US embassy cable - 05SANTODOMINGO971

C O N F I D E N T I A L SECTION 01 OF 08 SANTO DOMINGO 000971 
 
SIPDIS 
 
STATE FOR WHA/CAR, WHA/EPSC, WHA/USOAS, EB/TPP/BTA, 
EB/IFD/OMA; 
NSC FOR SHANNON AND MADISON;LABOR FOR ILAB; 
USCINCSO ALSO FOR POLAD; TREASURY FOR OASIA-LCARTER 
STATE PASS USTR FOR VARGO, RYCKMAN, MALITO, CRONIN 
USDOC FOR USPTO AND FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN 
DIVISION 
USDOC FOR 3134/ITA/USFCS/RD/WH; DHS FOR CIS-CARLOS ITURREGUI 
 
E.O. 12958: DECL: 02/16/2010 
TAGS: PREL, ETRD, KIPR, EFIN, EPET, CJAN, PHUM, PGOV, DR, HA, CU, MX, XM 
SUBJECT: DOMINICANS OUTLINE APPROACH TO HAITI, CAFTA, U.S. 
RELATIONS, FOREIGN AFFAIRS, ECONOMIC AND POLITICAL ISSUES 
 
REF: A. OTTAWA 473 (NOTAL) 
 
     B. PORT AU PRINCE 387 (NOTAL) 
     C. SANTO DOMINGO 758 (NOTAL) 
 
Classified By: DCM Lisa Kubiske for Reason 1.5 (b) and (d). 
 
1.  (C) Summary:  Haiti, bilateral relations with the United 
States, CAFTA ratification, promoting consensus on a new OAS 
secretary general, more active participation in regional and 
 
SIPDIS 
multilateral diplomacy, foreign investment and technology are 
priorities for the Dominican administration, according to 
officials who received WHA/CAR Director Brian Nichols on 
February 14-15.  Foreign Minister Morales assured the 
Ambassador he would press for more regional support for the 
interim government in Haiti and would continue to promote the 
Flores candidacy for OAS secretary general at an upcoming 
CARICOM meeting in Suriname.  The MFA outlined plans to 
increase the staff devoted to Haiti and to the United States, 
suggesting a periodic Dominican-U.S. commission to review 
bilateral issues.  On Cuba, the MFA confirmed that Mexico had 
proposed an "informal consultation mechanism" on human rights 
in the hemisphere, but denied that the initiative would 
preclude country-specific resolutions in the UN Committee on 
Human Rights.  Dominican Congressional leaders agreed to form 
a bicameral committee to accelerate the CAFTA ratification 
process.  A lawyer for the pharmaceutical industry expressed 
concern about a new legislative proposal that, if passed, 
would weaken patent and trademark protection.  Opposition 
politicians and commentators, whose parties control the 
Dominican Congress, criticized President Fernandez for 
promising more than he can deliver while his administration 
follows economic policies they perceive as dangerous.  The 
legislators and a senior advisor to Fernandez say that 
because of the 2006 elections, Congress is unlikely to take 
on the fundamental fiscal reform agreed with the IMF.  End 
summary. 
 
2.  (SBU) Visiting WHA/CAR Director Brian Nichols met with 
Dominican Government, Congressional, opposition, and business 
leaders February 14-15, accompanied by the Ambassador and/or 
DCM and other Embassy officers.  The Dominicans offered 
information of particular interest to the United States on 
this country's opposition political views, on prospects for 
ratification of the free trade agreement (CAFTA), on foreign 
policy priorities including Haiti, and on intellectual 
property rights (IPR) issues related to CAFTA. 
 
Haiti and the OAS 
- - - - - - - - - 
 
3.  (C)   Haiti, Liriano emphasized, occupies perhaps 
one-third of the Dominican bilateral agenda.  Haiti's severe 
problems affect the Dominican Republic directly, and the 
Fernandez administration is moving from talk to action, with 
a cooperative attitude.  Foreign Minister Carlos Morales 
Troncoso will attend a meeting of CARICOM foreign ministers 
in Suriname starting February 17.  While there, he will call 
on CARICOM to endorse the candidacy of Salvadoran 
ex-president Flores for OAS secretary general and will urge 
the English-speaking Caribbean "not to leave Haiti alone at 
this moment," but to support electoral preparations and 
efforts to re-establish security in Haiti.  The foreign 
minister is still planning to attend a French-sponsored 
donors' conference in Cayenne, French Guiana, on March 18 
(Ref A), and President Fernandez plans to visit Haiti in 
March.  Liriano told Nichols that Fernandez already has 5 or 
6 persons advising him on Haiti and the MFA will soon expand 
its Haiti office to 4 or 5 officers, reflecting that 
country's importance to the Dominican Republic.  This country 
wants a "permanent dialog" and "framework of cooperation" 
with Haiti and wants to offer Dominican "resources that could 
be used by Haiti" because of its proximity. 
 
4.  (C) Liriano privately confirmed to the DCM and Director 
Nichols that Dominican Ambassador to Haiti Jose Serulle Ramia 
(Ref B) had been brought to the Palace that day.  She did not 
know the outcome of the meeting.  The foreign minister later 
told the Ambassador that Serulle had been stripped of his 
authority, though not technically fired.  For now and 
effective immediately, the MFA has asked its Haitian affairs 
director Inocencio Garcia to cover the Dominican ambassador's 
responsibilities in Haiti.  Note: Serulle Ramia, we 
understand, was not fired because of President Fernandez's 
relationship with the local PLD chief in Santiago (another 
Serulle).   End note. 
 
CAFTA Ratification 
- - - - - - - - - - 
 
5.  (C) The Ambassador and WHA/CAR director Nichols discussed 
the timetable for CAFTA ratification with Dominican Senate 
President Andres Bautista and House President Alfredo 
Pacheco, both of the opposition PRD, and pointed out recent 
progress on ratification by other CAFTA signatories.  After 
discussing local concerns and potential opportunities under 
CAFTA, Bautista commented that a bicameral committee could be 
convened to accelerate the legislative process.  (Currently, 
the ratification bill is under consideration only in a Senate 
committee.)  Pacheco described himself as "a believer in 
CAFTA" and agreed that, as soon as he received a formal 
proposal from Bautista, they would form the bicameral 
committee.  Once that committee completes its work and issues 
a favorable opinion to both houses, the Senate and Chamber 
will be able to ratify in rapid succession.  Bautista said he 
would send the letter "tomorrow" (February 16).  (As of 
February 16, Senate Industry and Trade Committee chairman 
Santos confirmed to us that his committee was planning 
hearings and studies on CAFTA until early April.  Bautista 
and Pacheco confirmed to Nichols and to the Ambassador that 
they have the authority to redirect the process as they 
explained.) 
 
6.  (C) President of the Free Trade Zone Association 
(ADOZONA) Arturo Peguero warned that CAFTA will not be 
ratified until after the Dominican Government grants tax 
breaks to the sugar industry and other sectors.  Technical 
Secretary of the Presidency Temistocles Montas, Customs 
 
SIPDIS 
Director Miguel Cocco, and Secretary of Finance officials 
committed to these compensatory measures in December as a 
condition for the Senate's repeal of the 25 percent tax on 
corn syrup-sweetened beverages, he said. Hugo Rivera Santana, 
a Secretariat of Industry and Commerce official tasked with 
implementing CAFTA following ratification, described a clear 
division of labor on trade issues in the Fernandez 
administration: the Foreign Ministry has responsibility for 
trade negotiations and the Secretariat of Industry and Trade 
is in charge of implementation and administration of trade 
agreements once ratified.  Following CAFTA ratification, his 
office will become a council for CAFTA implementation, 
including other relevant agencies and private sector groups. 
 
7.  (C) In a later meeting Secretary of the Presidency Danilo 
Medina said that the government would have to compensate for 
lost revenues as tariffs are eliminated during CAFTA 
implementation.  He did not identify the manner of this 
compensation, but added that "it had been agreed" that no 
fiscal reform legislation would be considered before the May 
2006 congressional elections, owing to candidates' 
vulnerability on this sensitive issue. 
 
United States 
- - - - - - - 
 
8.  (C) The Dominican Republic wants to undertake "a series 
of activities" with the United States, according to Liriano, 
and the MFA plans to expand the U.S. affairs office from one 
senior officer currently to 4 or 5 officials (U.S. desk chief 
Roger Espaillat introduced Embassy officers to his newly 
assigned assistant on February 11).  Substantively, both 
Liriano and, separately, senior presidential political 
advisor Danilo Medina told WHA/CAR Director Nichols that 
Santo Domingo wants to intensify the bilateral dialogue on 
security issues.  This includes strengthening internal law 
enforcement (for example through expert visits from local 
U.S. police departments), border security, immigration 
issues, counter-narcotics, and counter-terrorism.  Liriano 
highlighted the need to coordinate the nation's foreign and 
defense policies, traditionally separate, and proposed that 
Fernandez's NGO "Global Foundation for Democracy and 
Development" (www.funglode.org) host a conference on Third 
Border issues including security.  Caribbean affairs director 
Danilo Clime, in a side conversation, proposed hosting a 
Dominican-U.S. conference on military and security issues. 
 
9.  (C) Medina raised two immigration issues.  He asserted 
that U.S. deportations of Dominican citizens who have been 
convicted of crimes and served prison sentences in the United 
States are aggravating a rise in criminal activity here, 
because the returning deportees bring with them patterns of 
criminal behavior learned abroad.  He said a bilateral 
agreement is needed to regulate such deportations.  The DCM 
replied that available evidence does not support the belief 
that these deportees significantly contribute to the crime 
wave.  Medina also complained about U.S. deportations of 
illegal immigrants, when apprehended for minor legal 
infractions, "breaking up families" and leaving U.S. citizen 
children without guardians in the United States.  Nichols 
replied that these deportations are required under U.S. law 
and that the large, concentrated Dominican-American community 
should be able to provide alternate living arrangements for 
the children. 
 
Cuba 
- - - 
 
10.  (C) WHA/CAR director Nichols and the DCM reiterated to 
Liriano our demarche (Ref C) about the Mexican proposal to 
establish an "informal consultation mechanism" on human 
rights in the hemisphere, in the context of GRULAC and the UN 
Committee on Human Rights (CHR).  Liriano commented that the 
Mexicans, in their meeting with GRULAC representatives in 
January, had kept their presentation "very general," had not 
referred to specific countries, and had not proposed any 
restrictions on country-specific resolutions.  She said such 
restrictions would "put a straitjacket" on CHR proceedings, 
given the wide divergence of views among member states.  She 
understood that the Mexican-proposed consultations did not 
imply any requirement for GRULAC states to vote as a regional 
bloc in the CHR.  The Cubans at the GRULAC meeting had 
expressed particular concern that their country might be 
targeted in this year's annual meeting, she said.  The DCM 
expressed our appreciation for the Dominican Republic's 
decisive vote on Cuba in the CHR last year; Liriano noted 
that "the Cubans almost killed us" for casting that vote and 
continue to show resentment. 
Foreign Policy Priorities 
- - - - - - - - - - - - - 
 
11.  (C) Deputy Foreign Minister Alejandra Liriano outlined 
the Fernandez administration's priorities in foreign policy: 
 
-- Active role: The Dominican Republic will participate 
actively in regional international organizations, bringing 
positions based on Dominican interests to meetings of those 
organizations.  Santo Domingo has proposed hosting the 2006 
OAS General Assembly, in part to continue regional attention 
to Haiti.  It will seek closer ties with the Central America 
and the English-speaking Caribbean. 
 
-- Multilateralism: The Dominican Republic will look to 
harmonize and sometimes to build consensus positions within 
multilateral organizations and will take action every time 
there is an issue that affects it.  This means playing a more 
active regional role, seeking closer ties with the 
English-speaking Caribbean, and helping achieve consensus in 
multilateral organizations on issues of interest, 
 
-- Key countries: The Dominican Republic will focus on its 
two most important bilateral relationships, those with the 
United States and Haiti.  At the same time, it will reach out 
beyond the region, exchanging ambassadors with India and 
South Africa and arranging a presidential visit to Japan in 
March. 
 
-- Investment and technology: Fernandez will seek to use 
these diplomatic relationships and contacts with businesses 
abroad to bring more foreign investment and information 
technology to the Dominican Republic. 
 
-- Energy: To supplement the agreement last year with 
Venezuela on petroleum supplies and financing, the Dominican 
Republic is trying to reach other agreements with Qatar, 
Colombia, and Brazil. 
 
-- Bilateral commissions: The Dominican Republic is proposing 
annual bilateral commissions (with the United States, Haiti, 
Colombia, and Spain, initially) to meet alternately in the 
participating countries.  The MFA wants to set up regular 
formal exchanges between the Ministry and each overseas 
embassy to discuss the full range of bilateral issues, 
possibly at sub-secretary level, every 3-6 months. 
 
-- Institution-building: The Dominican Foreign Service is 
weak as an institution.  The government wants to build a 
permanent career foreign service to serve the country rather 
than the  personal interests of any president, to improve 
computer-based diplomatic communications, and to assign to 
embassies only the right number of qualified employees. The 
Trujillo-era foreign service law needs an overhaul. 
 
-- February 27 speech: The president will address foreign 
policy in his state-of-the-nation speech to Congress on 
February 27; Foreign Minister Carlos Morales Troncoso will 
provide ideas to the text the president is drafting. 
 
IPR Issues 
- - - - - - 
 
12.  (U) A prominent local patent attorney whose clients 
include international pharmaceutical manufacturers told 
WHA/CAR director Nichols and Embassy officers that she had 
recently learned of newly proposed legislation to modify the 
law related to protection of industrial property (patents and 
trademarks).  The new draft legislation is slightly different 
from a similar bill that has been under consideration by the 
lower house of Congress for several months, which the Embassy 
raised with House President Pacheco because it proposed 
lowering penalties for violators of patents and trademarks. 
The revised proposal allows prison sentences in cases of 
trademark violations, but not for patent, infringements.  The 
attorney warned that if the proposal becomes law, convicted 
patent infringers will not only avoid serving jail time but 
will be able to pay a fine and avoid appearing in court 
entirely.  This is in keeping with the  new criminal 
procedures code implemented in 2004, which specifies that 
crimes that do not carry a prison sentence allow payment of a 
fine in lieu of a court appearance.  The attorney expects the 
legislative proposal to be submitted to Congress soon. 
 
Opposition Critique of Economic Policy 
- - - - - - - - - - - - - - - - - - - - 
 
13.  (SBU) Politicians from the opposition, an economist and 
a journalist sketched for WHA/CAR Director Nichols their 
concern that the Fernandez administration is overreaching, 
promising the Dominican public far more than it can actually 
deliver.  None of those present was willing to predict that 
Congress would pass fundamental fiscal reforms mentioned in 
the IMF standby.   With congressional election campaigning 
less than a year away, few in Congress would be willing to 
take the blame for increasing or significantly revising 
taxes.  (Later, presidential political advisor Danilo Medina 
expressed the same concern.)  Senator Santos acknowledged 
that ratification of CAFTA and its entry into force would be 
forcing events, depriving the government of important sources 
of revenue. 
 
14.  (SBU) Economist Jaime Aristy Escuder, closely associated 
with the Mejia administration but before that an advisor to 
Fernandez, said that by targeting the exchange rate, the 
administration is putting national finances in a "delicate 
and very dangerous" position.  Central Bank (CB) Governor 
Hector Valdez Albizu has aggressively increased the 
placements of CB certificates.  Since January 1, said Aristy, 
the CB has increased its net holdings by 9 billion pesos (US$ 
300 million), while rolling over 5 billion pesos in 
certificates reaching their term.  Limiting peso liquidity 
has succeeded in keeping the dollar exchange rate below 30 to 
the dollar.  IMF projections for 2005 were made at an 
estimated exchange rate of 37; Aristy says that the peso 
should be trading at about 42 to the dollar to keep Dominican 
enterprises competitive.  Recent announcements by free-zone 
apparel manufacturers of 6,000 or more layoffs in the central 
Santiago/Cibao area are only the first signs of the downside 
of the policy.  Aristy stresses that many, perhaps most, of 
the apparel workers are female heads of household.  When they 
lose their jobs, they and their children fall immediately 
into conditions of extreme poverty.  The hotel sector is 
under pressure as well, given the fall of the dollar from 42 
to less than 30. 
 
15.  (SBU) Aristy sees the Central Bank tactic as 
unsustainable over the long term.  He says that if continued 
it will mean that the CB will eventually have to refuse to 
honor its obligations, as happened in Argentina, or it will 
resort to the printing press and unrestrained inflation. 
 
16.  (SBU) Before the meeting, Aristy had been withering in 
his criticism of the Metro project touted by Fernandez 
advisor Diandino Pena. Aristy sees the murky arrangements as 
dangerous, since any financing provided to the Dominican 
Republic at 4 to 5 percent per annum would necessarily be 
offset by very high prices for materials furnished.  Aristy 
believes that a deal has already been cooked up with the 
Brazilian Export Credit Agency for the sale of equipment from 
factories owned by France,s Alsthom.  In his view, Pena is 
in a hurry to get approval of the deal before Congress is 
obliged by the IMF standby and the terms of the free trade 
agreement to pass legislation requiring open solicitations 
for government purchases.  Pena,s price tag of only USD 326 
million for the first Metro line and his completion date of 
three years are ridiculous, in Aristy,s view, and if pursued 
will leave Fernndez with little more than "a big hole in the 
ground" at the end of his term in 2008. 
 
Opposition Political and Press Issues 
- - - - - - - - - - - - - - - - - - - 
 
17.  (SBU) Acting President of the Dominican Revolutionary 
Party (PRD) Tony Raful said that Fernandez,s  electoral 
triumph of 57 percent, unmatched in Dominican history, was 
more a rejection of Hipolito Mejia,s economic mismanagement 
than an endorsement of Fernandez.  The PRD is returning to 
its base, restructuring, and hoping to overcome differences 
so as to retain an important presence after the 2006 
congressional elections.  Senator Alejandro Santos of the PRD 
and "Reformista" congressional representatives Ito Bisono and 
Marino Collante of the late president Balaguer's Social 
Christian Reformist Party (PRSC) stressed that the 
opposition-controlled Congress had cooperated so far with the 
Fernandez administration to raise taxes and pass a budget 
consistent with IMF requirements.  Congress revised that 
budget so as to provide more funding to education and health. 
 
18.  (SBU) The Reformistas said their party is undergoing 
reorganization as well.  Collante predicted that senior PRSC 
leaders such as Foreign Minister (and former vice president) 
Carlos Morales Troncoso who had bolted the party to support 
Fernandez would be excluded. 
 
19.  (U) Independent on-line journalist Fausto Adames 
recounted his discontent with the suppression of 
investigative reporting by owners of newspapers, all of them 
closely associated with banks and political interests.  He 
and other fired journalists have founded the on-line daily 
www.clavedigital.com.  Adames appealed to politicians to 
place the national interest above partisan 
beggar-thy-neighbor politics.  Economist Aristy said daily 
newspaper "Listin Diario" had lost all objectivity and had 
arbitrarily ended his weekly column, which had run for years. 
20.  (U) This cable was cleared by WHA/CAR director Brian 
Nichols. 
 
21.  (U) This piece and others in our series can be consulted 
on our classified SIPRNET site 
http://www.state.sgov.gov/p/wha/santodomingo/  along with 
extensive other material. 
HERTELL