VZCZCXYZ0004
PP RUEHWEB

DE RUEHAC #0625/01 2131241
ZNR UUUUU ZZH
P 011241Z AUG 07 ZDK
FM AMEMBASSY ASUNCION
TO RUEHC/SECSTATE WASHDC PRIORITY 5999
INFO RUCNMER/MERCOSUR COLLECTIVE

UNCLAS ASUNCION 000625 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ECIN ELIN PA
SUBJECT: PARAGUAY DRIVES TRANS-CHACO ROAD INTEGRATION PLAN 
 
 
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Summary 
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¶1. (U) Paraguay completed a major road network in the Chaco region 
in June that will enhance access to Bolivia, Chile, and Asian 
markets via Chilean ports.  The newly paved Trans-Chaco Highway and 
new secondary roads are part of a multi-national transportation 
integration project that will increase local access and spur 
regional economic development.  On the other hand, international 
organizations expressed concerns that the enhanced road system will 
encourage illegal trafficking and that the GOP may lack the capacity 
to maintain or police it.  On balance, the improved road network 
should benefit the isolated residents of the Chaco by stimulating 
the local economy and improving access to goods and services. End 
Summary. 
 
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Atlanta Pacific Corredor and 
Regional Infrastructure Integration 
------------------------------------- 
 
¶2. (U) Paraguay, Chile, Bolivia, Argentina, and Brazil founded the 
ZICOSUR Project in April 1997 to promote regional physical 
infrastructure integration and development.  The ongoing project 
focuses on railway, waterway, and road network integration.  ZICOSUR 
has concentrated most of its efforts on "Corredor Bioceanico," a 
comprehensive plan to build or improve regional road networks and 
link the Atlantic Coast in Brazil with the Pacific Coast in Chile. 
Once completed, the multi-national road network would stretch 
north-south from Corrientes, Argentina to Salta, Bolivia and 
east-west from Sao Paulo, Brazil to Antofagasta, Chile.  Paraguay 
lies at the heart of this network and would benefit economically if 
ZICOSUR achieves its stated objectives. 
 
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Chaco Road Network Integration 
------------------------------ 
 
¶3.  (U) Paraguay, in conjunction with the Corredor Bioceanico, 
initiated efforts in 1998 to improve roads in the Chaco region.  GOP 
Roads Director Juan Antonio Ferreira and Senior Project Engineer 
Hugo Miranda told Emboff that the enhanced Chaco road network adds 
149 miles of paved roads, 136 miles of gravel roads, and 186 miles 
of dirt roads to the Chaco's 2,000 mile road network.  The GOP paved 
the Trans-Chaco Highway (Route 9) from La Patria to the Bolivian 
border and re-routed it from the outpost of General Eugenio A. Garay 
in the northern Chaco to the western Chaco town of Infante Rivarola. 
 In June 2007, Paraguay also opened a new, all-weather compacted 
gravel highway between Filadelphia and Pozo Hondo near the Argentine 
border.  The new Chaco road network remains underutilized as it 
awaits completion of an 80-mile stretch in Bolivia that will link 
the Trans-Chaco Highway to Santa Cruz, Bolivia.  In spite of access 
to raw materials and labor, the Bolivians may need at least two 
years to complete their portion of the highway. 
 
¶4. (U) Paraguay used funding provided by Andean Development 
Corporation and the Inter-American Development Bank (IDB) to improve 
its road network.  In 2001, the IDB approved a USD 100 million loan 
to support Paraguay's road integration efforts.  Of that, USD 42 
million has been disbursed to the GOP for road construction and will 
allocate the remainder, if needed, for road maintenance over a 
three-year period.  IDB Paraguayan Roads Director Fernando Orduz 
told Emboff that private contractors offered lower bids than 
expected, enabling the Paraguayan portion of the project to come in 
below budget.  This accomplishment contrasts sharply with Paraguay's 
tendency to run behind schedule and over budget. 
 
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Road Integration Benefits 
------------------------- 
 
¶5. (U) Orduz told Emboff that the dirt roads in the Chaco 
traditionally fared poorly under harsh climate conditions, eroding 
in bad weather and hindering the transportation of goods and 
services.  The new paved and all-weather Chaco roads will reduce 
transportation costs, transit time, and provide a year-round outlet 
for vehicles moving in and out of the sparsely inhabited Chaco 
region.  Roads improvements also increase local access to goods and 
services such as health, education, and electricity for isolated and 
disadvantaged residents of the Chaco, who can now travel further - 
even to Asuncion - for goods and services. 
 
¶6. (U) Large Mennonite communities in the Chaco will also benefit 
from access to the improved road network system.  The Paraguayan 
economy relies heavily on Mennonite communities to produce milk, 
cheese, meat, and other staples sold throughout Paraguay.  These 
communities use modern, efficient production techniques, but they 
lacked the means to efficiently transport their goods to market. 
Easier access to markets should allow the Mennonites to rapidly 
expand food production to better serve the domestic market and 
stimulate economic growth. 
------------------------------------------ 
Road Integration:  A Benefit or a Concern? 
------------------------------------------ 
 
¶7. (U) Orduz said that a main concern with the project is the GOP's 
ability to maintain an extensive road system in a desolate area. 
The IDB will continue to supplement road maintenance in the Chaco 
over the next three years, but beyond that, the GOP will be 
responsible for the daunting task of road upkeep.  Moreover, 
accidents will likely increase as more people travel in 
sparsely-populated areas with few public services such as medical 
facilities.  Ferreira expressed concern that increased traffic could 
adversely impact the fragile eco-system of the Chaco.  Orduz 
speculated that members of the indigenous population will migrate to 
Mennonite towns looking for jobs and social services, potentially 
exhausting Mennonite social service resources and leading to growth 
of slums. 
 
¶8. (U) Improved road access in the Chaco could also facilitate both 
legitimate and illicit economic activity.  Historically, contraband 
traffickers have used the Trans-Chaco Highway to ferry stolen 
vehicles and counterfeit cigarettes to Bolivia and drugs from the 
Andes to Paraguay and beyond.  Ferreira indicated that an increase 
in road quality would not necessarily increase illegal transshipment 
activity because the GOP planned to place more authorities at 
previously underserved border crossings.  He said that illegal 
activity will continue but in different ways.  Those who smuggle 
will most likely find alternate routes - unimproved secondary roads 
that criss-cross the Paraguayan-Bolivian border - to transport 
contraband into Bolivia rather than using the new roads.  However, 
public works officials Ferreira and Miranda conceded that the new 
road could provide a faster way to get stolen cars into Bolivia, 
perhaps in better condition. 
 
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Comment 
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¶9. (U) Until Bolivia completes its portion of the Trans-Chaco 
Highway, Paraguay's road network integration efforts may not realize 
their full potential.  Once fully functional, the network will 
encourage more illicit trafficking, and checkpoints will likely 
remain ineffective deterrents because of pervasive corruption among 
border guards.  That is one of the downsides of "globalization" and 
interdependence.  Nevertheless, cheaper access to Pacific ports for 
Paraguayan exporters should benefit the economy in the long-run 
given the high transportation costs Paraguay now faces as one of 
South America's most isolated countries.  Improved roads also open 
up opportunities to enhance living conditions in the Chaco by 
increasing local access to goods and services, including much-needed 
social services.  The road network is a promising addition to 
Paraguay's future.  However, given historic corruption and the lack 
of a supportive infrastructure, it may yet end up a broken road and 
a shattered dream. 
CASON