIPDIS 
 
WHA/FO FOR A/S SHANNON, CMCMULLEN, WHA/BSC FOR MDRUCKER, 
BFRIEDMAN, CCROFT, INL FOR A/S JOHNSON, INL/LP ASMITH, 
DGRAHAM, NSC DFISK, USAID/CACIAA JCARDENAS 
 
E.O. 12958: DECL: 09/06/2028 
TAGS: PREL SNAR PGOV ECON PA
SUBJECT: LUGO FOCUSES ON COUNTERNARCOTICS, MICROENTERPRISE 
 
REF: ASUNCION 611 
 
Classified By: DCM Michael J. Fitzpatrick; reasons 1.4 (b) and (d). 
 
¶1. (C) SUMMARY: President Lugo expressed interest in closer 
counternarcotics cooperation with the United States and 
requested U.S. assistance with microenterprise development 
during a Friday, August 29 dinner with the Ambassador. Lugo 
made clear that he does not trust some of his closest 
advisors or cabinet ministers. During dinner, which took 
place before the weekend rumors emerged regarding coup 
planning, Lugo told Ambassador about a tape recording of 
former President Duarte and General Lino Oviedo betting that 
Lugo will last only three to eight months in office.  Lugo 
told the Ambassador his two goals are to strengthen democracy 
and make public institutions work.  In his now-characteristic 
warm style, the president told the Ambassador that he wants 
to continue meeting officially as well as unofficially ""with 
discretion.""  Lugo mentioned that he enjoys using his 
""pastoral"" personality as president to reach out to local 
government.  Lugo's dinner invitation is another sign of his 
interest in close relations with the United States. END 
SUMMARY. 
 
--------------------------------------------- --------- 
AN OPPORTUNITY FOR CLOSE COUNTERNARCOTICS COOPERATION 
--------------------------------------------- --------- 
 
¶2. (C) Lugo invited Ambassador Ayalde, USAID Director, and 
Pol/Econ Chief to dinner August 29 at his residence, where he 
expressed interest in closer counternarcotics cooperation 
with the United States.  Lugo was accompanied by new SENAD 
(Paraguay's counternarcotics agency) Director Cesar Aquino 
(septel bio report), who has been his close friend for 30 
years, as well as Omar Castorino, a wealthy architect who is 
a behind-the-scenes-player in Paraguayan politics. Aquino 
told the Ambassador of his plans to travel to Brazil and 
other Southern Cone countries the week of September 1-5 to 
coordinate on counternarcotics.  He mentioned the possibility 
that Brazil might work with Paraguay on alternative 
development programs near their shared border. Aquino 
repeated that he is interested in improving Paraguay's 
microtrafficking and demand reduction efforts; Lugo was 
supportive of Aquino's goals.  Castorino asked whether 
counternarcotics could be part of Paraguay's second MCC 
Threshold Program; USAID director reminded the group that it 
is mainly up to Paraguay to design its own proposal based on 
its priorities.  (NOTE: Counternarcotics is not identified in 
the GOP's near-final proposal to MCC for the Stage II 
Threshold Program.  END NOTE). 
 
----------------------------- 
MICROENTERPRISE DEVELOPMENT 
---------------------------- 
 
¶3. (C) Lugo asked the Ambassador for support for 
microenterprise development, particularly for small land 
owners.  Lugo appreciated Secretary Gutierrez' visit and 
confirmed his interest in strengthening commercial ties. 
Lugo mentioned increasing Paraguayan exports of sesame, 
organic sugar, tartar, cotton and stevia to the United 
States.  He also asked that U.S. assistance focus on 
Paraguay's three poorest departments -- San Pedro, Caazapa 
and Neembucu.  Lugo noted that (his adopted home department 
of) San Pedro has been isolated throughout Paraguay's history 
and that past administrations had politically persecuted many 
of its inhabitants, including his uncle (an early Colorado 
opponent of Stroessner).  He also expressed interest in 
continued USAID health programs. 
 
---------------------- 
PARAGUAYAN POLITICS 
---------------------- 
 
¶4. (C)  Lugo made clear to the Ambassador that he does not 
trust some of his closest advisors or cabinet ministers, 
telling her that Aquino and Castorino are ""of confidence."" 
Lugo lamented that he does not have more women in his 
cabinet, and called his Minister of Health, Esperanza 
Martinez, his only hope (playing on the fact that her name in 
Spanish means hope).  Castorino and Aquino stressed the 
importance of briefing the president directly on important 
issues such as the MCC Threshold Program so he can maintain 
control.  With respect to his relations with Vice President 
Franco, Lugo said Franco ""wanted more"" than the vice 
president's traditional role as a liaison to Congress. (NOTE: 
Ambassador paid a courtesy call on Franco September 3, during 
which Franco alluded to ""distance"" between him and Lugo. 
Franco purports to want to keep Paraguay on a moderate, 
centrist course, but left Ambassador with the distinct 
impression that he is out of the political loop. END NOTE). 
 
¶5. (C)  During dinner, which took place before the rumors 
emerged regarding a planned coup (reftel), Lugo told 
Ambassador about a tape recording of former President Duarte 
and General Lino Oviedo betting that Lugo will last only 
three to eight months in office.  He also worried about the 
Congressional deadlock over President Duarte's attempts to 
assume his senate seat. (NOTE: Coup rumors, which were 
over-exaggerated in the first place, have since blown over. 
The current Senate crisis ended September 4, when UNACE 
changed its position to vote with Lugo's Alliance and others 
to make President Duarte an honorary senator (with voice but 
no vote) as mandated by the constitution.  END NOTE).  Lugo 
also promised a ""big announcement"" this week, related to 
evidence he will produce about attempted bribes and 
""briefcases"" full of cash. (NOTE: News broke early September 
5 about the Lugo administration bringing charges against 
managers (mostly Colorados) scattered throughout Paraguay's 
port authority accepting large bribes. END NOTE). 
 
-------------- 
LUGO'S GOALS 
-------------- 
 
¶6. (C)  Lugo, clearly a big picture thinker, told the 
Ambassador that when he leaves office, he hopes his legacy 
will be that he strengthened democracy and made public 
institutions work.  ""I don't want to get rich,"" he said. 
Instead, he said he plans to retire in five years to reflect 
and perhaps write a book on his administration.  Lugo 
revealed a dim view of the courts, the public ministry, and 
prosecutors given low conviction rates.  ""If (the 
prosecutors) were any good,"" he said, ""more people would be 
in jail.""   Lugo also said it was a ""shame"" that public 
perceptions of the judiciary are low, referring to a recent 
event at which Supreme Court President Nunez was prevented 
from speaking because the crowd booed him. 
 
------------------------------------ 
LUGO REACHING OUT, TO US AND OTHERS 
------------------------------------ 
 
¶7. (C) In his now-characteristic warm style, the president 
told the Ambassador that he wants to continue meeting 
officially, as well as unofficially ""with discretion.""  Lugo 
also offered the Ambassador some insight into the Embassy's 
history in Paraguayan politics.  He told her about past 
rumors that the Embassy was behind Marzo Paraguayo, the March 
1999 demonstration in which eight students were killed, and 
that there are similar rumors today that the Embassy ""put 
Lugo in office.""  Lugo said matter-of-factly that it had been 
a frequent historic practice for the Embassy to meddle in 
internal Paraguayan affairs.  Ambassador welcomed Lugo's 
insight and assured him that different styles are appropriate 
for different times, but that her intention was to respect 
Paraguay's sovereignty and esnure Lugo's success. 
 
¶8. (C) Lugo mentioned that he enjoys using his ""pastoral"" 
personality as president to reach out to local government. 
He mentioned his first trips outside the capital, where he 
was the first president to meet with a group of mayors;  Lugo 
said he plans to meet Paraguay's governors once a month. Lugo 
mentioned that he had given out checks to some Roofless 
Movement leaders, but ""with accountability-- not like 
before."" 
 
----------------------- 
MORE PERSONAL INSIGHTS 
----------------------- 
 
¶9. (C) Lugo spoke fondly of his time in Ecuador, where his 
parish (four nuns and two priests) cultivated cocoa, 
harvesting the crop several times a year in order to cover 
the parish's expenses.  Lugo said he has started sleeping at 
the presidential residence, Mburuvicha Roga, as he likes to 
walk in its gardens at 5 a.m. daily with former marathon 
runner and ""shadow"" Marcial Congo (NOTE: Sensitive reporting 
indicates that Congo has close ties to Chavez.  END NOTE). 
Lugo also told the Ambassador that he used to play the guitar 
and enjoys music (even inviting a folksy guitarist to play 
during dinner).  He again mentioned his mission trip to Texas 
and Chicago, which was his only trip to the U.S. prior to his 
summer 2007 visit to Washington, D.C. and New York.  At 
dinner, Lugo allowed his waiters to fuss over him, eating two 
desserts at one waiter's insistence because he hadn't eaten 
all day. Lugo also told the Ambassador he had decided to 
donate his salary to the indigenous, as while he is living in 
the presidential residence, ""what could he possibly need?"" 
 
 
--------- 
COMMENT 
-------- 
 
¶10. (C) Lugo's dinner invitation is another sign of his 
interest in close relations with the United States.  Lugo 
clearly appreciates offers of U.S. support and assistance, as 
well as the Embassy's efforts to steer clear of internal 
politics.  The Ambassador again explained the importance of 
an October 22 meeting with President Bush, and Lugo promised 
to respond formally within two weeks.  (NOTE: Late September 
4, Lugo's chief of staff called Pol/Econ Chief to formally 
accept the invitation. END NOTE).  The Washington visit will 
be an important opportunity to shore up Lugo's government 
early on.  Given the challenges that Lugo has faced in his 
first few weeks in office, it appears he's going to need our 
support. END COMMENT. 
 
Please visit us at     http://www.state.sgov.gov/p/wha/asuncion 
 
AYALDE