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Viewing cable 08SANTODOMINGO1184, SANTO DOMINGO ECONOMIC-POLITICAL ROUNDUP, JULY 22,

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Reference ID Created Released Classification Origin
08SANTODOMINGO1184 2008-07-22 20:01 2011-08-26 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Santo Domingo
VZCZCXYZ0026
PP RUEHWEB

DE RUEHDG #1184/01 2042001
ZNR UUUUU ZZH
P 222001Z JUL 08
FM AMEMBASSY SANTO DOMINGO
TO RUEHC/SECSTATE WASHDC PRIORITY 1182
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUEHWN/AMEMBASSY BRIDGETOWN PRIORITY 2177
RUEHCV/AMEMBASSY CARACAS PRIORITY 0915
RUEHGE/AMEMBASSY GEORGETOWN PRIORITY 1089
RUEHKG/AMEMBASSY KINGSTON PRIORITY 2880
RUEHPO/AMEMBASSY PARAMARIBO PRIORITY 1214
RUEHPU/AMEMBASSY PORT AU PRINCE PRIORITY 4843
RUEHSP/AMEMBASSY PORT OF SPAIN PRIORITY 1915
RUEHUB/USINT HAVANA PRIORITY 0194
RUEAIIA/CIA WASHINGTON DC PRIORITY
RHEFDIA/DIA WASHDC PRIORITY
RUMISTA/CDR USSOUTHCOM MIAMI FL PRIORITY
UNCLAS SANTO DOMINGO 001184 
 
SENSITIVE 
SIPDIS 
 
STATE FOR WHA/CAR 
 
E.O. 12958: N/A 
TAGS: PGOV ECON ENRG KJUS DR
SUBJECT: SANTO DOMINGO ECONOMIC-POLITICAL ROUNDUP, JULY 22, 
2008 
 
(U) In this edition of the roundup: 
 
1. Government,s Plan to Address Economic Crisis 
2. Fernandez Focused on Constitutional Reform 
3. Subsidy Must Keep Pace with Oil Prices or Lights Will Go 
Out 
4. Astwood Extradition Controversy 
 
1. (SBU) Government,s Plan to Address Economic Crisis 
 
In a speech on July 17, President Fernandez announced the 
government,s plan to address the economic crisis, created by 
the rising cost of food and oil, by cutting back on 
government spending, although most government salaries will 
be increased, and by better targeting some subsidies for the 
poor.  The Finance Ministry is expected to send a 
supplementary budget to the Congress soon.  According to 
Fernandez, government spending in the last quarter of the 
year will be cut by 20 percent, with no funding going toward 
new infrastructure projects.  Fernandez announced a 15 
percent increase in government salaries for employees earning 
less than 30,000 pesos (USD 882) a month, which includes 97 
percent of public employees.  Salaries of more than 200,000 
pesos (USD 5,882) a month would be cut by 10 percent and 
those between 150,000 (USD 4,411) and 200,000 pesos would be 
cut by 5 percent. 
 
Fernandez acknowledged that subsidies in the energy sector 
are unsustainable given the high international oil prices. 
He outlined a detailed plan to reduce Liquefied Petroleum Gas 
(LPG) subsidies which are currently provided to all sales of 
LPG with no restriction.  The GoDR will only permit 24,000 
drivers of collective taxis and 800,000 poor households to 
obtain limited amounts of subsidized LPG.  Although the new 
subsidy will be USD 1 per gallon, double the current subsidy, 
Fernandez said targeting the subsidy would save the 
government USD 185 million on a yearly basis.  Fernandez 
offered a vague plan for the electricity sector, including 
unspecified measures to reduce the cost of energy generation, 
new limitations to the Blackout Reduction Program and the 
deployment of 10 million fluorescent light bulbs to replace 
incandescent bulbs.  He added that the government would 
increase its efforts to promote the production of renewable 
energy and biofuels.  Regarding agriculture, Fernandez called 
for increased production and the strengthening of research on 
innovative technologies.  COMMENT:  The speech lacked many 
details of how the measures would be implemented.  Some 
members of the opposition parties commented in the media that 
the proposals are not new and that Fernandez has previously 
said he would cut government spending but has not followed 
through.  Critics in the agriculture sector said they had 
hoped for new financing for production and subsidies for 
gasoline to address the high cost of transporting their goods. 
 
2. (SBU) Fernandez Focused on Constitutional Reform 
 
There are strong indications that constitutional reform will 
be a key priority of the next administration of Leonel 
Fernandez and his ruling PLD party.  In a meeting with 
POLOFF, Alejandro Montas, a member of the PLD leadership in 
the House, said that it was likely that Fernandez would 
submit his proposed amendments to Congress on August 16 -- 
the same day that he is inaugurated.  In comments to the 
media, the leadership of the opposition PRD party said that 
they planned to submit a rival package of amendments, and 
repeated their call for a Constituent Assembly to be elected 
to consider the changes.  COMMENT:  The big question is 
whether Fernandez will seek to eliminate term limits on the 
presidency.  POLOFF asked Montas how the PLD planned to 
obtain the two-thirds majority in the house that they require 
to amend the constitution.  Montas replied that there was the 
possibility that Fernandez and former President Mejia would 
strike a deal in which term limits would be eliminated 
(favoring both men) and Mejia would deliver the necessary PRD 
votes.  In a sign that the PLD has a unity issue to manage, 
Montas added that he supports term limits, noting that he is 
a supporter of Danilo Medina, a Fernandez rival within the 
 
PLD who has his eyes on another run for the presidency. 
 
3. (SBU) Subsidy Must Keep Pace with Oil Prices or Lights 
Will Go Out 
 
Energy company executives told EconOff that they are worried 
of a possible fiscal crisis if the government proves unable 
to maintain its high level of subsidies that are necessary to 
keep the grid from going dark.  Economy, Planning and 
Development Secretary Temistocles Montas told the press July 
21 that the government will not fully cover the 
under-budgeted deficit in the sector, offering figures that 
suggest a shortfall of about USD 300 million.  If this 
happens, the grid will go dark, said AES Dominicana President 
Marco de la Rosa.  He noted, however, that GoDR energy 
officials have assured him that the subsidy will continue and 
acknowledged an internal dispute regarding how the government 
will handle the subsidy in light of high oil prices. 
Dominican Corporation of State Electricity Companies (CDEEE) 
Radhames Segura told de la Rosa that the government may seek 
to renegotiate the power purchasing agreements, noting that 
the generators, profit margins have grown with the increase 
in oil prices.  De la Rosa said that AES may be amenable to 
this request if the state pays off frozen debt from 2004, but 
with two months, arrears to the sector adding up to more 
than USD 100 million, he doubts that the GoDR will entertain 
this offer.  On July 18, The CDEEE announced the payment of 
April,s invoice and Segura told energy generators that the 
government intends to remain two months behind in payments, 
which at current prices is about USD 100 million.  De la Rosa 
told EconOff that while this amount is manageable, any 
further delays could inhibit AES, bimonthly purchases of USD 
40-million natural gas shipments. 
 
4. (SBU) Astwood Extradition Controversy: 
 
On July 8, the five judges of the Penal Chamber of the 
Dominican Supreme Court wrote to the Ambassador expressing 
indignation over our June 20 diplomatic note protesting the 
misapplication of the Dominican statute of limitations in the 
extradition case of Juan Astwood Burgos, who is wanted in the 
United States for the murder of a policeman.  The Supreme 
Court also asserted in its letter (incorrectly, we believe) 
that the U.S. has not carried out any extraditions to the DR 
in 100 years.  Several Dominican newspapers carried the story 
on July 22, as the media had obtained copies of the Supreme 
Court,s letter and our original diplomatic note.  Our press 
guidance is that we maintain excellent working relations with 
all levels of the Dominican judicial system and do not 
comment on diplomatic communications, which are private. 
 
(U) Please visit us at 
http://www.state.sgov.gov/p/wha/santodomingo/  
BULLEN