US embassy cable - 05ASUNCION559

UNCLAS SECTION 01 OF 06 ASUNCION 000559 
 
SIPDIS 
 
INL -- ABBY SMITH 
 
E.O. 12958: N/A 
TAGS: ABUD, AFIN, SNAR, KCRM, PA 
SUBJECT: PARAGUAY'S FY 2007 INL BUDGET REQUEST -- CORRECTED 
SUBMISSION 
 
REF: STATE 488 
 
I. PROGRAM SUMMARY 
 
Paraguay is a transit country for roughly 40-60 metric tons 
of Andean cocaine en route to Brazil, Europe, the Middle 
East, and the United States.  Paraguay is also a source 
country for high-quality marijuana consumed largely in Brazil 
and Argentina.  Paraguay is a principal money laundering 
center, but there is no evidence as to what percentage is 
drug-related.  The multi-billion dollar re-export contraband 
trade centered in Ciudad del Este facilitates money 
laundering.  The narcotics trade and money laundering have a 
direct negative impact on USG political, economic and 
security interests, particularly as a possible source of 
terrorist financial support through the Tri-border region. 
They also pose a continued threat to Paraguay's fragile civil 
institutions, democratic order, and economic well-being. 
Despite notable efforts by President Nicanor Duarte to combat 
corruption, it remains embedded throughout the Paraguayan 
government, judiciary, and economy. 
 
As outlined in the Mission's MPP, the work plan for FY 2007 
and beyond is designed to focus our limited assets on 
strengthening the GOP's capability to disrupt cocaine 
trafficking operations, pursue and arrest high-level 
narcotics traffickers, and to combat money laundering.  Our 
goal continues to be working with the Anti-Narcotics 
Secretariat (SENAD) and the Financial Analysis Unit (FAU) of 
 
SIPDIS 
the Anti-Money Laundering Secretariat (SEPRELAD) and SENAD's 
Financial Crime's Unit (UIDF) to strengthen narcotics and 
money laundering investigations, arrests and prosecutions. 
Indicators of success feature prosecution of major narcotics 
cases, the implementation of a special communications 
program, and a notable reduction in the cocaine flowing 
through Paraguay. 
 
SENAD continues to work closely with DEA and SEPRELAD's FAU 
to combat money laundering and piracy through new efforts to 
change existing money laundering laws and to provide 
training.  A U.S. Department of Justice (DOJ) Resident Legal 
Advisor (RLA), detailed to Post in June 2003, has assisted 
the GOP in drafting a new money laundering law and is working 
on developing the skills of prosecutors.  A Department of 
Treasury (DOT) Resident Enforcement Advisor (REA) was 
assigned to the Embassy in 2004 to assess training and other 
needs of SEPRELAD -- Paraguay's FIU -- to help mount an 
effective anti-money laundering mechanism. Indicators of 
success include passage and enforcement of the new money 
laundering law and obtaining convictions in money laundering 
cases. 
 
Paraguay has made significant strides to professionalize its 
anti-drug enforcement agency and improve its ability to 
conduct complex operations based on intelligence.  In 
November 2004, cooperation between Brazil and Paraguay 
produced the arrest of Carlos Mendes-Mesquita, a major 
narcotrafficker of the Beira-Mar drug trafficking 
organization tied to Colombia's FARC and wanted in the U.S. 
as well as the seizure of 262 kilograms of cocaine - historic 
by Paraguayan standards.  Similar cooperation throughout 2004 
enabled Paraguay to extradite to Brazil five additional 
high-profile narcotraffickers.  In January 2005, Paraguay 
arrested Nilton Cesar Atunez, another notorious Brazilian 
trafficker associated with the Beira Mar organization and 
seized 103 kilograms.  These arrests demonstrate an increased 
ability and disposition on the part of SENAD to undertake 
effective investigations of major drug traffickers, often in 
collaboration with Brazilian counterparts. 
 
SENAD is at a critical point in its development and is 
demonstrating increasing will and ability to do the right 
thing. The removal of all police from SENAD has transformed 
it into a genuinely autonomous unit free of the corrupting 
influence of the National Police.  The addition of over sixty 
new agents into the semi-vetted unit provides SENAD with the 
additional manpower required to increase operations against 
narcotraffickers.  In addition, SENAD recently requested and 
received approval from the President to hire another fifty 
new agents that will also become part of the semi-vetted unit 
and signals the GOP's commitment to dedicate increased 
resources to combat drug trafficking.  SENAD will need USG 
support to polygraph and train the new recruits as well as to 
provide bonus payments and increased funding for operations. 
 
Post appreciates the challenge Washington faces in deciding 
how to allocate a diminishing pool of resources allocated to 
the Latin American regional account. Our budget submission 
represents an appreciation for this reality and reflects a 
consideration of pipeline funds.  A comparison with our 
submission from prior years will reveal we have significantly 
reduced our request for funds.  Nevertheless, USG funding in 
several key areas remains crucial for Paraguay to build on 
its progress in combating narcotics trafficking. 
Notwithstanding our assertions to the contrary, the GOP will 
interpret a cut in funding as a political statement signaling 
U.S. dissatisfaction with GOP efforts and a lack of U.S. 
commitment to GOP programs.  More substantively, a cut in 
funding will undercut SENAD's ability to sustain its 
stepped-up effort to stem trafficking activities. 
 
II.  PROJECT DESCRIPTIONS: Under the FY07 Mission Performance 
Plan (MPP) Performance Goal of Disruption of Criminal 
Organizations, Post aims to to enhance Paraguayan law 
enforcement institutions that counter transnational crime 
harmful to U.S. national interests, including drug 
trafficking, money laundering, IPR violations, and TIP. 
 
A. Project Title: Strengthening Host Country Enforcement 
Capability 
 
B. Project Description:  This project involves continued 
support of the SENAD's semi-vetted investigative unit which 
was recently expanded by over sixty agents as mentioned 
above.  Additional growth is expected in 2005 with the hiring 
of fifty new agents who will also be brought into the 
semi-vetted unit.  These field agents are located in four 
regional offices, assigned to conduct investigations of, and 
carry out operations against, suspected drug traffickers. 
Funding will be used to purchase upgraded computers and 
create and install a centralized database for storing, 
retrieving, and analyzing narcotics intelligence. We will 
also use funds to provide several training courses including 
firearms identification, OPDAT training for judges and 
attorneys, report writing and evidence handling, and the 
provision of an intensive three-week drug investigation 
course for all agents.  The broader goal of identifying, 
arresting and prosecuting traffickers and money launderers is 
also supported through related projects such as training, 
equipment and commodities, operational support and the 
narcotics detection canine program. 
 
Post is requesting an increase in funding for operational 
support in order to meet requirements for a plan elaborated 
by JIATF South and the Embassy to enhance support of GOP 
interdiction efforts in collaboration with USG agencies. 
This proposal, which originated in response to a request by 
the Ambassador, represents an effort to meet the the physcal 
and political challenges that we face in Paraguay with a 
comprehensive, integrated plan that will enable us to take 
advantage of JIATF South support in terms of intelligence, 
planning, and coordination.  The plan consists of three 
phases involving intelligence preparation for CNT operations, 
small unit training, technical support for helicopter 
maintainance, an expansion of helicopter support 
infrastructure, and employment of airbourne surveillance for 
detection and monitoring and possible deployment of ground 
based radars.  DEA will fund construction of remotely located 
fuel tanks out of Andean Funds.  However, we would like to 
draw down our operational funds to fund mobile fuel trucks as 
well as fuel that will allow for fuel support of helicopters 
in the outlying reachs of Paraguay, particularly the Chaco 
region, where the trafficking takes place. 
 
C.  Resources Requested: USD 350,000 
 
D.  Resource Justification:  With the assistance of DEA and 
thanks to INL funding, SENAD has taken significant strides 
toward strenghtening its institutional capacity to combat 
narcotics trafficking throughout the country.  It has 
signficantly enhanced the number of agents who have taken 
polygraph exams and been assigned to one of the four regional 
offices. In addition, the continued purchase and training of 
new canine units have helped to increase overall cocaine 
seizures for the past three years. 
 
Much of the trafficking of drugs in Paraguay centers upon the 
Chaco, an area the size of Arizona.  The Chaco is highly 
remote and the lack of any radar in Paraguay provides 
traffickers with an expansive corridor for moving cocaine 
through the region.  Helicopter coverage is vital for 
conducting operations in this harsh terrain where passable 
roads are few and distances great.  The cost of helicopter 
fuel is prohibitive for the GOP.  INL funds are critical for 
making the JIATF South-Embassy Conops operational and 
effective.  This project will further enhance efficiency and 
provide critical information for the investigation of 
narcotics traffickers. It will strengthen the ability of 
SENAD to conduct investigations and serve to professionalize 
law enforcement officials. GOP does not have the resources to 
carry out these essential activities.  Failure to meet these 
resource requirements with impact negatively on the ability 
of the GOP to conduct operations and make seizures. 
 
E.  Performance Measurements: 10% increase in the number of 
narcotics cases successfully prosecuted, 10% increase in the 
number of operations successfully executed. 
F.  Sustainability:  Currently, the GOP lacks the ability to 
polygraph its agents and the funds to compensate them 
properly.  It also does not have sufficient funding to 
purchase equipment, train its law enforcement and judicial 
sector personnel, and conduct operations.  Ultimately, 
dedication of funds obtained from sale of seized assets 
should help the GOP meet more of its resource requirements. 
Train the trainer programs will enable the GOP to better meet 
future training needs. 
 
G.  Evaluation Plan:  DEA and GOP statistics on 
investigations and seizures. 
 
----------------------------------------- 
 
A.  Project Title: Control Money Laundering and Financial 
Crime 
 
B.  Project Description:  INL funds continue to provide 
training and equipment for the SEPRELAD's FAU, which is 
responsible for processing suspicious activity reports, the 
SENAD's UIDF which conducts criminal investigations of 
suspected drug-related money laundering cases, as well as 
other judicial sector officials involved in prosecuting money 
laundering cases.  Complete and informative suspicious 
activity reports and thorough investigations are critical for 
the preparation of successful prosecution of money laundering 
cases.  The Duarte Administration has increased SEPRELAD's 
budget by 500 percent, providing it with sufficient resources 
to dismiss analysts hired by a previous director, who left 
under suspicion of corruption, and to hire new employees, and 
move into more secure quarters.  The Treasury Resident 
Enforcement Advisor (REA) will work with the director to 
increase reporting of suspicious activities and will assist 
in training the new analysts.  OPDAT may share training 
expenses.  The expected increase in activity will require an 
expanded computer infrastructure, the purchase of vehicles, 
and equipment for the SEPRELAD and SENAD teams. 
 
C.  Resources Requested:  USD 50,000 
 
D.  Resource Justification:  Funding will be used to provide 
equipment and training for SENAD's UIDF and SEPRELAD's FAU to 
enhance their capacity for collecting and analyzing 
suspicious activity reports and other intelligence received 
from financial institutions and obligated entities and for 
conducting criminal investigations of suspected money 
laundering violations.  It will also be used to train 
prosecutors and judges in prosecuting money laundreing cases. 
 Ultimately, the goal is to create an effective anti-money 
laundering mechanism that will eventually draw in 
professional organizations, and Customs and border control 
officials.  SEPRELAD has taken significant steps to hire 
professional analysts and establish respectable operating 
procedures to analyze cases.  However, its analysts and 
investigators of finanancial crimes from other GOP agencies 
require specialized training in the entire conduct of 
investigation from analysis of SARs to prosecution of 
defendants.  The U.S. is the only entity capable of providing 
this kind of training.  Without it, the GOP's ability to 
investigate and prosecute money laundering cases will be 
significantly hampered. 
 
E.  Performance Measurements:  The goal of this project is to 
develop cases actually investigated through Resident 
Enforcement and Legal Advisor-led training, and coalition 
building among financial institutions and investigative 
units.  Progress toward achievement of the project will be 
measured in terms of the number of successful prosecutions of 
money laundering cases presented to the Attorney General's 
Office. 
 
F.  Sustainability:  The GOP's ability to secure funds seized 
in assets will impact significantly its capacity to meet 
future training requirements.  Train the trainer programs 
will also address sustainability requirements. 
 
G.  Evaluation Plan: GOP statistics. 
 
----------------------------------------- 
 
A.  Project Title: Demand Reduction Assistance 
 
B.  Project Description:  This project is focused on 
expanding current efforts to educate school-aged children on 
the dangers of illegal use of drugs.  The funds requested are 
directed primarily toward SENAD's school and 
neighborhood-based prevention programs, and to possible 
support for the creation and airing of public service 
announcements (PSAs.)  Plans for this year involve expanding 
the program to reach children, parents, and teachers within 
Asuncion and in remote areas of the country. 
C.  Resources Requested:  USD 30,000 
D.  Resource Justification:  Public awareness of the 
seriousness of drug use in Paraguay will help build public 
support for GOP anti-narcotics interdiction and production 
programs.  It will also educate children, parents, and 
teachers about the dangers of drug abuse.  Much research has 
shown effective programs to prevent first use of drugs by 
youth are critical to reducing the number of adults who 
consume and abuse drugs. 
 
E.  Performance Measurements:  Receipt of demand reduction 
courses by at least 50% of the students attending schools in 
Asuncion, and a 10% decrease in instances of narcotics abuse 
in targeted areas, as measured by surveys and statistical 
data.  Greater public awareness (particularly by school-aged 
children) as measured by reliable polls on the dangers posed 
by drug use and the drug trade to Paraguayan society. 
 
F.  Sustainability:  Historically, the GOP has dedicated few 
resources to programs aimed at reducing demand.  It may be 
necessary for other governments or NGO's to meet resource 
requirements absent U.S. funding. 
 
G.  Evaluation Plan: GOP statistics. 
 
----------------------------------------- 
 
Project Title: Culture of Lawfulness 
 
Project Description:  This project would foster a culture of 
lawfulness to counter the culture of corruption that prevails 
in Paraguay through programs focused on schools and civil 
society.  The project's core would be integrated into the 
curriculum of targeted schools to ensure community buy in and 
long term impact.  Separately, the project would identify NGO 
partners for community-based efforts particularly focused on 
identifying future leaders of the private and public sector. 
 
Resources Requested:  $50,000 
 
Resource Justification:  Corruption is endemic in Paraguay. 
According to Transparency International's most recent survey, 
Paraguay ranked as the second most corrupt country in South 
America and the Caribbean after Haiti, and the sixth worst in 
the world.  There are many reasons for this problem and the 
Duarte government has adopted several reforms to deal with 
it.  However, much of the problem resides in cultural 
attitudes towards corruption that foster and sanction its 
practice.  Until the society as a whole embraces a culture of 
lawfulness that views corruption as not only illegal but 
morally wrong and the cause of Paraguay's poverty , it will 
remain difficult to transform Paraguay's longterm record and 
develop deeply rooted institutions.  In a society where 
corruption is the norm, Paraguay could benefit significantly 
from such a program geared towards education on the benefits 
of lawfulness.  Funds would be used towards development of an 
education campaign, similar to the demand reduction program, 
focused on school-aged children, their parents and teachers. 
Also, the development of Public Service Announcements on 
anti-corruption could target all levels of society. 
 
Performance Measurements:  Number of participants in the 
program; change in attitudes of participants about corruption 
per polling. 
 
Sustainability: National and local authorities would be 
required to commit their own resources for continuation of 
the project. 
 
Evaluation Plan:  GOP and USG statistics. 
 
III. RESOURCE TABLES 
 
A.  PROJECT RESOURCE REQUEST TABLE - BY COST COMPONENT 
 
Project 1 - Strengthening Host Country Enforcement Capability 
 
----------------------------------------- 
 
Cost Component     FY04     FY05     FY06     FY07    FY08 
 
Operational        160     230       230      220     230 
Support 
 
Equipment and      132     100       100       85      85 
Commodities 
 
Training            11      30        25       25      25 
 
Canine Program      45      30        20       20      20 
 
Total Project      348     390       375      350     360 
Request 
 
Project 2 - Money laundering and financial crimes 
 
----------------------------------------- 
 
Cost Component     FY04     FY05     FY06    FY07  FY08 
 
Commodities                 30        30      35    35 
 
Training          50        20        20      25    25 
 
Total Project 
Request           50        50        50      60    60 
 
 
Project 3 - Demand reduction assistance 
 
----------------------------------------- 
 
Cost Component     FY04     FY05     FY06    FY07  FY08 
 
Commodities        2.5       5        5        5     5 
 
Training          17.5      25       25       25    25 
 
Total Project 
Request           20        30       30       30    30 
 
 
 
Project 4 - Culture of lawfulness 
 
----------------------------------------- 
 
Cost Component     FY04       FY05     FY06    FY07   FY08 
 
Commodities                 10       10      10     10 
 
Training                    20       30      30     20 
 
Total  30    40      40     30 
 
 
 
 
 
 
 
B.  PROGRAM DEVELOPMENT AND SUPPORT TABLE - BY OBJECT CLASS 
 
----------------------------------------- 
 
Object Class       FY04     FY05     FY06    FY07  FY08 
 
Salaries           40       54       54      54      54 
 
Awards              0        0        0       0       0 
 
Commodities        3.5      6         2       2       2 
 
Training/ 
Travel             12       6         6       6       6 
 
ICASS              23.4    40.5      45      50      50 
 
Total              78.9   106.5     107     112     112 
 
 
 
C.  SUMMARY TABLE 
 
----------------------------------------- 
 
Project            FY04     FY05     FY06     FY07   Y08 
 
Project 1         348       390      375      350    360 
 
Project 2          50        50       50       50     50 
 
Project 3          20        30       30       30     30 
 
Project 4                    30       40       40    300 
 
PD&S               78.9     106.5    107      112    112 
Subtotal 
(without PD&S)    418       500      495      470    470 
 
 
Total             496.9     606.5    602      582    582 
 
D.  RESOURCE ALLOCATION TABLES 
 
1) ALLOCATION BY FUNCTIONAL ACTIVITY 
 
----------------------------------------- 
 
Category            FY04     FY05     FY06     FY07 FY08 
 
-- Institutionalize 
GOP anti-drug 
capabilities        348.    390      375      350   360 
 
-- Demand Reduction 
Assistance           20     30       30       30     30 
 
Subtotal            368    420      405      380    390 
 
 
Transnational 
Crime 
 
-- Control M/L      50     50       50        50     50 
 
 
Rule of Law 
 
-- Culture of 
lawfulness                30        40        40     30 
 
 
2)  COST ALLOCATION BY TARGET DRUG 
 
----------------------------------------- 
 
Drug                FY04     FY05     FY06     FY07 FY08 
 
Cocaine           398     480        475       450  450 
 
Marijuana          20      20         20        20   20 
 
Total             418     500        495       470  470 
KEANE