US embassy cable - 05SANTODOMINGO3820

UNCLAS SECTION 01 OF 02 SANTO DOMINGO 003820 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR WHA, WHA/CAR, WHA/EPSC, EB/TPP/BTA-MANOGUE; 
STATE PASS USTR FOR VARGO AND MELITO; 
NSC FOR SHANNON AND MADISON; TREASURY FOR OASIA- 
MAUREEN WAFER; USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN 
BASIN DIVISION; USDOC FOR 3134/ITA/USFCS/RD/WH; 
DHS FOR CIS-CARLOS ITURREGUI 
 
E.O.12958:  N/A 
TAGS: ETRD, PREL, DR, PGOV, CAFTA 
SUBJECT: DOMINICAN REPUBLIC REACTS TO DR-CAFTA APPROVAL 
ON HILL 
 
 
1.  Summary:  In the hours after the U.S. House of 
Representatives voted to approve DR-CAFTA implementing 
legislation, Dominican reactions indicate that the vote 
has dispelled any doubts about U.S. ability to 
implement DR-CAFTA and may have improved prospects for 
Dominican ratification.  End summary. 
 
2. Background note:  For the past three weeks, 
Dominican private sector, labor, and civil society 
representatives have been negotiating a proposal on tax 
reforms that will be required to replace tax revenues 
lost under DR-CAFTA.  Opposition politicians and some 
business interests have demanded that ratification of 
DR-CAFTA be linked to simultaneous passage of the 
reforms and compensatory measures to make national 
businesses more competitive.  The tax talks have 
progressed, but the newly elected party president of 
the main opposition PRD, Senator Ramon Alburquerque, 
has taken a hard line on this linkage.  A meeting of 
the PRD leadership on July 25 adopted his view as the 
party line.    End note. 
 
3. The mediator of the negotiations on tax reform and 
DR-CAFTA ratification, Monsignor Agripino Nunez, called 
DCM Kubiske to congratulate us on the House vote and 
say that DR-CAFTA will be good for both countries.  He 
said that an agreed package on tax reform should be 
achievable by July 29, at least in broad outline.  The 
DCM mentioned the desirability of DR-CAFTA ratification 
as soon as possible. 
 
4. In another call to DCM, the chief of the Dominican 
DR-CAFTA negotiating team, former Secretary of Commerce 
Sonia Guzman, and former presidential trade advisor 
Carolina Mejia commended the "triumph" of the vote in 
the United States.  They were "euphoric" that DR-CAFTA 
was moving forward, optimistic that Dominican 
ratification would be completed, and equally optimistic 
that in 10 years the Dominican Republic would be "a new 
country." 
 
5. Senator Enriquillo Reyes (PRD) asserted to political 
officers, "We will pass DR-CAFTA."  Reyes, like Senate 
president Andres Bautista (PRD) but unlike Senator 
Alburquerque, wants to ratify now and then deal with 
the other, more time-consuming, proposals. 
Alburquerque and others are playing politics in advance 
of the May 2004 Congressional elections, said Reyes. 
He also believed that the razor-thin margin in the 
House of Representatives would help convince Dominicans 
that DR-CAFTA is not lopsidedly favorable to the United 
States - as critics have claimed -- but will have real 
benefits for the Dominican Republic. 
 
6. In remarks to the afternoon press, Albuquerque - who 
has been increasingly criticized by Dominican 
commentators as the biggest roadblock on the road to 
ratification - used terms that were only slightly less 
obstinate than what he told the Ambassador over lunch 
on July 14.  Alburquerque's bottom line was the same: 
DR-CAFTA ratification, compensatory measures for 
national business interests, and tax reform must 
proceed together.  And the Fernandez administration 
must submit its own tax reform proposal for debate by 
the opposition (Comment: to share the political cost of 
raising taxes.  End comment.). 
 
7. Chamber of Deputies president Alfredo Pacheco (PRD), 
contacted by the DCM, said there had been progress in 
the direction of ratification (Comment:  presumably on 
tax reform).  Pacheco, who will shepherd ratification 
through the lower house of Congress, commented that 
with the favorable U.S. Congressional vote, "the 
Dominican people" will see things more clearly now and 
will move expeditiously toward ratifying DR-CAFTA. The 
DCM mentioned that, with investors inclined to work 
with countries that have already ratified, the 
Dominican Congress might wish to conclude the matter 
promptly, consistent with the national interest. 
Pacheco agreed. 
 
7. Dominican Ambassador to the United States Flavio 
Dario Espinal, in a phone interview with daily "El 
Caribe," commented that the U.S. approval of DR-CAFTA 
"opens a new scenario in our relations with the United 
States."  To Espinal, the House vote "is a clarion call 
to our Congress to focus on ratification." 
 
8. The local Coalition to Support DR-CAFTA, which 
includes the AmCham, issued a press release July 28 
revising its earlier stance published the week of July 
11, advocating action on tax reform and DR-CAFTA "on 
parallel tracks."  Now, the Coalition "calls on the 
Dominican Congress to seize this important moment and 
act in the highest national interest approving the 
agreement as soon as possible.  This action would show 
the Dominican Republic's commitment to integration in 
the global economy and "to economic and institutional 
reforms to establish a modern market economy under rule 
of law."  The country, concluded the statement, "cannot 
delay this historic decision." The statement also 
called for "a framework of action" to strengthen the 
country's competitiveness in order to take advantage of 
the opportunities presented by DR-CAFTA. 
 
KUBISKE