US embassy cable - 04SANTODOMINGO3626

UNCLAS SECTION 01 OF 03 SANTO DOMINGO 003626 
 
SIPDIS 
 
STATE FOR WHA/CAR, WHA/PPC AND DRL;NSC FOR SHANNON AND 
MADISON;LABOR FOR ILAB;TREASURY FOR LAMONICA AND OASIA; 
USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION 
USDOC FOR 3134/ITA/USFCS/RD/WH 
DHS FOR CIS-CARLOS ITURREGUI 
 
E.O. 12958: N/A 
TAGS: PGOV, PINR, EFIN, DR 
SUBJECT: DOMINICAN TRANSITION # 3: SIDES ENGAGE ON IMF AND 
TAX REFORM; EMBASSY SPENDS A DAY WITH THE INCOMING 
ADMINISTRATION 
 
REF: A. SANTO DOMINGO 3313 
 
     B. SANTO DOMINGO 3358 
 
1.  (U) This is cable no. 3 in our series on the transition 
to a new administration in the Dominican Republic. 
 
SIDES ENGAGE ON IMF AND TAX REFORM 
 
----------------------------------------- 
Fiscal reform, necessarily the hot topic 
----------------------------------------- 
 
As the power outages continue and the balance sheets show 
more red than black, the Dominican Republic is faced with the 
critical need for fiscal reform sooner rather than later.  At 
a full day PLD-Embassy transition conference on June 17, PLD 
transition leader Danilo Media confirmed that President-elect 
Leonel Fernandez and President Hipolito Mejia will meet for a 
mini-summit on Tuesday, June 22, under the benevolent 
sponsorship of Msgr Agripino Nunez, rector of the catholic 
university PUCCMM.  They will announce the joint initiative 
to have a fiscal reform package to Congress no later than 
July 15.  An IMF technical advisor arrived in the country on 
June 21 to assist the PLD and PRD teams in preparing a reform 
package that will satisfy both sides and comply with the 
terms of the IMF agreement. In effect, the PLD is already 
negotiating with the Fund. 
 
The technical teams for both parties are experienced and 
realize the gravity of the situation.  They met three times 
at a senior level, and for almost a week the mid-level 
technicians from Finance and the Presidency have been working 
directly with the PLD to elaborate a proposal to discuss with 
the Fund.  The aim is to have a proposal ready by July 10 and 
for President Mejia to forward the PLD plan to Congress on 
July 15th.  Daniel Toribio, former finance minister in 
Fernandez's first administration and one of the key PLD 
transition committee members, told us that fiscal reform, "is 
a political problem and nothing else.  The numbers are there, 
we have to make it work." Carlos Despradel, PRD Technical 
Secretary of the Presidency, says that the PLD now 
 
SIPDIS 
understands the extent of the fiscal challenge. 
 
Monsignor Agripino Nunez will be the mediator at the 
mini-summit on June 22.  Behind the scenes, former Spanish 
President Felipe Gonzalez, the Spanish Ambassador, the EU 
Representative, and Ambassador Hertell have played 
significant roles in bringing the two sides together. 
 
--------------------------------------------- ---------- 
EMBASSY SPENDS A DAY WITH THE INCOMING ADMINISTRATION 
--------------------------------------------- ---------- 
 
On June 17 the Ambassador hosted a day-long conference at his 
residence between the PLD transition team with its advisors 
and the staff of the Embassy.  Medina's announcement to us of 
the plans for the PLD/PRD mini-summit came at the kickoff 
breakfast.  The PLD transition team leaders (Medina, Montas, 
Toribio, Puig, Morales Troncoso, Pena Guaba, Gonzalez 
Espinoza and Prota - reftel A), the Ambassador and Emboffs 
started the day with a discussion of common interests, the 
need to look forward now (rather than wait until August 16) 
and a reiterated offer by the Embassy to help bring the PLD 
and PRD together on difficult issues. 
 
After the breakfast, the conference continued with a morning 
schedule of three hour-long meetings to share USG priorities 
and perceptions with PLD leaders on the following areas: 1) 
Trade issues/Macroeconomic Issues/D-CAFTA, 2) Anti-corruption 
and Judicial sector issues, 3) Consular Issues and 
Trafficking in Persons.  A mid-day lunch allowed the PLD 
transition team and emboffs to recap the morning's topics and 
discuss the USG position on human rights.  The afternoon 
session included expanded exchanges on: 1) Military, Law 
Enforcement and Counter-terrorism issues, 2) Energy, and 3) 
Social Responsibility issues (Health, Education and the 
Environment). 
Our invitation to the conference had pressed the PLD to name 
working level members for each of the group discussions, 
which it did.  On average, the meetings consisted of 18 PLD 
members per subject meeting, four members of the core PLD 
transition team, the Ambassador and eight Emboffs.  Some 85 
Fernandez people attended all or part of the sessions.  Most 
of the PLD attendees have prior government experience. 
 
The conference also accomplished USG goals of sharing our 
priorities and concerns on each topic, establishing working 
links and pledging follow-up meetings in each area.  In 
addition, the PLD experts educated their own PLD transition 
team in many areas, most prominently during the social 
responsibility meeting on education, health and the 
environment. 
 
During the macroeconomic session, Julio Ortega asked if the 
USG would provide a USD 25 million cushion for fuel 
financing, to ease the situation for the poor.  Emboffs 
responded that the request might be given consideration after 
the Dominican Republic got its house in order with the IMF. 
During the discussion on law enforcement and 
counter-terrorism, former national police chief Euclides 
Gutierez Feliz noted the importance of the USG third border 
initiative and asked for information on security guidelines 
under this program.  Emboffs will provide information as well 
as port and airport security guidelines. 
 
In the anti-corruption meeting, Onofe Rojas mentioned the aim 
of PLD leaders to combat corruption, echoing the sentiments 
of the new Secretary General of the OAS in stating that, 
"corruption is the cancer of Latin America." 
 
 
Numerous PLD attendees approached Emboffs to thank us for the 
opportunity to discuss the issues and provide them with 
contacts and a "jumping off point" for continued 
collaboration.  Throughout the day, and especially in the 
Economic, Anti-corruption and Military/Law Enforcement 
meetings, the PLD attendees expressed appreciation for the 
early opportunity to confirm that the PLD and the USG share 
many of the same goals.  Max Puig, one the PLD core 
transition team members who attended every meeting, 
approached the DCM to express his "sincere appreciation for 
U.S. efforts to make the transition in the Dominican Republic 
the best one ever." 
 
 
------------ 
What's next? 
------------ 
 
Short term, the next priority for the PLD transition team is 
the June 22 mini-summit.  Medina told us that Fernandez had 
specified that the summit needs to be, "more than a photo 
opportunity," which it should be with the public announcement 
of the fiscal reform pledge.  The PLD will also have to 
confront the ever worsening electricity situation (septel to 
follow) in order to keep the lights on in the country. 
Finally, the PLD will have to continue to work at the 
technical level with their PRD counterparts, keeping in check 
any impulses for mutual blame in order to ensure that there 
is an adequate transfer of information and an otherwise 
smooth transition from one administration to the next. 
The Embassy will build on the transition conference, moving 
to smaller group meetings with PLD counterparts on specific 
issues.  At all levels we will seek out the names of 
potential nominees to key positions, pointing out the dangers 
and potential repercussions of naming less than desirable 
candidates to head ministries or agencies.  We will 
reemphasize our offer to bring the PLD and PRD together when 
needed.  Finally, we will continue to work closely with the 
current administration to keep programs on track and 
encourage cooperation between the outgoing and incoming 
administrations. 
 
2.  (U)  Drafted by Angela Kerwin. 
 
3.  (U)  This report and others in the series are available 
on our SIPRNET site at 
http://www.state.sgov.gov/p/wha/santodomingo/  along with 
extensive other material. 
KUBISKE