US embassy cable - 05ASUNCION860

C O N F I D E N T I A L SECTION 01 OF 06 ASUNCION 000860 
 
SIPDIS 
 
STATE FOR WHA/BSC 
 
E.O. 12958: DECL: 06/27/2015 
TAGS: PGOV, PREL, MARR, MASS, PA 
SUBJECT: WELCOME TO PARAGUAY, US SOUTHERN COMMAND CDR. 
CRADDOCK 
 
Classified By: Polcouns James P. Merz for reasons 1.4 (b) and (d). 
 
1.  (C)  General Craddock, Embassy Asuncion and I warmly 
welcome your visit as an opportunity to promote U.S. 
interests in military, counter-narcotics and 
counter-terrorism cooperation with Paraguay.  You come at a 
particularly sensitive time, with press and political 
activity calling into question important aspects of our 
military to military relationship.  The open and permissive 
environment for exercises and other military activities here 
is both extremely valuable and potentially vulnerable to 
local and regional pressures.  The following updates the 
situation you will find and highlights key issues.  It is 
important to avoid discussion of the ICC with Paraguayan 
interlocutors. 
 
----------------------------------- 
Your Program in Asuncion 
----------------------------------- 
 
2.  (U)  I am glad to have this opportunity to host your 
visit to Paraguay.  After we meet, the visit will begin with 
the Country Team's brief on the overall situation in 
Paraguay.  We then will transition to more detailed 
discussions on CT.  We have arranged for you to visit both 
the Minister of Defense, Dr. Roberto Gonzalez Segovia and the 
Commander of Armed Forces, GEN Jose Key Kanazawa Gamarra, and 
his service chiefs.  I understand that you met CHOD GEN 
Kanazawa in Buenos Aires last month during the Southern Cone 
Defense Conference.  This meeting should afford you a good 
opportunity to further your relationship with him.  I also 
recommend a meeting with Vice President Castiglioni.  We are 
also making arrangements for you to visit Ciudad del Este.  I 
understand this will be your first visit to Paraguay.  I 
believe that you will find your stay to be both enjoyable and 
fruitful. 
 
--------------------------------------------- -------------- 
The Political Scene:  President Duarte's Efforts Under Fire 
--------------------------------------------- -------------- 
 
3.  (C)  Your visit comes almost two years into the 
presidency of Nicanor Duarte Frutos.  In that time, Duarte 
has taken steps to deal with a pressing fiscal crisis, revive 
the economy, and fight corruption.  In recent months, 
however, political support for Duarte has sagged with polls 
indicating the general population is not satisfied his 
government has taken adequate measures to improve the economy 
and tackle corruption.  As part of a pact to gain control of 
the Congress with the support of dissident Congressmen from 
opposition parties, Duarte's party, the Colorados, supported 
election of a member of the socialist "Country in Solidarity" 
Party Senator (Carlos Fillizola) to be President of the 
Congress.   Congressmen opposed to this tenuous pact are 
bitter about having lost control of the Congress in the June 
elections and threaten to undermine the Colorados' 
legislative agenda.  Fillizola is a strong supporter of the 
ICC, opposes U.S. military exercises, and has called actions 
in Afghanistan and Iraq "Genocide."  While as President of 
Congress he will likely moderate his views, his ascendancy is 
troubling for the U.S. agenda. 
 
------------------------------------- 
Paraguay's Public Security Challenges 
------------------------------------- 
 
4.  (U)  Members of the Patria Libre Party (PPL), a far-left 
political movement based in the countryside, kidnapped and 
subsequently murdered the daughter of a former president, 
Cecilia Cubas, whose body was discovered in February. 
Evidence ties the PPL to the FARC.  A culture of distrust 
allowing for little interinstitutional cooperation hampers 
the ability of Paraguay's law enforcement community to tackle 
rising concerns about public security; Paraguay's National 
Police are widely disparaged by the general population as 
incompetent and corrupt.  Last November, given the lack of 
confidence in the police, the President called the military 
out of the barracks to assist with law enforcement efforts. 
Its profile on the street has diminished in recent months as 
focus on the Cubas kidnapping recedes from the public eye. 
The Cubas killing and clear evidence of FARC involvement 
shocked Paraguay's leaders and population.  Increased 
cooperation with Colombia and realization of the need for 
better intelligence and other security measures were one 
result. 
 
--------------------------------------------- - 
Reforming the Economy, But Growth Insufficient 
--------------------------------------------- - 
5.  (U)  Paraguay's economy relies on agriculture.  It 
features bloated but weak state institutions and the heavy 
involvement of state-owned enterprises.  There is 
considerable activity involving the trading of imported 
legitimate goods, contraband and counterfeit products, most 
of which are destined for Brazil or Argentina.  The Duarte 
government took office in 2003 on the heels of Paraguay's 
worst recession in years promising to attack widespread 
corruption and reform the economy.  He named a non-partisan, 
technocratic economic cabinet and has supported their 
efforts.  On a macroeconomic level, Paraguay's performance 
has been strong: economic growth reached 2.6 and 2.9 percent 
in 2003 and 2004, respectively, and inflation was brought 
down to near 3 percent in 2004.   However, whereas the 
government succeeded early on in getting some significant 
economic reform laws through Congress, progress over the last 
year has been slow.  For Paraguay to escape from the poverty 
affecting roughly half of its population, the country needs 
to increase productivity by attracting capital and raising 
annual growth rates closer to 5 or 6 percent.  Success will 
require the government to stay the course on macro economic 
stability and undertake deeper structural reforms. 
 
----------------------------------------- 
International Crime and Counter Terrorism 
----------------------------------------- 
 
6.  (U)  The Tri-Border Area (TBA), the area of Paraguay that 
meets Brazil and Argentina, near the city of Ciudad del Este, 
is a primary area of USG concern due to the high rate of 
transnational crime that impinges on U.S. interests.  The 
area is notorious for drug and other smuggling, including 
trafficking in persons, intellectual piracy, document 
forgery, counterfeit cigarette manufacturing and loose border 
controls, especially at the Friendship Bridge connecting 
Paraguay with Brazil.  A priority concern for that region is 
terrorist fundraising, especially by Hezbollah.  Despite the 
lack of specific antiterrorist statutes, Paraguay has 
actively prosecuted known terrorist fund-raisers on tax 
evasion charges.  President Duarte noted the threats from 
international crime, including terrorist fund raising, in his 
July State of the Union. 
 
7.  (SBU)  Paraguay is a significant transit point for the 
transportation of cocaine and other narcotics by air from 
Colombia to Brazil.  Much of the northwestern part of the 
country is barren and uninhabited, and the GOP has 
difficulties in enforcing the law due to geography and the 
political power some drug traffickers wield.  SENAD, the 
national anti-narcotics secretariat, coordinates GOP 
interdiction efforts, with significant assistance from the 
DEA.  In November 2004, Paraguay and Brazil collaborated in a 
joint operation, with DEA assistance, that produced an 
historic seizure of over 260 kilograms of cocaine and the 
arrest of notorious Brazilian drug trafficker Ivan Carlos 
Mendes Mesquita, wanted in the U.S. on drug trafficking 
charges involving Colombia,s FARC guerrillas.  Paraguay 
cooperated with the USG extradition request and Mendes 
Mesquita was taken into U.S. custody on June 27, a dramatic 
and unprecedented step.  Clear congratulations are 
appropriate.  Post considers this case emblematic of the 
success we have been able to achieve by working with the 
SENAD as an autonomous unit.  Paraguay has no radar coverage 
throughout the entire country and it is not unlikely some 
interlocutors will request U.S. assistance in this area.  We 
are looking into this possibility in the context of JIATF's 
"Southern Light" but Paraguay has many other tasks more 
important than obtaining radars, and we are supporting phased 
improvements in enforcement and prosecution. 
 
-------------------------- 
U.S. Interests in Paraguay 
-------------------------- 
 
8.  (SBU)  U.S. interests in Paraguay are focused on 
strengthening democratic institutions, promoting sound 
economic policies and good governance, disrupting criminal 
organizations, and combating terrorist financing.  Post 
maintains bilateral assistance programs dealing with 
combating narcotics trafficking, money laundering, 
intellectual property violations, and trafficking in persons. 
 Post has a Department of Justice Resident Legal Advisor and 
a Department of Treasury Resident Enforcement Advisor who 
have worked quietly behind the scenes over the past year to 
assist the Paraguayan Government in developing appropriate 
money laundering and counter terror legislation. In the wake 
of the Cubas kidnapping, Vice President Castiglioni traveled 
to the U.S. for meetings with VP Cheney, SECDEF Rumsfeld, and 
other key officials to discuss a comprehensive approach to 
Paraguay's security challenges, including a planned 
high-level seminar sponsored by the Center for Hemispheric 
Defense Studies (CHDS) in September or October.  USAID and 
the Peace Corps also have programs in the country.  Paraguay 
has been named a threshold country for Millennium Challenge 
Account funding; its poor historical record on corruption was 
the major reason it did not qualify for full participation in 
the program. 
 
---------------------- 
The Military's Mission 
---------------------- 
9.  (SBU)  Paraguay's military is a small force struggling to 
redefine its mission while it endures insufficient funding, 
scandals, and frequent and questionable leadership 
appointments.  The Army is the largest of the three services 
(9,000), followed by the Navy (2,000) and Air Force (1,200). 
The Navy has a law enforcement mission on Paraguay's rivers. 
The military's primary mission is to protect Paraguay,s 
territorial integrity, defend the legitimate authorities in 
accordance with the Constitution, and cooperate in civil 
defense.  It does not have a lead role in counter drug 
operations; however, the military provides a specialized 
tactical unit to support SENAD.  The military's Special 
Forces unit is in the process of organizing a company- size 
counterterrorism unit, and the Presidential Guard Unit has a 
specialized counterterrorist platoon.  More recently, 
Paraguay has attempted to increase its presence in 
peacekeeping operations.  It is seeking Spanish support to 
deploy a 200 person contingent to Haiti subsequent to a 
failed attempt to get sufficient Brazilian support. 
 
10.  (U)  Military infrastructure and equipment is old, 
obsolete and in desperate need of repair/replacement. 
Paraguay's defense budget for 2005 represents approximately 
1.7 percent of the national budget or USD 59M, an USD 8M 
increase over 2004.  Ninety percent of the budget is used to 
pay salaries and 5 percent is used for sustaining conscripts, 
leaving only 5 percent for operations, maintenance and 
training.  Budget problems are not expected to go away in the 
near future due to lack of strong support in congress and 
lingering memories of Paraguay's 35-year dictatorship among 
some politicians.  Also, the military is continuously beset 
by public scandals including the July 4 arrest of an active 
duty AF Colonel for flying smuggled cigarettes into 
Argentina. 
 
11.  (U)  Despite the above-noted challenges, the military 
has remained subordinate to civilian authority and has 
remained in their barracks.  When called, it has supported 
law enforcement activities, public health campaigns and 
provided transportation assistance for farmers to bring their 
products to market.  The military is still seen as the first 
to be called whenever there is a "crisis," and many 
Paraguayans feel "safer" when the military is out on the 
streets with the police.  The role of the Presidential Guard 
and its leader, Col. Galeano, have created controversy.  With 
its own armor, artillery and other material, and better 
trained troops, it is the strongest unit in country and acts 
independently. 
 
------------------------------------- 
Strong Record of Military Cooperation 
------------------------------------- 
 
12. (U) Post's Office of Defense Cooperation (ODC) has 
developed a robust JCET/CNT program, second to only that of 
Colombia in the region, and implemented the Counter Terrorism 
Fellowship Program contributing significantly toward 
establishment of host nation CT capability, including 
designation and creation of a Paraguayan Tier 1 unit. 
Funding from the Enhanced International Peacekeeping 
Cooperation (EIPC) program has facilitated the training of 
over 700 observers and peacekeepers and the deployment of 
approximately 252 Paraguayans in support of peacekeeping 
operations in this hemisphere and Africa.  Currently, 61 
Paraguayans are deployed in support of peacekeeping 
operations.  Separately, ODC has also launched an outreach 
program, leveraging the State Partnership Program, designed 
to encourage the military to build institutional links with 
legislators in part through visits by Paraguayan Congressmen 
as well as Flag officers from the Joint Staff and Ministry of 
Defense with their counterparts in the U.S.  The partnership 
with the Massachusetts National Guard is robust; the MARNG 
designation of a full time TCA coordinator from MARNG has 
greatly promoted this lash up.  These visits have generated 
greater appreciation for the value of military cooperation 
and helped solidify support in Congress for approval of 
protections and authorizations for U.S. participants in the 
exercises.  The incredible impact of MEDRETES and other 
humanitarian deployments in poor areas over the years is 
invaluable.  During a recent public controversy, one 
legislator answered critics of military exercises by citing 
the poor who have vision, hearing, or their lives saved.  US 
military support after the tragic fire last August also made 
a lasting impression. 
 
------------------------------- 
Flap Over Article 98/Immunities 
------------------------------- 
 
13.  (U)  In the absence of a SOFA,  the U.S. has gained 
protections for U.S. participants in a diverse range of 
U.S.-Paraguay joint military exercises for defined periods of 
time, most recently gaining Congressional approval of 
immunities for exercises scheduled from July 2005 through 
December 2006.   In June, however, an article in an Argentine 
newspaper criticizing the Paraguayan Senate's decision to 
extend the immunities for these exercises and suggesting 
these exercises were a harbinger to creation of a U.S. base 
in Paraguay, prompted significant press treatment here on the 
issue.  FM Rachid and MOD Gonzalez defended the decision, 
qualifying it as consistent with GOP treatment of cooperation 
agreements with other countries and with Paraguay's 
commitments under the Rome Treaty.  In late June, the Senate 
granted the U.S. participants permission to enter for these 
exercises over the next 18 months. 
 
14.  (SBU)  In 2003, President Duarte said Paraguay would not 
negotiate an Article 98 agreement.  Nevertheless, Paraguay's 
FM has conveyed a willingness to extend protections to U.S. 
citizens provided it would not have to be approved by 
Paraguay's Congress and would not be considered to contravene 
Paraguay's Rome Treaty obligations.  Negotiations have been 
going on for two years.  In the wake of the recent flap over 
the immunities for participants in military exercises, 
Argentina, Brazil, Paraguay, and Uruguay signed a declaration 
at the MERCOSUR Summit committing themselves not to sign 
bilateral or multilateral agreements that would affect the 
jurisdictional basis of the ICC, particularly in connection 
to Article 98.  Paraguay's lawyer for Article 98 negotiations 
with the U.S. conveyed concern that this declaration could 
pose a further obstacle to concluding an agreement. 
 
15.  (SBU)  Paraguay currently provides a very permissive 
environment for U.S. military exercises.  Given the recent 
flap over immunities for those exercises and the MERCOSUR 
Summit declaration, negotiations over Article 98 negotiations 
have entered a very delicate stage with lawyers on both sides 
engaging closely.  We recommend not entering into a 
discussion of this issue given the risk it could prompt 
another controversy that could set back negotiations on 
Article 98 and the record of success on protections for 
current exercises. 
 
------------------------ 
The Impact of Your Visit 
------------------------ 
 
16.  (U)  Press interest in the your visit will be high, 
although not exceedingly so as members of the Paraguayan 
press are accustomed to visits by SOUTHCOM chiefs.  The 
Paraguayan journalists are generally friendly people.  Even 
if you have no time, it is better to stop and answer one 
question than to refuse questions.  If you refuse, then it 
becomes a case of offended reporters claiming "secret 
meetings."  It is also advisable to plan in advance with your 
meeting host what you will say to the press after the meeting 
and to stick to answering questions on topics that you are 
comfortable with.  If something out of your area is asked, 
refer the question to the U.S. Embassy press office or the 
Ambassador. 
 
Some talking points you might consider are: 
 
Purpose of visit 
 
-- This is an initial visit to Paraguay to meet key civilian 
and military leaders valued friend. 
 
Immunities for troops 
 
-- The immunities granted to U.S. troops by the Paraguayan 
Congress are typical of those that would be granted to troops 
doing similar training in other countries. 
 
-- The Ambassador can provide more details about the 
bilateral discussions and arrangements here in Paraguay. 
 
International Criminal Court/Treaty of Rome 
 
--  I would refer you to the Ambassador on this issue. 
 
Rumors of a base 
 
-- Reports of the basing of U.S. troops is without any basis 
in fact. 
-- The truth is that small numbers of U.S. personnel, 
generally 10-20 persons, will train with their Paraguayan 
military colleagues during periods of two to six weeks.  No 
U.S. soldiers will be deployed in Paraguay for extended 
periods of time, and there will never be more than a few 
dozen U.S. service members in Paraguay for longer than 45 
days. 
 
-- The exercises include humanitarian medical assistance to 
thousands of needy campesinos and others in the interior. 
 
-- The exercises will take place during the next 18 months. 
The official status for these troops, for sake of efficiency, 
was requested for the trainings and medical exercises over 
the entire time period. 
 
-- Again, none of the trainings lasts more than 45 days. 
These exercises are not linked to any other assistance being 
provided by the U.S. government. 
 
Guarani aquifer (rumors that the U.S. wants to steal 
Paraguay's supply of fresh water) 
 
-- I have heard of these rumors and they are without basis in 
fact. 
 
-- The U.S. has access to adequate water supplies.  In the 
unlikely event of a crisis, there are sources much closer and 
more cost-effective. 
 
International Crime and Counter-terrorism 
 
-- As clearly outlined in the U.S. report on global 
terrorism, we believe the activities in the Tres Fronteras 
are basically fundraising and financing ) not operational in 
nature. 
 
-- We rely on the authorities in the countries involved to 
provide the legal structure to allow the investigation, 
arrest, and prosecution of persons involved in such 
activities. 
 
-- We are pleased by Paraguay's active cooperation in the 
fight against terrorism.  It has taken important steps to 
counter this grave problem and was instrumental in helping 
strengthen regional cooperation with the U.S. (through the 
"3 1" mechanism). 
 
But where is your proof that Paraguay funds terrorists? 
 
-- President Duarte mentioned the threat from terrorist 
financing in his annual message to congress 
 
-- Illicit activity, particularly along the tri-Border, 
fosters corruption, discourages investment, inhibits economic 
development, and creates a milieu favorable to money 
launderers and terrorist financiers. 
 
-- In recent years, Paraguay has convicted individuals for 
tax evasion who have also been implicated in laundering money 
to terrorist groups. 
 
-- It is vital Paraguay continue to prosecute and convict 
those implicated in illicit activity, including money 
laundering and terrorist financing. 
 
Anti-drug effort 
 
-- Paraguay is making an important effort against drug 
trafficking, despite limited 
resources.  We applaud historic achievements including the 
arrest and extradition of Mendes Mesquita who had ties to the 
FARC. 
-- We are confident there will be continued good performance 
in this area, which will 
benefit the Paraguayan people, as well as the region at large. 
 
What will SOUTHCOM be doing to help Paraguay fight drug 
trafficking?  Can you give us radars and helicopters? 
 
-- In 2004, the U.S. provided Paraguay with USD 1,000,500 in 
funds to assist Paraguay in combating narcotics trafficking, 
money laundering, trafficking in persons, and intellectual 
property rights piracy. 
 
-- Those funds support training for judges, prosecutors, and 
police, purchase of equipment, and conduct of operations. 
U.S. funds also support construction of SENAD offices in 
Pedro Juan Caballero and expansion of SENAD's offices in 
Mariscal Estigarribia. 
-- Since 1987, the U.S. has donated over USD 5.8 million to 
assist Paraguay's law enforcement efforts. 
 
What will SOUTHCOM do to help Paraguay deal with the threat 
posed by the FARC? 
 
-- Evidence of FARC ties to the Cubas kidnapping is very 
disturbing.  The FARC has demonstrated its readiness to 
commit any number of atrocities, including kidnappings and 
other forms of terrorism, to advance its objectives. 
 
-- The U.S. recognizes Paraguay's commitment to address this 
problem.  We are exploring ways we can support Paraguay, 
particularly in the law enforcement field, with appropriate 
training. 
 
-- In May, the Vice President traveled to the U.S. to discuss 
ways to expand U.S.-Paraguayan cooperation.  That visit 
produced agreement to create a Trade Transparency Module in 
the Customs Department, provide anti-kidnapping training, and 
conduct a workshop sponsored by the Center for Hemispheric 
Defense Studies (CHDS). 
 
KEANE