US embassy cable - 05ASUNCION512

C O N F I D E N T I A L SECTION 01 OF 03 ASUNCION 000512 
 
SIPDIS 
 
STATE FOR WHA/BSC AND EB/IFD/OIA 
STATE PASS TO USAID FOR LAC/AA 
STATE PASS TO USTR FOR SCRONIN AND LYANG 
NSC FOR KIM BREIER 
TREASURY FOR OSIA MAUREEN WAFER 
TREASURY FOR OTA WARFIELD, VAN KOCH, MILLAR 
COMMERCE FOR ITA SARAH COOK 
SOUTHCOM FOR POLAD DAN JOHNSON 
 
E.O. 12958: DECL: 03/20/2013 
TAGS: PGOV, PREL, PINR, PTER, KCRM, PA 
SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, APRIL 8-15 
 
REF: A. ASUNCION 00458 
     B. ASUNCION 00453 
     C. ASUNCION 00308 
     D. ASUNCION 00038 
     E. 04 ASUNCION 01226 
 
Classified By: PolOff Mark Stamilio, reasons 1.4(b) and (d). 
 
1. (U) Summary 
-------------- 
-- Council rules Rienzi must seek re-appointment to Supreme 
Court 
-- IMF employee accepts offer to head Central Bank 
-- Health Minister on thin ice with NDF? 
-- NDF polls Governors about constitutional reform, 
re-election 
-- Release of supermarket owner sparks heated protests 
-- Two new charges filed against Hatem Barakat 
-- SENAD Agents Arrest Police Officers in 
Kidnapping/Extortion Case 
 
Council rules Rienzi must seek re-appointment to Supreme Court 
--------------------------------------------- ----------------- 
2. (U) Following the March 30 postponement of a Senate vote 
on Supreme Court Justice Wildo Rienzi's re-appointment, the 
Duarte administration announced that it planned simply to 
leave Rienzi on the Court for two more years, when he would 
reach the mandatory retirement age of 75 (ref B).  The 
announcement provoked a debate over two conflicting statutes 
regarding the tenure of Justices and the proper procedures 
for announcing and filling vacancies on the Court.  The Court 
ultimately conceded the issue, announced the vacancy created 
by the expiration of Rienzi's current term, and transferred 
the matter to the Council of Magistrates.  The Council ruled 
that Rienzi must compete for re-appointment.  Within a 
proscribed time frame, the Council will present a list of 
qualified candidates to the Senate for selection with the 
concurrence of the President. 
 
3. (C) Rienzi is perceived as a strong supporter of the 
Colorado Party.  Supreme Court President Fretes confided to 
PolCoun that President Duarte supported the decision to 
announce Rienzi's vacancy over the strong opposition of 
Colorado Party insider Sen. Galaverna.  Until a new candidate 
is selected, however, Rienzi remains a sitting member of the 
Court.  Galaverna continues to explore deals to keep Rienzi 
on the Court; it is not unlikely that his name will appear on 
a list of three names the Council submits to the Senate for a 
vote. 
 
IMF employee accepts offer to head Central Bank 
--------------------------------------------- -- 
4. (U) On April 12, Vice President Castiglioni announced that 
IMF economist Monica Perez had accepted the Duarte 
administration's offer to head Paraguay's Central Bank.  If 
confirmed by the Senate, Perez would replace Gabriel 
Gonzalez, who resigned after a shooting incident at his home 
on March 30 (ref A).  Perez, a native Paraguayan, worked at 
the Central Bank prior to joining the IMF, and previously 
interned at the Inter-American Development Bank, the World 
Bank, and the U.S. Federal Reserve.  She completed her 
undergraduate studies in economics at Paraguay's National 
University in Asuncion, and received her Masters and Ph.D. in 
economics from the University of Nuremberg, Germany. 
Although a handful of opposition Senators have characterized 
Perez as an outsider who does not understand Paraguay's 
economic situation, the appointment reportedly faces little 
opposition. 
 
Health Minister on thin ice with NDF? 
------------------------------------- 
5. (U) Prior to his appointment as Minister of Health, Julio 
Cesar Velazquez served as Mayor of Fernando de la Mora, a 
community on the outskirts of Asuncion and one of 15 
municipalities facing probes into the administration of funds 
and contract awards, including during Velazquez's tenure as 
Mayor.  President Duarte submitted the list of 15 
municipalities to the Chamber of Deputies last week. 
Velazquez subsequently commented that complaints lodged 
against him and his successor were merely politically 
motivated attacks by detractors.  Velazquez's comments 
provoked a sharp public rebuke from Vice President 
Castiglioni, who stated that any member of the administration 
who does not adhere to principles of transparency and rule of 
law should resign.  Duarte has refrained from public comment. 
 Commentators suggest that he would like Velazquez to resign 
but does not want to lose the support of Velazquez's 
followers in Central Department. 
 
NDF polls Governors about constitutional reform, re-election 
--------------------------------------------- --------------- 
6. (U) On April 13, during a meeting with Governors from 
several Departments, President Duarte re-introduced the 
possibility of pursuing constitutional reform, which would 
likely include amending the Constitution to permit the 
President to run for re-election (refs D and E).  Duarte 
reportedly asked the Governors their opinion on holding a 
referendum to determine whether there would be public support 
for a constitutional convention, which would be held within 
the year.  The leaders of all five opposition parties later 
expressed their opposition to the proposal.  The Liberal 
Party, Paraguay's largest opposition party, has indicated in 
the past a willingness to consider amending the Constitution 
to allow a President to run for reelection only if an 
amendment were also made to require a runoff election for 
President if the candidate tallying the highest number of 
votes did not receive a simple majority. 
 
Release of supermarket owner sparks heated protests 
--------------------------------------------- ------ 
7. (U) On April 11, Judge Ramon Melo ordered the house arrest 
during pretrial detention of Juan Pio Paiva, the owner of the 
Ycua Bolanos supermarket that caught fire on August 1, 
claiming nearly 400 lives.  The authorities are investigating 
Paiva for criminal negligence and for allegedly ordering his 
employees to lock the doors to the supermarket during the 
fire to prevent looting.  Melo ordered Paiva's transfer from 
Tacumbu prison to the National Police Polyclinic Hospital for 
treatment of his diabetes and heart condition, but since 
there were no beds available in the hospital, he was placed 
under house arrest.  News of his release sparked heated 
protests in front of Paiva's residence and one of his 
supermarkets, forcing several businesses in the area to close 
their doors on April 12.  The protests led Melo to reverse 
his decision, citing his failure to consider the "social 
effects" of Paiva's release.  Melo was subsequently recused 
from the case, and Paiva was finally admitted to the 
Polyclinic Hospital in the early morning hours of April 14. 
For the sake of other patients, the protesters have agreed 
not to protest in front of the hospital -- which is across 
the street from the Embassy -- but will continue to picket 
Paiva's supermarkets. 
 
Two new charges filed against Hatem Barakat 
------------------------------------------- 
8. (U) Prosecutors filed two new charges against Hatem 
Barakat, a brother of money launderer and suspected terrorist 
financier Assad Barakat, who in 2003 was convicted of tax 
evasion and sentenced to six years in prison (ref C).  The 
new charges against Hatem involve the falsification of his 
children's birthplace for purposes of obtaining Paraguayan 
citizenship.  Ironically, these seemingly less serious 
charges carry a greater maximum penalty than the tax evasion 
charges, subjecting Hatem to the possibility of eight years 
in prison if convicted. 
 
SENAD Agents Arrest Police Officers in Kidnapping/Extortion 
Case 
--------------------------------------------- -------------- 
 
9. (U) On April 14, two agents from SENAD's Operations Unit 
arrested three police officers and two employees of the 
Public Ministry's Judicial Investigative Center (CIJ) on 
charges of extortion.  The gang allegedly kidnapped the two- 
year old son of a woman whom they blackmailed for USD 1,000. 
They also threatened to bring drug trafficking charges 
against the woman who admitted to the DOA agents she had 
traveled to Spain transporting cocaine.  The employees of the 
CIJ had identified themselves as DOA agents in telephone 
calls to the woman demanding the ransom.  The case broke 
however when the woman lodged a complaint with the Attorney 
General's implicating police and CIJ officials leading to 
their arrest by the DOA agents. 
KEANE