VZCZCXYZ0002
RR RUEHWEB

DE RUEHAC #0446/01 1181554
ZNR UUUUU ZZH
R 281554Z APR 06
FM AMEMBASSY ASUNCION
TO RUEHC/SECSTATE WASHDC 4186
INFO RUCNMER/MERCOSUR COLLECTIVE
RUEHNR/AMEMBASSY NAIROBI 0217
RHEHNSC/WHITE HOUSE NSC WASHDC
RUMIAAA/USCINCSO MIAMI FL//SCJ5//
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC

UNCLAS ASUNCION 000446 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/BSC, INL, AND EB/IFD/OIA 
STATE PASS TO USAID FOR LAC/AA 
STATE PASS TO USTR FOR LYANG 
NSC FOR SUE CRONIN 
TREASURY FOR OSIA MAUREEN WAFER 
TREASURY FOR OTA WARFIELD, VAN KOCH, MILLAR 
COMMERCE FOR ITA SARAH COOK 
SOUTHCOM FOR POLAD 
NAIROBI FOR MICHAEL FITZPATRICK 
 
E.O. 12958: N/A 
TAGS: PGOV PREL PINR PHUM KCRM SNAR KWMN SMIG PA SP
SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, APRIL 
22-29, 2006 
 
REF: A. ASUNCION 0371 
     ¶B. ASUNCION 0348 
     ¶C. ASUNCION 0296 
     ¶D. ASUNCION 0200 
     ¶E. ASUNCION 0445 
 
¶1. (U) SUMMARY: 
--AMB Meets with Colorado Leadership 
--UTE Seizes Pirated Goods 
--Ten Generals Retired, Galeano Delayed 
--TIP Traffickers Arrested in CDE 
--OTA Meets with Minister Bergen 
--President Replaces Agriculture Minister 
 
---------------------------------- 
AMB Meets with Colorado Leadership 
---------------------------------- 
 
¶2. (U) On 4/24, Ambassador accompanied by A/DCM, PolCouns and 
EconCouns met key Colorado Party leaders including Party 
President Jos Alberto Alderete, Third Vice-President Senator 
Nelson Argaa, Executive Board Party Secretaries -- Roberto 
Gonzlez, Minister of Defense and Deputy Arstides Da Rosa, 
and Executive Board Members (from opposition to Duarte within 
Party):  Alfredo (Goli) Stroessner, Mario Abdo Bentez, and 
Doctor Rubn Melgarejo Lanzn.  (Note: Colorado Party Second 
Vice-President Juan Carlos Galaverna, implicated in numerous 
corrupt activities and considered by many observers as the 
most powerful individual within the Party, declined to attend 
the meeting. End Note.)  The Ambassador took the opportunity 
to: 
 
-- reenforce the importance we attach to movement on the AML 
law as part and parcel of the fight against corruption and 
the effort to attract investment; 
-- describe the different forms of assistance we are 
providing Paraguay - MCA, USAID, PC, military exercises, 
efforts to create more U.S. study opportunities for poor 
Paraguayans and more export opportunities for Paraguayan 
products to the U.S.; 
-- share concern about PPL activity and stress the need for 
Paraguay to act now; 
-- appeal for support for new agreement on military exercises 
including MEDRETES in 2007; 
-- support Anti-Drug Secretariat,s (SENAD) CN efforts 
stressing the need for Congress to provide funding for 50 new 
agents. 
 
¶3. (U) Alderete conveyed appreciation for U.S. assistance and 
affirmed his Party,s desire for continued collaboration from 
us in promoting economic development and tackling the threat 
posed by the PPL.  He criticized the opposition for 
obstructing its initiatives within Congress but insisted the 
Party leadership was capable of dealing with this problem on 
its own. 
 
------------------------ 
UTE Seizes Pirated Goods 
------------------------ 
 
¶4. (U) On 4/21, Prosecutor Luis Maniagurria and agents of the 
USG-supported Specialized Technical Unit (UTE) raided four 
labs in Ciudad del Este seizing 13,550 pirated CDs, 7,184 
pirated DVDs, 5,750 virgin CDs, and 32,550 cases for CDs, all 
with an estimated value of approximately 75,000 USD. The 
agents also seized 58 boxes containing pirated Nintendo and 
GameBoy software from two businesses, which are believed to 
be a front for Lebanese businessman Ali Zaioun. One of the 
businesses is registered under the name of Ali Hassan 
Hamaied, a naturalized Paraguayan citizen, and the other 
under Walli Abdulamir Atwi. 
 
------------------------------------- 
Ten Generals Retired, Galeano Delayed 
 
------------------------------------- 
 
¶5. (U) On 4/27, the Duarte administration released its 
revised military promotions list and announced that ten 
general officers would pass into retirement.  They include 
Army Commander Lieutenant General Alviso and Air Force 
Commander General Roberto Vera, but not Military Forces 
Commander General Jose Kanazawa or Navy Commander Rear 
Admiral Miguel Caballero, who was reassigned to the Logistics 
Command.  The announcement followed Duarte,s 4/23 attempt to 
placate the opposition by replacing the three military 
service commanders and the controversial commander of the 
Presidential Escort Regiment, Colonel Heriberto Galeano (ref. 
E).  Galeano,s name did not appear on the revised promotions 
list.  However, the opposition continues to call for 
Kanazawa,s removal as well as Galeano's retirement as a sine 
qua non for consideration of the rest of the list. 
 
¶6. (SBU) Comment: Once the ten general officers are retired, 
if their replacements are not promoted because of the 
impasse, the military brass will be left light at the top. 
There will be no active duty (three-star) lieutenant generals 
between the (four-star) Military Forces Commander and the 
remaining crop of (two-star) brigadier generals.  While 
Galeano,s absence from the revised promotion list is a 
welcome development, Duarte may attempt to promote him again 
next year, after the dust settles.  End Comment. 
 
------------------------------- 
TIP Traffickers Arrested in CDE 
------------------------------- 
 
¶7. (U) In two raids in Ciudad del Este, authorities 
apprehended and detained three human traffickers.  The 
detainees are Delsey Eva Garcete, Yeni Sosa Barrios and 
Noelia Aquino Sosa.  According to the prosecutor, Nelson 
Ruiz, the women had been advertising jobs in Spain to young 
women, including modeling jobs.  Before the trip to Spain, 
the women were told they had to sign a contract and pay fees, 
which would have committed them to pay back the contract 
debts.  Ramon Gonzalez, the boyfriend of one of the victims, 
brought the case to the attention of authorities. 
 
------------------------------ 
OTA Meets with Minister Bergen 
------------------------------ 
 
¶8. (U) On April 26, the visiting Deputy Director of 
Treasury,s Office of Technical Assistance, Michael Ruffner, 
who is also the head of OTA,s budget team, met with Finance 
Minister Ernst Bergen to discuss the budget team,s work and 
explore future opportunities.  The Finance Minister revived 
an idea raised in September 2005 for OTA to collaborate with 
the IDB (some funds are already available) to produce a major 
intervention - "an assault" on the budget process.  Bergen 
emphasized his focus on results rather than continued study. 
He also discussed the need to better coordinate with Congress 
so that budget deliberations would stay within the fiscal 
limits set by the Finance Ministry.  In the past few years, 
Congress has inflated the executive,s budget proposals 
beyond what can be financed, forcing the Ministry to use a 
special provision to hold spending in line with revenues. 
This has helped produced excellent fiscal results, but has 
resulted in disproportionate cuts to much needed social and 
capital investment. 
 
¶9. (U) Bergen asserted that the economic team has continued 
to work independently, free from pressure from the President. 
 Partially as a result, revenues have increased 27 percent 
year-on-year in the first three months of 2006, much more 
than expected by either the GOP or the IMF, and 22,000 new 
taxpayers have registered.  These developments are a direct 
result of the implementation of the fiscal adjustment law 
which is leading to increased formalization. 
 
 
--------------------------------------- 
President Replaces Agriculture Minister 
--------------------------------------- 
 
¶10. (U) On Saturday, April 22, Minister of Agriculture 
Gustavo Ruiz Diaz resigned following a meeting with President 
Duarte Frutos.  The outgoing minister noted "outside 
pressures" that contributed to his decision.  The new 
Minister of Agriculture, Carlos Abel Santacruz, is the former 
head of the GOP,s Agriculture Credit Bureau.  According to 
media reports, Santacruz is often portrayed as a technocrat, 
yet he functions more as a politician.  Claudia Russer, 
President of the Soy Producers Association told Econoff that 
the choice of Santacruz was "a disaster."  Russer continued, 
"The Ministry is being filled with politicians instead of 
technical experts, and this Minister is a step down from his 
predecessor."  Maris Llorens, President of the beef producers 
association, was more optimistic, telling Econoff that no 
change had been made in the Vice Minister of Livestock, and 
that her industry did not anticipate any changes in the 
Ministry,s key technical personnel. 
CASON