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Cablegate: Lugo Focuses On Counternarcotics, Microenterprise

VZCZCXYZ0010
OO RUEHWEB

DE RUEHAC #0624/01 2491858
ZNY CCCCC ZZH
O 051858Z SEP 08
FM AMEMBASSY ASUNCION
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7225
INFO RUCNMER/MERCOSUR COLLECTIVE PRIORITY
RHEHNCS/NSC WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHMFISS/HQ USSOUTHCOM MIAMI FL PRIORITY
RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY
RHMFISS/USSOCOM MACDILL AFB FL PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

C O N F I D E N T I A L ASUNCION 000624

SIPDIS

WHA/FO FOR A/S SHANNON, CMCMULLEN, WHA/BSC FOR MDRUCKER,
BFRIEDMAN, CCROFT, INL FOR A/S JOHNSON, INL/LP ASMITH,
DGRAHAM, NSC DFISK, USAID/CACIAA JCARDENAS

E.O. 12958: DECL: 09/06/2028
TAGS: PREL SNAR PGOV ECON PA
SUBJECT: LUGO FOCUSES ON COUNTERNARCOTICS, MICROENTERPRISE

REF: ASUNCION 611

Classified By: DCM Michael J. Fitzpatrick; reasons 1.4 (b) and (d).

1. (C) SUMMARY: President Lugo expressed interest in closer
counternarcotics cooperation with the United States and
requested U.S. assistance with microenterprise development
during a Friday, August 29 dinner with the Ambassador. Lugo
made clear that he does not trust some of his closest
advisors or cabinet ministers. During dinner, which took
place before the weekend rumors emerged regarding coup
planning, Lugo told Ambassador about a tape recording of
former President Duarte and General Lino Oviedo betting that
Lugo will last only three to eight months in office. Lugo
told the Ambassador his two goals are to strengthen democracy
and make public institutions work. In his now-characteristic
warm style, the president told the Ambassador that he wants
to continue meeting officially as well as unofficially ""with
discretion."" Lugo mentioned that he enjoys using his
""pastoral"" personality as president to reach out to local
government. Lugo's dinner invitation is another sign of his
interest in close relations with the United States. END
SUMMARY.

--------------------------------------------- ---------
AN OPPORTUNITY FOR CLOSE COUNTERNARCOTICS COOPERATION
--------------------------------------------- ---------

2. (C) Lugo invited Ambassador Ayalde, USAID Director, and
Pol/Econ Chief to dinner August 29 at his residence, where he
expressed interest in closer counternarcotics cooperation
with the United States. Lugo was accompanied by new SENAD
(Paraguay's counternarcotics agency) Director Cesar Aquino
(septel bio report), who has been his close friend for 30
years, as well as Omar Castorino, a wealthy architect who is
a behind-the-scenes-player in Paraguayan politics. Aquino
told the Ambassador of his plans to travel to Brazil and
other Southern Cone countries the week of September 1-5 to
coordinate on counternarcotics. He mentioned the possibility
that Brazil might work with Paraguay on alternative
development programs near their shared border. Aquino
repeated that he is interested in improving Paraguay's
microtrafficking and demand reduction efforts; Lugo was
supportive of Aquino's goals. Castorino asked whether
counternarcotics could be part of Paraguay's second MCC
Threshold Program; USAID director reminded the group that it
is mainly up to Paraguay to design its own proposal based on
its priorities. (NOTE: Counternarcotics is not identified in
the GOP's near-final proposal to MCC for the Stage II
Threshold Program. END NOTE).

-----------------------------
MICROENTERPRISE DEVELOPMENT
----------------------------

3. (C) Lugo asked the Ambassador for support for
microenterprise development, particularly for small land
owners. Lugo appreciated Secretary Gutierrez' visit and
confirmed his interest in strengthening commercial ties.
Lugo mentioned increasing Paraguayan exports of sesame,
organic sugar, tartar, cotton and stevia to the United
States. He also asked that U.S. assistance focus on
Paraguay's three poorest departments -- San Pedro, Caazapa
and Neembucu. Lugo noted that (his adopted home department
of) San Pedro has been isolated throughout Paraguay's history
and that past administrations had politically persecuted many
of its inhabitants, including his uncle (an early Colorado
opponent of Stroessner). He also expressed interest in
continued USAID health programs.

----------------------
PARAGUAYAN POLITICS
----------------------

4. (C) Lugo made clear to the Ambassador that he does not
trust some of his closest advisors or cabinet ministers,
telling her that Aquino and Castorino are ""of confidence.""
Lugo lamented that he does not have more women in his
cabinet, and called his Minister of Health, Esperanza
Martinez, his only hope (playing on the fact that her name in
Spanish means hope). Castorino and Aquino stressed the
importance of briefing the president directly on important
issues such as the MCC Threshold Program so he can maintain
control. With respect to his relations with Vice President
Franco, Lugo said Franco ""wanted more"" than the vice
president's traditional role as a liaison to Congress. (NOTE:
Ambassador paid a courtesy call on Franco September 3, during
which Franco alluded to ""distance"" between him and Lugo.
Franco purports to want to keep Paraguay on a moderate,
centrist course, but left Ambassador with the distinct
impression that he is out of the political loop. END NOTE).

5. (C) During dinner, which took place before the rumors
emerged regarding a planned coup (reftel), Lugo told
Ambassador about a tape recording of former President Duarte
and General Lino Oviedo betting that Lugo will last only
three to eight months in office. He also worried about the
Congressional deadlock over President Duarte's attempts to
assume his senate seat. (NOTE: Coup rumors, which were
over-exaggerated in the first place, have since blown over.
The current Senate crisis ended September 4, when UNACE
changed its position to vote with Lugo's Alliance and others
to make President Duarte an honorary senator (with voice but
no vote) as mandated by the constitution. END NOTE). Lugo
also promised a ""big announcement"" this week, related to
evidence he will produce about attempted bribes and
""briefcases"" full of cash. (NOTE: News broke early September
5 about the Lugo administration bringing charges against
managers (mostly Colorados) scattered throughout Paraguay's
port authority accepting large bribes. END NOTE).

--------------
LUGO'S GOALS
--------------

6. (C) Lugo, clearly a big picture thinker, told the
Ambassador that when he leaves office, he hopes his legacy
will be that he strengthened democracy and made public
institutions work. ""I don't want to get rich,"" he said.
Instead, he said he plans to retire in five years to reflect
and perhaps write a book on his administration. Lugo
revealed a dim view of the courts, the public ministry, and
prosecutors given low conviction rates. ""If (the
prosecutors) were any good,"" he said, ""more people would be
in jail."" Lugo also said it was a ""shame"" that public
perceptions of the judiciary are low, referring to a recent
event at which Supreme Court President Nunez was prevented
from speaking because the crowd booed him.

------------------------------------
LUGO REACHING OUT, TO US AND OTHERS
------------------------------------

7. (C) In his now-characteristic warm style, the president
told the Ambassador that he wants to continue meeting
officially, as well as unofficially ""with discretion."" Lugo
also offered the Ambassador some insight into the Embassy's
history in Paraguayan politics. He told her about past
rumors that the Embassy was behind Marzo Paraguayo, the March
1999 demonstration in which eight students were killed, and
that there are similar rumors today that the Embassy ""put
Lugo in office."" Lugo said matter-of-factly that it had been
a frequent historic practice for the Embassy to meddle in
internal Paraguayan affairs. Ambassador welcomed Lugo's
insight and assured him that different styles are appropriate
for different times, but that her intention was to respect
Paraguay's sovereignty and esnure Lugo's success.

8. (C) Lugo mentioned that he enjoys using his ""pastoral""
personality as president to reach out to local government.
He mentioned his first trips outside the capital, where he
was the first president to meet with a group of mayors; Lugo
said he plans to meet Paraguay's governors once a month. Lugo
mentioned that he had given out checks to some Roofless
Movement leaders, but ""with accountability-- not like
before.""

-----------------------
MORE PERSONAL INSIGHTS
-----------------------

9. (C) Lugo spoke fondly of his time in Ecuador, where his
parish (four nuns and two priests) cultivated cocoa,
harvesting the crop several times a year in order to cover
the parish's expenses. Lugo said he has started sleeping at
the presidential residence, Mburuvicha Roga, as he likes to
walk in its gardens at 5 a.m. daily with former marathon
runner and ""shadow"" Marcial Congo (NOTE: Sensitive reporting
indicates that Congo has close ties to Chavez. END NOTE).
Lugo also told the Ambassador that he used to play the guitar
and enjoys music (even inviting a folksy guitarist to play
during dinner). He again mentioned his mission trip to Texas
and Chicago, which was his only trip to the U.S. prior to his
summer 2007 visit to Washington, D.C. and New York. At
dinner, Lugo allowed his waiters to fuss over him, eating two
desserts at one waiter's insistence because he hadn't eaten
all day. Lugo also told the Ambassador he had decided to
donate his salary to the indigenous, as while he is living in
the presidential residence, ""what could he possibly need?""


---------
COMMENT
--------

10. (C) Lugo's dinner invitation is another sign of his
interest in close relations with the United States. Lugo
clearly appreciates offers of U.S. support and assistance, as
well as the Embassy's efforts to steer clear of internal
politics. The Ambassador again explained the importance of
an October 22 meeting with President Bush, and Lugo promised
to respond formally within two weeks. (NOTE: Late September
4, Lugo's chief of staff called Pol/Econ Chief to formally
accept the invitation. END NOTE). The Washington visit will
be an important opportunity to shore up Lugo's government
early on. Given the challenges that Lugo has faced in his
first few weeks in office, it appears he's going to need our
support. END COMMENT.

Please visit us at http://www.state.sgov.gov/p/wha/asuncion

AYALDE

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