US embassy cable - 05ASUNCION150

C O N F I D E N T I A L SECTION 01 OF 02 ASUNCION 000150 
 
SIPDIS 
 
STATE WHA/BSC 
STATE PASS TO USAID LAC/AA 
NSC FOR KIMBERLY BREIER 
SOUTHCOM FOR POLAD DAN JOHNSON 
 
E.O. 12958: DECL: 01/27/2015 
TAGS: PGOV, PREL, KJUS, ECON, KIPR, PINR, PA 
SUBJECT: PARAGUAY,S MINISTER OF INDUSTRY ON REFORMS AND 
ANTI-CORRUPTION 
 
REF: ASUNCION 52 
 
Classified By: DCM KEVIN M. JOHNSON FOR REASONS 1.4 (B) AND (D). 
 
1. (C) Summary:  The Ambassador raised concerns over threats 
to reforms and placement of corrupt officials to Minister of 
Industry Ernst Bergen.  Bergen shared the Ambassador's 
concerns and added that it was vital to preserve the current 
economic team.  Bergen said President Nicanor Duarte Frutos 
put the nation above politics and that he would stress to 
Duarte the need to resist pressures against reform.  U.S. 
pressure is important, especially when coordinated with key 
reformers.  End Summary. 
 
2.  (C) January 27 the Ambassador called on Minister of 
Industry and Commerce (MIC) and presidential confidant Ernst 
Bergen to urge continued GOP emphasis on reform and fighting 
corruption. (Note: Bergen is a religious mentor of the First 
Lady and President, vacationed with the Duartes last year, 
suggested Duarte attend the February 3 National Prayer 
Breakfast in Washington, and will join him there.  End Note.) 
 
3. (C) The Ambassador raised the international community's 
concern over possible threats to structural reforms and 
pressures to place corrupt officials in key positions. 
Bergen's close relationship with NDF and their upcoming joint 
trip offered an opportunity to remind the president of these 
issues.  The Ambassador noted the near promotion of police 
official Aristides Cabral, who is tied to narcotics 
traffickers, late last year (reftel).  The president later 
assured the Ambassador Cabral would not/not be promoted when 
the legislature reconvenes in March, but pressures continue. 
A corrupt official, Arnoldo Samaniego was recently named to a 
key Customs position over the objection of the Minister of 
Finance and Customs Chief, continued the Ambassador.  In 
addition, the EU is pressing for more energetic prosecution 
of Padre Rubio case, where a priest and others stole millions 
from social welfare programs.  The Ambassador added that 
hard-won reforms of pensions were under attack, the public 
banking law has been held up, reform of state enterprises is 
stalled, and pressures to abandon fiscal discipline were 
mounting.  The Ambassador stressed that Duarte's reputation 
as an anti-corruption reformer was hard earned, but could be 
endangered by an accelerating political calendar (there is 
discussion of a constitutional convention this year to 
examine reelection, inter alia.)  Paraguay's improved 
reputation is fragile, the Ambassador noted, urging Bergen 
and other reformers to weigh in with the President. 
 
4. (C) Bergen said he shared the Ambassador's concerns.  NDF 
was not/not fanatically dedicated to reelection, so the 
nation comes first with him, but pressures are strong and 
everywhere.  NDF had pushed strongly in a cabinet meeting 
last week for quick progress on the Padre Rubio case, Bergen 
pointed out, so he did not see the executive as lacking will. 
 He said he and Finance Minister Borda were both surprised by 
the appointment of Samaniego in Customs.  This was bad news, 
he said, but the President had told Samaniego by phone in 
their presence that he would be watched carefully, that he 
was to follow the orders of his superiors, and that he would 
be fired if there was any corruption.  Bergen said he gave 
Samaniego the same message personally, stressing the 
importance of stopping CD and other smuggling and IPR 
violations. 
 
5.  (C) Bergen said that, in addition to sharing the 
Ambassador's concerns, he felt it vital to retain the entire 
Economic team, noting that the President is very unlikely to 
fire Borda because he recognizes his value.  There is some 
risk that a stressed-out, rigid and unhappy Borda might 
resign, Bergen added.  An expression of support from the 
international community and Paraguayan leaders will buck him 
up to persevere.  Bergen is working to improve the 
relationship between Borda and NDF and reminds the President 
of what Borda has accomplished.  Bergen concluded that he 
appreciated the Ambassador's frank assessment, shared his 
concerns, and would reiterate them to the President.  He 
lamented that "we can't do everything at once, but we can't 
let reforms be turned around". 
 
6. (C) Comment:  Key reformers in the cabinet and elsewhere 
face a tortuous daily balance, seeing continued corruption 
while trying to make things a bit better and preserve major 
achievements.  The President must live both with his own 
party and with powerful special interests and choose his 
fights carefully.  Our counter-pressure is important, 
especially when coordinated with key reformers.  End Comment. 
KEANE