US embassy cable - 05SANTODOMINGO3877

S E C R E T SECTION 01 OF 03 SANTO DOMINGO 003877 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR WHA, WHA/CAR, WHA/AND, INR, EB/ESC/IEC/EPC; 
NSC FOR SHANNON USCINCSO ALSO FOR POLAD;TREASURY FOR 
OASIA-MAUREEN WAFER; USDA FOR FAS; 
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: 08/03/2025 
TAGS: PGOV, ETRD, DR, Dominican Politics, CAFTA 
SUBJECT: DOMINICAN POLITICS #34:  PRESIDENTS DO "SUMMIT" 
AND PLEDGE CAFTA RATIFICATION 
 
Classified By: EcoPol Counselor Michael A. Meigs.  Reason:  1.4(b) and 
(d). 
 
1.  (U)  Following is number 34 in our series on Leonel 
Fernandez's first year in office: 
 
Dominican &Summit8 -- LF and HM Pledge to Support CAFTA-DR 
 
(U) On the morning of August 2 President Fernandez and former 
president Hipolito Mejia met for breakfast at the residence 
of catholic university president Msgr Agripino Nunez and 
discussed cooperation on ratification of CAFTA-DR and the 
fiscal reform package.  The press was informed only after the 
meeting started.  El Nacional, the afternoon tabloid, carried 
a color picture of the two presidents smiling and embracing 
outside Agripino's house. 
 
(S) Msgr Agripino Nunez told the Ambassador this afternoon 
that the meeting had been prepared in great secret, 
coordinating through presidential chief of staff Danilo 
Medina.  Nunez asked U.S. officials to treat his comments 
&with the secrecy of the confessional.8  Mejia had spoken 
to Nunez last week, stressing the final para of his letter to 
President Fernandez (see telegram), in which he avowed his 
willingness to cooperate for the interests of the nation. 
 
(SBU) Fernandez arrived first for the 8:30 encounter, 5 
minutes before Mejia.  He was accompanied by Danilo Medina. 
The closed door breakfast included only the presidents, 
Medina, and Msgr Nunez.  The presidential press corps was 
informed at 9:00 and was awaiting when the participants 
emerged at 10:50. 
 
(C) According to Msgr Nunez, the presidents agreed on the 
necessity of ratification of the DR-CAFTA and the associated 
fiscal package that the Senate had declared must be passed at 
the same time.  Mejia pledged to deliver the votes of 
virtually all PRD Senators.   Nunez says that Mejia has the 
certain loyalty of at least 21 senators in the 32-member 
Senate.  The PLD has a single Senator. 
 
(S)  Senator Ramoon Albuquerque, just elected president of 
the PRD, is probably an exception.  Nunez qualified Senator 
Albuquerque several times as corrupt and self-seeking, but 
emphasized that in the PRD process in June of selecting PRD 
Senator Andres Bautista for re-election, Mejia had 
demonstrated that Senator Albuquerque had no control over PRD 
senators. 
 
(C)  Msgr Nunez said that the presidents were in agreement 
about the deal hammered out so far in the consultative 
committee chaired by Nunez (and boycotted by the PRD, an 
initiative of Albuquerque).  Offsets have been identified for 
the 25 billion Dominican pesos (about $90 million) that 
disappear from the 2006 government budget, and participants 
in the process -- the administration's economic/fiscal team 
and representatives of economic sectors and interests -- are 
generally in agreement.  The remaining task is to find a 
source for approximately 5 billion pesos (about $18 million) 
that are proposed to be used for subsidies, compensation and 
other benefits for the losing agricultural sector 
(principally through tax exemptions for imports of capital 
goods and inputs).  The working proposal is for these to come 
from an increase in the corporate income tax from 25% to 30%; 
the powerful Entrepreneurs' Council (CONEP) is resisting this 
approach and proposed to extend the base for the value-added 
tax (with a rate of 16%) from just under half of all retail 
goods to all ("including even yams," according to Nunez). 
Participants in the dialogue will convene tomorrow, 
Wednesday, in the afternoon to resume this discussion. 
 
(SBU)  Msgr Nunez says that he believes that agreement can be 
reached on the package elements this week.  The agreement is 
that Fernandez will take those elements and present them 
formally to the legislature, which is due to reconvene in 
regular session on August 16.  He has the option of calling 
an extraordinary session but there was no discussion of his 
doing so. 
 
(C) Other than the presidential inauguration a year ago, this 
is the first time the presidents have met face to face since 
a November 2003 session presided by Msgr Nunez to agree to 
approaches to the presidential campaign.  Nunez says that the 
two were firmly agreed on the need to exert their leadership 
in the national interest to assure that CAFTA-DR is ratified. 
 Nunez predicts that the agreement will be ratified by the 
end of August, at the latest. 
 
(S)  The atmosphere was relaxed and cordial from the outset, 
according to Nunez, with no recriminations.  In reply to 
Mejia's letter on bank fraud, Fernandez assured him that 
there had been a misunderstanding; he had not intended to 
imply that Mejia's economic policies were solely to blame for 
the crisis or that the bank frauds did not occur.  The two 
agreed that it was necessary for the judicial cases to 
proceed normally through the courts.  Mejia's 
characteristically gruff, accusatory remarks on television 
the previous evening were apparently no obstacle to the 
breakfast understanding. 
 
(S)  Nunez said that during general discussion of crime and 
the threat of narcotics, Fernandez informed Mejia that much 
of the traffic in drugs was coming from Venezuela (clearly a 
reference to the chart of "air tracks" shown to presidents by 
Secretary Rumsfeld in the mid-May CAFTA-DR visit to 
 
SIPDIS 
Washington.  They agreed that the narcotics trade had 
transformed Dominican society and that it had become 
difficult to know whether well-off individuals were 
associated with the trade. 
 
(SBU) Both agreed on the need for practical cooperation 
between the political parties on matters of national interest. 
 
(U)  Remarks to the press reported in the afternoon tabloid 
El Nacional included Fernandez's comment that ratification of 
CAFTA-DR is of fundamental importance because the country 
cannot afford to scorn an agreement already approved by the 
United States; the U.S. is the principal commercial partner 
of the country.  Concerning the fiscal discussions, he said 
that participants didn't seek to create new taxes but rather 
to substitute for lost revenues.  Mejia said that PRD 
legislators are awaiting a draft proposal for study and 
eventual approval.  He added, "The country stands above our 
individual interests and no one can stand in the way of 
dialogue."  Mejia said that he was hardly in any position to 
oppose ratification, considering that his government was the 
one that initiated the negotiations.  During the presidential 
campaign, he said, he and Fernandez said many things about 
one another, but that was all in the past.  In their meeting 
they had spoken about many subjects.  Msgr Nunez called it a 
&meeting of engagement and cordiality" in which the 
presidents left open the possibility of meeting again as many 
times as might be necessary; he said that they had left open 
the possibility of including a representative of the PRSC, 
the country's third major political party. 
 
2. (U)  Drafted by Michael Meigs 
 
3.  (U)   This piece and others in our series can be 
consulted at our SIPRNET site 
http://www.state.sgov.gov/p/wha/santodomingo/  
along with extensive other material. 
HERTELL