US embassy cable - 05SANTODOMINGO3199

C O N F I D E N T I A L SECTION 01 OF 02 SANTO DOMINGO 003199 
 
SIPDIS 
 
STATE FOR WHA, WHA/CAR, WHA/EPSC, EB, EB/TPP/BTA/EWH; 
NSC FOR SHANNON AND MADISON; USCINCSO ALSO FOR 
POLAD;TREASURY FOR OASIA; USDOC FOR 
4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION 
USDOC FOR 3134/ITA/USFCS/RD/WH; DHS FOR CIS-CARLOS ITURREGUI 
 
E.O. 12958: DECL: 05/24/2015 
TAGS: ETRD, PGOV, EFIN, DR, CAFTA 
SUBJECT: AMBASSADOR BRINGS TOGETHER DOMINICAN PRESIDENT AND 
LEGISLATORS FOR CAFTA 
 
Classified By: DCM Lisa Kubiske.  Reason:  1.4 (b) and (d). 
 
1.  (SBU) At the Ambassador's initiative, Dominican President 
Leonel Fernandez convened a meeting  at the presidential 
palace on Tuesday evening, June 14, with the presidents of 
the Dominican Senate  and House, mediator Monsignor. Agripino 
Nunez of the Catholic PUCMM university, the Ambassador and 
DCM to discuss timing of legislative ratification of the free 
trade agreement with the United States and Central American 
states (CAFTA). 
 
2.  (SBU) By the end of the meeting, the Dominicans had all 
agreed: 
 
- - that they all supported CAFTA; 
 
- - that they would convene a public "hearing" at the Palace 
on Wednesday morning next week with President Fernandez 
chairing at least the opening and closing sessions, to give 
the principa interested parties  a chance to voice their 
concerns and be heard at a national level.  They will 
probably include the press.  Afterwards, they announced this 
much to the press  (some reporters mistakenly wrote that the 
session would be today instead of next week).  Msgr Agripino 
Nunez will convene the meeting in his capacity as chair of 
the ad hoc "National Dialogue." 
 
- - that there would be no commitment to legislating 
immediately to fulfill any  of the concerns expressed, but 
that the information could be factored into later discussions 
about the budget and public spending bills for 2006 and 
eventual fiscal reform.  Fernandez was categorical in his 
insistence that the government would adhere to the 2005 
budget as already voted, despite any moves to craft fiscal 
reform, as required by the IMF agreement. 
 
- - that it should be possible to have the Dominican congress 
vote to ratify a week later, i.e., by around the end of June. 
 
3.   (SBU) Comment:  We know from experience that lots of 
follow up will be needed. However, the agreement to hold a 
hearing and for President Fernandez to lend his prestige and 
stature to the exercise breaks several weeks of CAFTA inertia 
in the Dominican Republic.   Fernandez agreed readily late 
last week when the Ambassador proposed such a meeting, the 
guest list for it, the focus,  and the presentation.  Msgr. 
Nunez was a skillful "closer." 
 
4. (C) The Ambassador's pitch was that the timing of 
Dominican ratification matters greatly, as it will send a 
signal to Washington of interest in the trade agreement by 
the Dominicans as a people and country with close relations 
and a sizable trade with the US.  He argued that there is 
little downside to ratifying before the U.S. Congress takes 
action and a lot to lose from delay. 
 
5. (SBU) Fernandez insists on de-linking the vote on CAFTA 
from the process of deciding on fiscal reform and any 
eventual "compensatory measures."  The Ambassador   noted the 
good outcome reported from the Senate Finance Committee's 
mock mark-up  earlier in the day. He complimented Fernandez 
for exercising presidential leadership. 
 
6.  (SBU) The congressional leaders agreed that giving 
special interests a chance to "be heard" would be sufficient 
before moving to a vote.  (Note:   Chamber president Alfredo 
Pacheco has also just been elected as one of several national 
vice presidents of the PRD.) 
 
7. (C) In informal comments to the Ambassador, Senate 
president and DCM before the meeting, Fernandez commented 
that the free trade agreement would put a great deal of 
pressure on Dominican businesses.  He sounded 
uncharacteristically pessimistic.  Continuation of the 
Caribbean Basin Initiative would have been easier for the 
country, which in only a short period had moved from being 
primarily an  agricultural economy to being a service 
economy, without the phase of significant  industrial 
development.  The free zone industries were a thing apart 
from the domestic economy, he commented, given that most of 
them imported inputs and exported essentially their entire 
production.  He spoke of his desire to reinforce democracy 
and institutions in the country, commenting that the  United 
States has its own brand of democracy, in which there is a 
certain amount  of control by opinion-makers.  For example, 
he said, when the New York Times recently printed an article 
on the Dominican Republic that contained  "inaccuracies," 
Fernandez wrote to the paper.  The editors at first ignored 
his comments and then, after some inquiries, agreed to print 
excerpts but not the full text. Fernandez declined to accept 
any editing, and the letter never appeared.  In contrast, he 
said,  "Here, newspapers will print anything that anyone 
says, regardless of whether the comments are truthful or 
informed." 
 
Other News 
 
8.  (SBU) Fernandez was scheduled to give a speech that same 
evening delivering his decision on whether to proceed with 
cuts in the subsidy for cooking gas agreed in the IMF 
program.  (septel follows).  He previewed his approach, 
stating that the government is NOT in a position to eliminate 
it right now.  (NOTE: Fernndez did tell the country that the 
subsidy would be continued at its present level of 17 pesos 
per gallon of LPG, approximately US 60 cents; he mentioned 
the fact that the mechanisms and infrastructure are not yet 
available to target the subsidy.)  The President related that 
when the government did the survey of poorest families, who 
number about 180,000 it turned out that many were using wood 
or coal, not gas.  This being so, he said, targeting the 
subsidy to the poorest group would  not provide any comfort 
to the neediest.  Removal of the subsidy would hurt middle 
class households and transportation operators.  Political 
pressure from the transportation sector has been vocal and 
insistent; he seems to have decided that now is not the time 
to remove the subsidy for these groups.  He expressed the 
hope that eventually more vehicles would use liquefied 
natural gas, since it is cheaper and cleaner than gasoline. 
 
9. (SBU) Fernandez highlighted to the congressional leaders 
his hopes that the Central Electoral Board (JCE) and the 
Camara de Cuentas, a government auditing body, could both be 
staffed by non-partisan officials to give these groups 
credibility.  The Congressional leaders listened but did not 
comment. 
 
Hertell