US embassy cable - 03SANTODOMINGO6582

UNCLAS SECTION 01 OF 02 SANTO DOMINGO 006582 
 
SIPDIS 
 
SENSITIVE 
 
FROM AMBASSADOR HERTELL TO THE DEPUTY SECRETARY AND TO WHA 
ASSISTANT SECRETARY NORIEGA; DEPT TREASURY FOR U/S TAYLOR; 
NSC FOR SHANNON; DEPT ALSO FOR EB, G/TIP, INL, WHA/CAR 
(GILROY) 
 
E.O. 12958: N/A 
TAGS: PGOV, PREL, EFIN, ETRD, DR 
SUBJECT: HOW BEST TO SUPPORT U.S. INTERESTS IN THE 
DOMINICAN REPUBLIC -- RECOMMENDATIONS 
 
 
1.  (SBU) The difficult economic situation in the Dominican 
Republic, coinciding with the early stages of a presidential 
campaign, presents a complex of challenges to United States 
interests in the country.  I consider it essential to 
continue to support the administration of President Hipolito 
Mejia.  I take into account Mejia,s pro-U.S. policies on 
Iraq and the Middle East, his close law enforcement 
cooperation, his advocacy of free trade,  and his signature 
of an Article 98 agreement.  Equally important, and 
transcending the relationship with the current 
administration, is the need to assure institutional 
stability, with transparency and inclusiveness of political 
process, while strengthening economic, judicial and political 
reforms. 
 
2.  (SBU) I believe that all significant political actors and 
the Dominican public will respond positively to USG actions 
and statements supporting GODR efforts to face economic and 
political difficulties squarely and responsibly.  The USG can 
help shape dialogue on the key issues, so as to focus on 
positive actions and institutional reforms rather than on the 
casting of blame.  The United States is necessarily a major 
presence for the Dominican Republic, through trade, 
investment, shared values and interests, geography, and the 
number of Dominicans residing in the United States.  Our 
voice and example have an extraordinary weight in Dominican 
domestic events. 
 
3.  (SBU) Following are my proposals to the Department and 
other agencies for constructive actions to be undertaken in 
the short term by the USG: 
 
-- Senior level civilian visits.  I suggest that Assistant 
Secretary Noriega and Treasury Under Secretary Taylor make 
 
SIPDIS 
separate one-day working visits to Santo Domingo before the 
end-of-year holidays.  The senior visitors could deliver a 
frank admonition to President Mejia to stay on track with the 
IMF despite the election pressures and could meet with other 
prominent political and congressional leaders to deliver a 
message of support to Dominicans generally.  In particular, 
Assistant Secretary Noriega could deliver strong words of 
encouragement to combat corruption and prosecute individuals 
for corrupt behavior, further developing the testimony to 
Congress which received a great deal of attention here.  The 
Embassy can program a full, appropriate round of media 
contacts.  Senior USG visitors could address the joint houses 
of the legislature, for example, or could speak at other 
prestigious local institutions.  The general political 
message would be distinct but complementary to that of U.S. 
Trade Representative Zoellick at the mid-January opening in 
Santo Domingo of bilateral trade talks. 
 
-- Military visits and assistance.  I would welcome the visit 
of appropriate Pentagon officials or senior military, such as 
Commander of Southern Command General Hill.  I understand 
that DOD and State may have the option to increase various 
categories of military assistance and are studying the 
possibility of doing so.  If a senior visitor could make 
early public announcement of such measures, this would 
emphasize U.S. solidarity with the GODR and would show valued 
appreciation for GODR willingness to shoulder 
responsibilities in the Coalition of the Willing.  This U.S. 
engagement would stress the principled nature of the decision 
to send the Quisqueya Battalion to Iraq for a year and would 
help to counteract the emphasis by some of the downside risks. 
 
-- Accelerating IFI consideration.  Assistance from the 
international financial institutions will be crucial in 
overcoming the crippling financial plight of the GODR and of 
the financial system.   The GODR must come to terms, quickly, 
with the IMF negotiating team arriving tomorrow.  I believe 
that they will do so and I will continue to stress that 
message.  Once the standby is renewed, the GODR will need to 
tap other sources of lending.  I understand the previously 
developed World Bank loan of USD 200 million for electric 
sector reform cannot be carried forward, given the 
government's buy-back of Union Fenosa holdings in the system. 
 USG agencies and the U.S. Executive Director at the World 
Bank can urge the Bank to draw up a fast-disbursing 
structural adjustment loan to help meet the urgent needs to 
plan restructuring and to cover arrears in the electricity 
sector.  The USG can advocate a similar approach at the IDB. 
 
-- Increased support for Dominican institutional reform.  One 
of the massively contributing causes to the current 
macroeconomic plight of the country is banking fraud at 
Baninter, Bancredito and Banco Mercantil, the tally for which 
has now risen to near USD 3 billion (approximately 15 percent 
of GDP).  The instability in the exchange rate and many 
financial indicators stems in large part from the distrust of 
the public in its own financial institutions.  USG agencies 
are already active in legal cooperation and investigation -- 
Homeland Security, Treasury, DEA, State/INL, and Justice, 
most prominently.  This work is extremely valuable and should 
be reinforced and given additional funding, particularly for 
programs that promote technical training, professionalism and 
effective practice by the Dominicans.  A U.S.-based 
prosecution of Dominican criminals would deliver a powerful 
message.  Increased assistance to financial regulation, to 
the judiciary, and to fraud investigation would demonstrate 
our conviction that sound institutions are fundamental to 
sustainable economic development.  In this connection I ask 
that Washington fund fully and as quickly as possible USD 
300,000 to support technical assistance related to complex 
banking fraud. 
 
-- Election monitoring.  We are six months away from a 
presidential election.  This Embassy has requested financing 
for electoral observers and understands that NDI and IFES 
have drawn up proposals.  I consider it vital that the 
Dominican public understand that the United States is 
completely impartial in this contest, regardless of our good 
relations with the Mejia administration.  It is equally vital 
that we provide financial support for effective election 
monitoring to ensure public faith in the democratic process 
and its results.  An early pledge will emphasize our policy 
that citizens must be empowered with full rights of 
participation and a voice in choosing their government, in 
free, fair and transparent elections. 
 
-- Law enforcement support.  Key enforcement priorities in 
the Dominican Republic include counter-terrorism, 
counter-narcotics, anti-trafficking-in-persons, illegal alien 
smuggling, visa and passport fraud, counterfeiting, and 
money-laundering.  Any additional funding for these programs 
would bring a direct benefit to U.S. interests and a pay-off 
in further increases in cooperation. 
HERTELL