US embassy cable - 05ASUNCION1260

C O N F I D E N T I A L SECTION 01 OF 03 ASUNCION 001260 
 
SIPDIS 
 
NSC FOR SUE CRONIN 
SOUTHCOM FOR POLAD DAN JOHNSON 
TREASURY FOR OTA WARFIELD, VAN KOCH, MILLAR 
 
E.O. 12958: DECL: 08/19/2015 
TAGS: PGOV, PREL, PINR, PTER, KCRM, PA, BR 
SUBJECT: PARAGUAY: BRAZIL SEEKING GREATER COOPERATION ON 
CRIME 
 
Classified By: A/DCM James P. Merz for reasons 1.4 (b) and (d). 
 
1.  (C)  Summary. On 10/5, Emboffs met with Brazilian Embassy 
Poloffs to discuss views on GOP reform efforts, particularly 
as they relate to efforts to combat contraband, money 
laundering, and other illicit activities in the Tri-Border 
Area (TBA).  Brazilian PolCouns conveyed an interest in 
deepening U.S.-Brazilian cooperation on specific cases as 
well as openness to bringing more pressure to bear on 
Paraguay through the UN CTC.  Brazil continues to object to 
the U.S. making public pronouncements regarding its concerns 
about terrorist financing in the TBA absent the U.S. 
providing evidence.  Brazil's Polcouns sought to play down 
the controversy over FM Amorim's recent remarks criticizing 
Paraguayan-U.S. relations; separately, he expressed concern 
about "heavyhanded" GOP measures against Brazilian landowners 
in Paraguay.  End Summary. 
 
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Brazilian-Paraguayan Cooperation on Crime Difficult 
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2.  (C)  On 10/5, Polcouns and post's Resident Enforcement 
Advisor (REA) met with Brazilian PolCouns Antonio Da Costa 
and Poloff Luis Galvao to discuss our respective efforts to 
combat transnational crime.  Da Costa made it clear that 
efforts to develop joint activities with Paraguay on customs 
and immigration controls and even basic information sharing 
had not progressed significantly notwithstanding commitments 
made at 3 1 meetings.  Brazilian officials did not trust 
their counterparts particularly in the TBA; they had shared 
information with Paraguay on some customs cases and the 
information had been compromised.  Brazil remain committed to 
combating contraband in the TBA but saw little evidence that 
Paraguay shared that commitment.  (Note: Notwithstanding 
Brazil's distrust of Paraguay's law enforcement community, 
Brazil has deepened cooperation with Paraguay's Anti-Drug 
Secretariat (SENAD) on the investigation of key drug cases, 
 
SIPDIS 
including one that led to Paraguay's arrest of Brazilian drug 
kingpin Mendes Mesquita in November of last year.  End Note.) 
 
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U.S. Focus on Key Institutions, Key Cases 
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3.  (U)  Emboffs appreciated and shared Brazil's frustration. 
 Corruption within customs remained a daunting challenge. 
Nevertheless, President Duarte's appointment of non-political 
technocrats to key offices including the Ministry of Finance, 
Customs, and the Tax Revenue Department offered some hope. 
The Embassy has focused on building trust and capacity in key 
agencies/offices including the Anti-Drug Secretariat (SENAD) 
and the Secretariat for the Prevention of Money Laundering 
(SEPRELAD).  Last year, we had helped create and fund 
Paraguay's Statistics Center and a Specialized Technical Unit 
(UTE) to help investigate IPR violations.  Presently, we are 
sponsoring a four-week training course in the conduct of 
economic crime investigations into a variety of areas such as 
trademarks, copymarks, piracy, tax evasion, corruption and 
money laundering for investigators from SENAD, SEPRELAD, UTE, 
the Finance Ministry, the Tax Revenue Department, and 
Customs.  All participants had been polygraphed as were the 
prosecutors from the Economic Crimes Unit with whom we work 
on specific cases. 
 
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Towards Broader U.S.-Brazilian Cooperation 
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4.  (C)  Da Costa repeated Brazil's objections to U.S. claims 
that terrorist financing occurs out of the TBA, urging the 
U.S. to share evidence in support of these claims or desist 
from making them.  As an example, he noted that Brazil 
considered Assad Barakat a criminal but not a terrorist 
financier.  (Note: Barakat is a Brazilian citizen of Lebanese 
descent who was sentenced to 6 1/2 years in prison in 
Paraguay for a conviction for tax evasion in 2004.  The U.S. 
has reason to believe he was involved in terrorist financing. 
 End Note.)  However, on a broader level, Da Costa agreed 
Brazil shares our concern about illicit activity that takes 
place in the TBA, including money laundering, and made a 
point of requesting that Brazil and the U.S. cooperate more 
closely, not only in terms of coordinating to avoid 
duplication, but also in terms of information/intelligence 
sharing to advance key initiatives and the investigation of 
key cases, including the case of Kassem Hijazi.  (Note: 
Hijazi is a Brazilian citizen of Lebanese descent who has 
been charged with tax evasion and is implicated in money 
laundering.  The U.S. has reason to believe he has been 
involved in terrorist financing.  End Note).  Brazil had a 
deeper knowledge of the region and the key players but the 
U.S. had its own information and expertise to offer.  Da 
Costa specifically requested that this cooperation extend to 
our respective customs and law enforcement officials both in 
Washington and Brasilia, conveying the hope that our 
communicating this message to both places would improve 
prospects for concrete follow-up. 
 
5.  (C)  Aware that adoption of Paraguay's anti-money 
laundering (AML) legislation -- introduced to Congress in May 
2004, over 16 months ago -- is a high USG priority, Da Costa 
also offered to consider ways Brazil could support that 
objective.  Recalling Brazil's reticence last year to have 
the UN CTC draw greater attention to Paraguay's failure to 
adopt AML and CT legislation, Polcouns requested Brazil's 
support for bringing greater pressure to bear before the UN 
CTC.  According to Da Costa, Brazil was reluctant to work 
through the CTC last year in view of GOP efforts to ratify 
the UN's counter terror conventions and its readiness to 
receive a team of experts from the UN CTC, UNODC, CICTE, and 
UNCHR.  During that visit last December, Paraguay assured 
officials that Congress would adopt the AML law in early 
Spring 2005 and that  President Duarte would introduce the 
counter terror bill immediately afterwards.  Ten months 
later, Paraguay had done neither, yet meaningful 
international pressure had not been brought to bear on it. 
Da Costa appreciated U.S. frustration with Paraguay and 
conveyed GOB openness to bringing more pressure to bear upon 
Paraguay both through the CTC and the 3 1 mechanism. 
 
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GOP-GOB Frictions 
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6.   (U)  Brazil has come under political and public 
criticism in Paraguay for conveying concern about the August 
visit of SECDEF Rumsfeld and Paraguay's military cooperation 
with the U.S. as well as for warning Paraguay against 
pursuing a bilateral trade agreement with the U.S.  In 
September, the Paraguayan Congress adopted a resolution 
rejecting Brazilian FM Amorim's remarks about U.S.-Paraguayan 
relations.  At the same time, Paraguay's Environmental 
Ministry has opened an investigation into the activities of 
Brazilians owning large tracts of land in the Department of 
Alto Paraguay, in northwestern Paraguay bordering Brazil.  Da 
Costa sought to shrug off the controversy over Brazil's 
criticism of Paraguay's relations with the U.S., attributing 
the stir to a misrepresentation of his FM's words.  Instead, 
he focused on Paraguay's "heavyhanded" investigation of 
Brazilian cattle ranchers accused of violating laws 
pertaining to the purchase and titling of land and import of 
heavy machinery.  He conceded some ranchers may have skirted 
the law or should have known better than to trust the local 
Paraguayan officials assisting them with legal paperwork. 
However, he maintained that a GOP bias against landed 
Brazilian interests was driving the investigation. 
 
7.  (C)  Comment.  Brazil's complaint about public U.S. 
statements regarding terrorist financing is a common refrain 
that we can expect to hear repeated in stronger terms in 
upcoming 3 1 events. If it were possible and appropriate, it 
would be helpful to share the intelligence that supports our 
concerns with the Brazilians to push back this complaint. 
Post welcomes closer cooperation with Brazilian law 
enforcement officials in Paraguay, Brazilia and Washington 
with a view to investigating key cases.  Post's REA plans to 
meet more regularly with Brazilian Embassy customs and police 
liaisons.  We similarly support strengthened cooperation with 
Brazilian law enforcement officials in Brasilia and 
Washington provided it improves prospects for concrete 
results.  While skeptical Brazil will back up its expressed 
openness to bringing more pressure to bear on Paraguay before 
the UN CTC with action in New York, we find it encouraging 
Brazil appreciates our frustration and has expressed 
readiness to explore options  in international fora including 
the UN and 3 1 Security Group.  Post requests Department/USUN 
explore ways we can bring CTC pressure to bear upon Paraguay 
including by requesting the CTC Director seek an invitation 
to Paraguay to assess its progress in moving on key AML and 
CT legislation.  End Comment. 
KEANE