VZCZCXYZ0003
RR RUEHWEB

DE RUEHAC #0201/01 0531654
ZNY CCCCC ZZH
R 221654Z FEB 06
FM AMEMBASSY ASUNCION
TO RUEHC/SECSTATE WASHDC 3814
INFO RUCNMER/MERCOSUR COLLECTIVE
RUEHLP/AMEMBASSY LA PAZ FEB NAIROBI 0136
RHEHNSC/WHITE HOUSE NSC WASHDC
RUMIAAA/USCINCSO MIAMI FL//SCJ3/SCJ33/SCJ34/SOCSO LNO//

C O N F I D E N T I A L ASUNCION 000201 
 
SIPDIS 
 
SIPDIS 
 
NAIROBI FOR MICHAEL FITZPATRICK 
SOUTHCOM FOR POLAD BARBARA MOORE 
NSC FOR SUE CRONIN 
 
E.O. 12958: DECL: 02/22/2016 
TAGS: PGOV PREL KDEM KCRM ENGR ECON PINR PA
SUBJECT: PARAGUAY: MINISTER OF PUBLIC WORKS ON ANR 
ELECTIONS, FUTURE PRIORITIES 
 
REF: A. A) ASUNCION 200 
     ¶B. B) ASUNCION 183 
 
Classified By: ECON Patrick R. O'Reilly for reasons 1.4(b),(d). 
 
------- 
SUMMARY 
------- 
 
¶1. (C)  In the Ambassador's introductory call on Minister of 
Public Works Jose Alderete, who was also President Duarte's 
campaign manager for the just concluded ANR internal 
elections, Alderete said the President's decisive win (with a 
margin of 31 points) was better than expected and provides 
Duarte with renewed political capital.  He said he expects 
progress soon on the GOP's reform agenda.  Alderete expressed 
appreciation for the U.S. government's support through the 
MCC Threshold Program, which he viewed as a recognition of 
the GOP's efforts to formalize the economy, fight IPR piracy 
and reduce contraband.  He characterized the program as an 
important political boost at a key time, and expressed 
confidence that the GOP would work to comply with its 
commitments.  The Ambassador raised the importance of the 
passage of the anti-money laundering law, and Alderete told 
the Ambassador that the law was important to the GOP, but 
acknowledged that gaining passage would require effort.  The 
Ambassador noted that he had discussed a strategy with the 
Vice President, and offered to collaborate on pushing for 
passage of the law.  Alderete identified "creating a market" 
as the GOP's number one priority, by which he meant 
formalizing the Paraguayan economy and making Paraguay a 
place attractive for investment.  On the work of the 
Ministry, Alderete singled out road construction and 
specifically completion of the "bioceanic" project linking 
Paraguay to the Pacific via Bolivia and Chile as his first 
priority.  The Ambassador and Alderete also discussed the 
ongoing exploration for hydrocarbons in western Paraguay. 
Alderete expressed optimism that commercial quantities would 
be found, and made a pitch for the Embassy to send would-be 
investors his way. 
End Summary. 
 
¶2. (U) On February 21, Ambassador Cason, accompanied by 
Econcouns, had his introductory call on Minister of Public 
Works Jose Alderete, who as a close confidant of President 
Duarte served as his campaign manager for the just concluded 
Colorado Party (ANR) internal elections (ref A).  Alderete 
was gracious, candid, and eager to establish a positive and 
productive relationship with Ambassador Cason. 
 
--------------------------------------------- -------- 
ANR INTERNAL ELECTIONS -- THE COLORADO HOUSE IN ORDER 
--------------------------------------------- -------- 
 
¶3. (C) Alderete was clearly pleased with President Duarte's 
strong showing in the ANR elections.  He said the campaign 
team expected to beat the ODD/Stroessner ticket by at least 
18 points, but thought the best they would do would be a 22 
point difference.  In fact, NDF received 31 percent more of 
the votes (63 percent for NDF versus 32 percent for ODD). 
Alderete sees this as an important political boost for the 
President.  He called it a vote of confidence in NDF and his 
policies, and said the result was even stronger for the high 
voter turnout (for an internal party election) of nearly 48 
percent of Colorados.  He said that now the Duarte government 
has both legitimacy of entry (i.e., a clean 2003 election) as 
well as legitimacy of governance (i.e., the election 
represented almost a referendum on NDF's administration, with 
a very favorable result).  He predicted that the President's 
hand would be strengthened and that the GOP would be able to 
make advances on its reform agenda. 
 
¶4. (C) Alderete characterized the President's decision to run 
for the Presidency of the ANR as a great, but necessary risk. 
 If NDF had not achieved a strong mandate, he would be 
seriously weakened.  However, he said that when three or four 
possible ANR candidates emerged, none of which could stand up 
to an ODD/Stroessner ticket, the President decided that he 
must run to obtain this mandate and unify the party. 
Alderete pointed out that while the elections were internal, 
the ANR is the country's most important party, and that the 
turmoil and unpredictability of the first 14 
post-dictatorship years were entirely the doing of the 
Colorado Party.  He felt that now, for the first time, the 
 
President had the governability within the Party necessary to 
govern effectively.  He named Stroessner nostalgia and 
Oviedismo as victims of this election that are now 
discredited. 
 
--------------------------------------------- -- 
MCC THRESHOLD PROGRAM IMPORTANT POLITICAL BOOST 
--------------------------------------------- -- 
 
¶5. (C) Alderete expressed appreciation for the U.S. 
government's support through the MCC Threshold Program, which 
he viewed as a recognition of the GOP's efforts to formalize 
the economy, fight IPR piracy and reduce contraband.  He 
characterized the program as an important political boost at 
a key time, and expressed confidence that the GOP would work 
to comply with its commitments.  The Ambassador emphasized 
the fact that the program and its goals were designed by the 
GOP, and that it was up to the GOP to live up to its own 
goals.  He told Alderete that it was an ambitious program 
viewed in Washington as reflective of a serious desire to 
attack the roots of corruption.  The topic of the GOP's 
seriousness led Alderete to criticize Transparency 
International, saying that while he had no problems with such 
organizations, he resented the apparent lack of appreciation 
for the progress the government has made so far, which he 
said included successes in the anti-piracy campaign and the 
passage of important legislation such as tax and pension 
reforms.  He acknowledged, though, that Paraguay had a long 
way to go, and emphasized on more than one occasion the 
difficulty of formalizing the economy. 
 
--------------------------------- 
ANTI-MONEY LAUNDERING LEGISLATION 
--------------------------------- 
 
¶6. (C) The Ambassador raised the importance of the passage of 
the anti-money laundering law, and asked Alderete if he 
thought the votes were there for passage.  Alderete told the 
Ambassador that the law was important to the GOP, but he 
acknowledged that gaining passage would require effort.  He 
said that the Senate would be the problem, while he 
considered the Chamber of Deputies to be much more in the 
control of the ANR.  He mentioned the Liberal Party (PLRA) 
and Beloved Fatherland (PQ) parties in particular, and said 
that Embassy intervention would be valuable.  The Ambassador 
noted that he had discussed a strategy with the Vice 
President, and offered to collaborate on pushing for passage 
of the law.  (Note: Colorado claims that the opposition is 
holding up the law are false and self-serving; we are urging 
the President to use his influence to get his Senators in 
line, the crucial step for passage.  End note.) 
 
--------------------------------------------- --------- 
GOP's FUTURE VISION -- IMPORTANCE OF CREATING A MARKET 
--------------------------------------------- --------- 
 
¶7. (C) Alderete identified "creating a market" as the GOP's 
number one priority, by which he meant formalizing the 
Paraguayan economy and making Paraguay a place attractive for 
investment.  He underscored that the task is difficult, that 
the GOP is fighting vested interests, and that large numbers 
of jobs arise from informality.  He cited the social unrest 
experienced by Gonzalo (Goni) Sanchez de Lozada, former 
President of Bolivia, as an example of the dangers of 
shifting from one economic model to another.  He asserted 
that the GOP must be able to provide an alternative for those 
displaced through the process of formalization. 
 
--------------------------------------------- ---------------- 
BIOCEANIC PROJECT PROGRESSING BUT GOOD NEIGHBORS HARD TO FIND 
--------------------------------------------- ---------------- 
 
¶8. (C) On the work of the Ministry, Alderete singled out road 
construction and specifically completion of the "bioceanic" 
project linking Paraguay to the Pacific via Bolivia and Chile 
as his first priority.  He praised the assistance the 
Ministry of Public Works and Communication (MOPC) has 
received from the InterAmerican Development Bank and the 
Texas Highway Institute associated with Texas A&M University. 
 He said work is well advanced on the project, and that he 
had met with former Bolivian President Mesa and former 
Chilean President Lagos in the negotiating phases.  The road 
project should make Paraguayan projects more competitive in 
Asian markets by reducing transportation costs.  According to 
 
Alderete, the Bolivian road construction team is about 130 
kilometers from the Paraguayan border.  He expects the 
project to be completed by the end of 2007.  The GOP 
considers the Chaco (Paraguay's sparsely inhabited western 
half) a priority, and Alderete said that about $180 million 
of the $300 million the Ministry will spend on public works 
will be spent in the Chaco. 
 
¶9. (C) In the context of the bioceanic discussion, Alderete 
became fairly animated as he expressed his disdain for the 
rhetoric of Paraguay's neighbors, specifically Brazil.  He 
said he had the good fortune of accompanying the President on 
his foreign trips and meetings with other heads of state. 
From the region, he said he has heard too much talking and 
seen too little action.  He mentioned the MCC and 
concessional financing received from Japan as examples of 
foreign countries trying to help Paraguay.  He contrasted 
this with Brazil, which offered Paraguay financing for road 
construction at 8 percent. 
 
------------------------------- 
SEEKING HYDROCARBONS INVESTMENT 
------------------------------- 
 
¶10. (C) The Ambassador asked about on-going petroleum 
exploration in the Chaco region.  Alderete expressed optimism 
that usable resources will be found, but cautioned that more 
testing needed to be done to assess the viability.  He noted 
that oil had been found in eastern Paraguay, but of a poor 
quality rendering it non-commercial.  Alderete said he'd 
rather cut out middlemen and deal directly with potential 
investors in the energy sector, offering to make himself 
available to any investors who might inquire with the 
Embassy.  In addition to the ongoing exploration (ref B), 
Alderete noted that 27 million hectares remain open for 
potential exploration. 
 
--------- 
BIO NOTES 
--------- 
 
¶11. (C) Alderete began the meeting by giving an overview of 
the early part of his 29-year political career, shedding 
light on the origins of his relationship with President 
Duarte.  He said his interest in politics began as a student, 
and he participated in school government.  He has always been 
a member of the ANR, and said he led a youth organization 
known as Ignacio Pani from 1985-1988 that worked against the 
Stroessner regime.  Alderete said he could have left, but 
decided it was better to work against the dictatorship from 
within the Colorado Party.  He fondly recalled the interest 
shown in him by then U.S. Ambassador Taylor, who attended the 
group's meetings from time to time.  He told the Ambassador 
that he had participated in an International Visitor Program 
to the U.S. during that time, something he appreciated very 
much. 
 
¶12. (C) Alderete said that President Duarte was a respected 
journalist for the still-existing newspaper Ultima Hora in 
those days, and that Duarte gave Alderete a voice, something 
he appreciated.  He claimed to have played a key role in 
convincing Duarte to leave journalism in 1990 and enter 
politics, a move Alderete admired for the difficulty of 
making such a risky career change.  Alderete was a Senator 
from 1993-1998.  He does not speak English. 
 
------- 
COMMENT 
------- 
 
¶13. (C) If Alderete is correct about the recent ANR elections 
strengthening President Duarte, the next six months or so 
will be an excellent opportunity for the Duarte 
Administration to again make headway with a reform process 
that has largely stalled after a very successful first year. 
Both the MCC Threshold Program and possibly a new IMF 
agreement will provide ample opportunity to demonstrate 
political will. 
CASON