US embassy cable - 04SANTODOMINGO4637

C O N F I D E N T I A L SECTION 01 OF 02 SANTO DOMINGO 004637 
 
SIPDIS 
 
STATE FOR WHA/CAR AND WHA;NSC FOR SHANNON AND MADISON 
TREASURY FOR OASIA-LAMONICA 
USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION 
USDOC FOR 3134/ITA/USFCS/RD/WH 
DHS FOR CIS-CARLOS ITURREGUI; SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: DECL: 08/10/2014 
TAGS: PREL, PGOV, ECON, EPET, MCAP, DR, VE 
SUBJECT: DOMINICAN TRANSITION #14: FERNANDEZ TELLS 
AMBASSADOR HE HAS HALF-PRICE OIL FROM VENEZUELA AND 
PROMISES OF DOLLAR LOANS 
 
REF: STATE 3749 
 
Classified By: Economic and Political Counselor Michael Meigs for Reaso 
n 1.4 (b) and (d). 
 
 1. (U) This no. 14 in our series on the transition to a new 
presidential administration in the Dominican Republic. 
 
Lunch with Leonel 
 
(U) On August 6, the Ambassador and visiting Senator Bill 
Nelson (D-FL) attended a lunch hosted by President-elect 
Leonel Fernandez (PLD) at the office of his Global Foundation 
for Democarcy and Development.  Also present were Alfonso 
Fanjul of the Central Romana Corporation and Alberto 
Ibarquen, editor of the Miami Herald.  The Defense Attache 
was notetaker.  The lunch, just 10 days before Fernandez is 
to be installed as President, enabled him to talk with his 
guests at length about topics of interest to the United 
States, while also affording insights into how he views his 
impending presidency. 
 
Rescuing the Economy 
 
(SBU) The President-elect spent much of the time discussing 
the deteriorating economic situation, which had undermined 
President Mejia's popularity and helped bring Fernandez to 
power.  Fernandez said he has to take immediate steps to 
stabilize the economy, and has said publicly that he will not 
increase public spending, including on salaries, until the 
economy stabilizes.  He said his initial economic plan 
involves quickly increasing Central Bank liquidity so it can 
protect the value of the peso, allowing him to focus on the 
longer-term health of the economy. 
 
(C) In particular, Fernandez told his guests, he has several 
commitments that could generate more than 1 billion dollars 
in liquidity for the country.  Foremost among these is USD 
500 million in investments in the tourism industry promised 
by Spanish companies in return for rolling back the proposed 
tax on hotel rooms.  In addition, Fernandez said, he has 
offers of dollar loans to the Central Bank from Brazil (USD 
250 million), Venezuela (USD 250 million), and Spain (USD 150 
million).  Fernandez said he will try to negotiate additional 
loans by governments and private institutitons. His goal is 
to raise confidence in the Dominican peso, which could then 
help lower inflation. 
 
(C) Fernandez said dollarization is something that will 
eventually happen in the country, but it is impossible in the 
short term.  He said he would be labeled as "selling the 
nation" if he proposes dollarization as an alternative 
monetary policy. 
 
Fernandez and Chavez: A Close Relationship 
 
(C) Fernandez also spoke at length about his ties to 
President Hugo Chavez of Venezuela, professing admiration for 
his friend while also recognizing Chavez's autocratic 
tendencies.  The two leaders maintain excellent relations, 
according to Fernandez. 
 
(C) The Dominican Republic depends on Venezuela for much of 
the fuel that it uses to produce power.  The country is in 
the midst of an energy crisis, he said, because of rising 
fuel costs and because the government has failed to pay 
energy producers on time.  The constant power shortage is 
perhaps the biggest short-term problem that Fernandez faces 
when he takes office.  During a visit to Caracas in June, 
Fernandez used his friendship with Chavez to secure a promise 
of extremely favorable terms for oil imports -- a credit line 
for purchases of Venezuelan oil at half the world price, with 
no payments due for six months. 
 
(C) The group discussed President Chavez's leadership of 
Venezuela and his prospects in  the August 15 recall 
referendum.  Fernandez said Chavez will face serious problems 
even if he wins. Fernandez acknowledged a need for Chavez to 
tone down his rhetoric and concentrate more on good 
governance and less on image.  Chavez likes to emulate Fidel 
Castro, both in style and substance, Fernandez noted.  He has 
told Chavez that he must govern all of Venezuela, not just 
the poor, and reach out to business and the oligarchy. 
According to Fernandez, "Chavez lacks leadership and has 
transformed nothing.  He is Fidel without talent, but with 
oil." 
 
(C) Fernandez says he sees himself as an international 
statesman.  He offered to be a bridge between the world and 
Venezuela, using his access and influence with the Venezuelan 
leader. 
 
The Fragility of a Latin American Mandate 
 
(SBU) Fernandez was keenly aware that he faces problems, even 
though he comes to office with a strong mandate.  He said 
that he understands the expectations of the people and  knows 
that his political honeymoon will not be long.  He referred 
to several other elected Western Hemisphere leaders in the 
recent past who were did not serve out their full terms 
because of economic or other crises. 
 
(SBU) Senator Nelson mentioned the possibility of a reduction 
in Dominican armed forces levels and suggested the United 
States might assist in this process.  Fernandez expressed 
interest in the idea and stressed that the lines of 
communication with the U.S. military would be open. 
 
(C) The Ambassador and Senator Nelson raised the topics of 
corruption, port security, the Third Border Initiative, and 
Dominican relations with Haiti.  The Ambassador reiterated 
his offer for the U.S. Embassy to vet the names of candidates 
for Fernandez's key appointments and encouraged him to fight 
corruption at all levels. 
 
2. (U) Drafted by Jay Raman and LtCol Glenn Huber. 
 
3. (U) This report and others in our election and transition 
series can be read on the SIPRNET at 
http://www.state.sgov.gov/p/wha/santodomingo/ index.cfm along 
with extensive other current material. 
KUBISKE