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R 181857Z AUG 06
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TO RUEHC/SECSTATE WASHDC 4679
INFO RUCNMER/MERCOSUR COLLECTIVE
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RUMIAAA/USCINCSO MIAMI FL//SCJ5//
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UNCLAS ASUNCION 000852 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR WHA/BSC AND EB/IFD/OIA 
STATE PASS TO USAID FOR LAC/AA 
STATE PASS TO USTR FOR LYANG 
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TREASURY FOR OSIA MAUREEN WAFER 
TREASURY FOR OTA WARFIELD, VAN KOCH, MILLAR 
COMMERCE FOR ITA SARAH COOK 
SOUTHCOM FOR POLAD 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON EINV KMCA PTER KCRM PY
SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, AUGUST 12 
- 18 
 
¶1. (U) Summary 
 
-- Senate Passes TFCA 
-- SENAD Seizes Illegal Weapons 
-- President Signs Decree to Create New Customs Unit 
-- Supreme Court Rejects Case Against American Airlines 
-- Stroessner Goes Out on Top 
 
---------------------- 
Senate Passes TFCA 
------------------ 
 
¶2.  (U)  On 8/17, the Paraguayan Senate adopted unanimously 
the agreement Paraguay had signed with the U.S. under the 
Tropical Forest Conservation Act that provides Paraguay with 
$7.4 million, zeroing out its remaining bilateral debt to the 
U.S. in exchange for the GOP's commitment to conserve and 
restore tropical forests in the southeastern region of the 
country.   This bill will now move on to the House of 
Deputies where we anticipate no substantive obstacle to its 
adoption there as well. 
 
---------------------------- 
SENAD Seizes Illegal Weapons 
---------------------------- 
 
¶3.  (U)  In a series of raids from 8/11-8/13, Paraguay's 
Anti-Drug Secretariat (SENAD) and the Military's Weapons 
Directorate (DIMIBEL) seized more than 300 unregistered 
firearms including a belt fed heavy machine gun, assault 
rifles, machine pistols, silencers, and numerous handguns as 
well as approximately 60,000 rounds of ammunition.  According 
to the information received by SENAD and Paraguay's National 
Police (PNP), Alberto Dornelles Rodriguez, a weapons retailer 
in Pedro Juan Cabellero, sought to transport the weapons and 
ammunition illegally to Brazil overland by truck.  It is 
believed that these weapons were destined for the Primero 
Comando de Capital in Sao Paulo.   Dornelles remains at 
large.  This seizure only reinforces the suspicion that 
Paraguay serves a transit point for significant arms 
trafficking in the region. 
 
--------------------------------------------- ---- 
President Signs Decree to Create New Customs Unit 
--------------------------------------------- ---- 
 
¶4.  (U)  On 8/16, President Duarte approved a decree to 
create a Coordination Unit (COGRINAT) charged with 
responsibility for intercepting contraband on Paraguay's 
borders. Creation of this unit represents a major step 
towards meeting necessary pre-conditions of the government's 
MCC Threshold Country Program designed to promote 
formalization of the economy.  This Coordination Unit will 
answer directly to the Director of Customs. 
 
--------------------------------------------- ------- 
Supreme Court Rejects Case Against American Airlines 
--------------------------------------------- ------- 
 
¶5.  (U)  Shortly after American Airlines announced in 
December 2005 that it would cease operations in Paraguay, a 
former part-time employee of American filed suit against the 
company, claiming that she was owed a significantly higher 
severance package than American had paid when she lost her 
job.  Based on her tenure with the company and part-time 
salary of about $250 per month, Paraguay's labor code 
required a severance payment of about $1,500.  However, her 
lawyer argued that the discounted flight perks enjoyed by the 
employee should be counted as salary.  They estimated two 
first-class round trip tickets to Miami per month, or about 
$5,000 per month.  A judge ruled in favor of the plaintiff 
and ordered American to pay approximately $100,000 in 
severance.  Six other cases, with claims against American 
Airlines totaling approximately $3.2 million, were filed soon 
after the first case.  Those cases have not yet been heard by 
the judge. 
 
¶6.  (SBU)  The Ambassador and other officers raised the case 
with President Duarte, the Vice-President, and others.  An 
appeals court rejected the judge's ruling in April, and the 
Supreme Court ruled last week in favor of American, upholding 
the Appeals Court decision.  According to one of the Supreme 
Court justices, the Court's decision should render American 
Airlines safe from the other six pending cases.  The business 
community here lobbied on behalf of American as well, since a 
ruling favorable to the employee would put employee perks in 
danger for workers throughout the economy. 
 
-------------------------- 
Stroessner Goes Out On Top 
-------------------------- 
 
¶7.  (U)  On 8/16, Alfredo Stroessner, Paraguay's dictator for 
over 34 years, died of pneumonia at the age of 93 in a 
hospital in Brazilia.  His family has decided for the time 
being to bury Stroessner in Brazil where he has lived in 
exile since being overthrown in 1989.  Opponents and 
supporters have already revisited controversy over his legacy 
with a debate over whether a future return of his body should 
be afforded state honors.  According to judicial authorities, 
there is no legal impediment to the return of his body. 
President Duarte has announced Paraguay would not honor his 
return with any special honors. (Note. Stroessner was laid to 
rest in Brazilia on 8/17.  End Note.)  On 8/17, opposition 
deputies walked out of Congress in protest when Colorado 
Party deputies moved to offer a moment of silence as a 
tribute to Stroessner.  Meanwhile, as of 8/16, the day 
Stroessner died, 58 percent of the over 1,000 participants in 
an on-line poll conducted by Paraguay's most widely read 
newspaper had indicated they would support Stroessner if he 
were a candidate for national office.  While this poll is by 
no means scientific, it suggests noteworthy nostalgia for 
Paraguay's undemocratic past under Stroessner described by 
many as a more "secure and prosperous" period in Paraguay's 
history and disaffection with Paraguay's current crop of 
politicians. 
 
CASON