US embassy cable - 05ASUNCION1215

UNCLAS SECTION 01 OF 02 ASUNCION 001215 
 
SIPDIS 
 
STATE FOR WHA/BSC, WHA/EPSC 
STATE PASS TO USTR FOR LYANG, MSULLIVAN 
USAID FOR AA/LAC ADOLFO FRANCO 
TREASURY FOR OSIA MAUREEN WAFER 
TREASURY FOR OTA RICHARD BARTHOLOMEW 
COMMERCE ITA SARAH COOK 
NSC FOR MIKE DEMPSEY, SUE CRONIN 
SOUTHCOM FOR POLAD 
US SOUTHERN COMMAND MIAMI, FLORIDA 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, ETRD, PA 
SUBJECT: MINISTER OF FINANCE REQUESTS BUDGET EXECUTION 
ASSISTANCE 
 
1.  (U) This cable is Sensitive but Unclassified.  Please 
protect accordingly. 
 
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Summary 
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2.  (SBU) Finance Minister Bergen has asked the Ambassador 
for USG assistance with a major overhaul of the Ministry's 
financial management function, as part of a general 
restructuring of the ministry.  He spoke in terms of a team 
of experts, and suggested that perhaps a university, such as 
the Kennedy School of Government or Columbia, could oversee 
the program, in part to provide political cover for the 
effort.  Post and Treasury's Office of Technical Assistance 
have been in contact about the proposal, and Minister Bergen 
will meet with OTA on September 26 in Washington.  The 
InterAmerican Development Bank resident representative has 
expressed a strong interest to us in working together to 
support Minister Bergen's plan.  End Summary. 
 
3.  (SBU) In early September, Finance Minister Bergen asked 
the Ambassador for a meeting to discuss budget issues.  Vice 
Minister of Economy Jorge von Horoch and Econchief also 
attended the meeting.  The Minister requested USG assistance 
in providing or recommending a source that could provide 
help with overhauling the Ministry's budget execution 
capacity. 
 
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REQUEST FOR HELP WITH INSTITUTIONAL OVERHAUL 
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4.  (SBU) Minister Bergen requested USG assistance with a 
major overhaul of the Ministry's financial management 
function.  Minister Bergen was aware and appreciative of the 
work of the Resident Budget Advisor from Treasury's Office 
of Technical Assistance (OTA) but he requested additional 
assistance to bring about a rapid sea change in the 
Ministry.  The Minister is focusing on increasing the 
transparency and effectiveness of budget execution, but he 
has in mind a general restructuring of the Ministry. 
 
5.  (SBU) Both Minister Bergen and Vice Minister von Horoch 
described various problems ranging from lack of capacity to 
analyze the budget proposals of other ministries to 
sabotage.  The Vice Minister complained that, while working 
on the 2006 budget, items deleted after some meetings would 
reappear hours later in subsequent versions of the budget as 
saved on the Ministry's information systems.  They also 
noted that while social spending as recorded by the overall 
budget numbers has increased, there has been little visible 
impact. 
 
6.  (SBU) What Minister Bergen has in mind is a "takeover," 
akin to a corporation hiring outside consultants to 
reengineer the firm.  He envisions a team of experts coming 
in and virtually assuming control, either by giving over-the- 
shoulder instructions to the current staff, or, if the 
current staff resists, moving them aside and putting new 
people in who will take the instructions and implement what 
the experts dictate.  He spoke in terms of a team of 
experts, and suggested that perhaps a university, such as 
the Kennedy School of Government or Columbia University, 
could oversee the program, in part to provide political 
cover for the effort. 
 
7.  (SBU) Subsequently, Econchief and the Resident Budget 
Advisor contacted OTA.  Minister Bergen, Vice Minister von 
Horoch and possibly Central Bank President Monica Perez will 
be meeting with OTA on September 26 while in Washington for 
the World Bank/IMF meetings.  Von Horoch has clarified that 
they would welcome OTA leadership in the effort, but would 
prefer the involvement of a university or think tank of some 
kind to defuse any potential complaints of USG interference 
in the Finance Ministry.  Note: the recent visit of 
Secretary Rumsfeld and press misinformation relating to 
 
SIPDIS 
future USG military operations in Paraguay has made USG 
assistance to Paraguay in such a direct manner rather 
sensitive.  End note. 
 
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IDB SEEKS TO COLLABORATE WITH USG 
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8.  (SBU) Econchief spoke with Alvaro Cubillos, Resident 
Representative of the InterAmerican Development Bank (IDB), 
as a follow-up to a previous conversation he had had with 
the Ambassador and Minister Bergen.  Cubillos expressed 
strong interest in working together to support Minister 
Bergen's plan for a general restructuring of the Ministry of 
Finance (of which the budget process is the largest part). 
Cubillos said that the IDB has up to $1.5 million in grant 
funds that could be utilized for the project, and suggested 
that bringing in the U.S. Trade and Development Agency 
Evergreen Fund (a USTDA fund established to provide the IDB 
with access to funds for US consultants) would provide 
maximum flexibility in the use of the funds. 
 
9.  (SBU) Cubillos said the IDB has experience working with 
entities such as the Kennedy School or Wharton, and welcomes 
the involvement of Treasury's OTA.  For next steps, he 
suggested that, after the Bergen meeting with OTA in 
Washington, we meet in Asuncion to devise a common plan and 
agenda to most efficiently use our combined resources. 
Cubillos suggested that the IDB could work with USTDA 
directly on the funding, while OTA could define the 
specifics of the program. 
 
10.  (SBU) Although Cubillos did not foresee a conflict with 
the World Bank's "Ministry of Excellence" program, expected 
to begin implementation in 2006, it will be important to 
coordinate with the World Bank to ensure against overlap. 
 
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COMMENT 
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11.  (SBU) Minister Bergen, displaying the pragmatic, 
results oriented stance that made him a successful 
businessman, has made an aggressive proposal to rework the 
Ministry.  Unlike his predecessor, who opted to initially 
bypass the institutional problems of the ministry by 
bringing in a large team of trusted advisors, Minister 
Bergen clearly wants to overhaul the Ministry in hopes of 
leaving a permanently strengthened institution when he 
leaves.  Minister Bergen is close to President Duarte and 
has his strong support, and Bergen is also unlikely to waver 
in his resolve.  Post strongly believes that additional USG 
investment to support Minister Bergen's request will pay 
large dividends by strengthening one of the GOP's most 
important ministries. 
 
KEANE