Cablegate: How Ex-Paramilitaries Financed Themselves Through


DE RUEHBO #4798/01 1862040
R 052040Z JUL 07

C O N F I D E N T I A L BOGOTA 004798



E.O. 12958: DECL: 07/05/2017

B. BOGOTA 2464

Classified By: Political Counselor John S. Creamer.
Reason: 1.4 (b,d)


1. (C) Colombia's decentralization in the 1990s made local
governments a tempting target for paramilitary infiltration.
The paramilitary demobilization, confessions through the
Justice and Peace process, and a renewed GOC security
presence in former-para regions have exposed numerous cases
of paramilitary looting of municipal finances, especially on
Colombia's north coast. Local politicians were offered
"silver or lead," a choice between being bought off with
bribes or killed. Paramilitaries pocketed ten to twenty
percent of all local government funds, and controlled much of
the rest through shady government contracts. Education and
health funds were a particularly lucrative source of funding.
End Summary.

Infiltrating Local Governments

2. (C) United Self-Defense Forces of Colombia (AUC) founder
Carlos Castano publicly admitted that 70 percent of all
paramilitary funds came from narcotrafficking. The rest came
from plundering local government funds and from "vacunas,"
extortion levied on citizens and businesses (see septel on
vacunas). By the mid-1990s, the AUC had a presence in over
three-quarters of all departments and a third of all cities,
especially on the country's north coast. Para infiltration
was a major source of paramilitary financing and influence
(ref A). The paramilitary demobilization, confessions under
the Justice and Peace Law, and greater security in areas
previously dominated by paras are enabling officials to
expose corruption without fearing for their lives.

An Unintended Consequence of Decentralization

3. (C) Under Colombia's 1991 Constitution, governors and
mayors, previously appointed by the central government,
became directly elected. Local authorities also received
greater control over health, education and welfare spending
with transfers from the national government to local
governments tripling within a decade. Weak local governments
with new power and money created opportunities for
paramilitaries to increase political influence and to broaden
funding sources according to Fabio Sanchez, director of the
Center for Economic Development at the University of the
Andes. Sanchez's research shows a strong link between the
amounts of funds transferred to local governments and the
levels of paramilitary activities in those areas.

"Silver...or Lead?"

4. (C) Paramilitaries stole government funds for cash and
influence. Gustavo Duncan, an expert on paramilitaries at
the Foundation for Security and Democracy, estimates
paramilitaries typically stole anywhere from 10-50 percent of
total local government revenues in the worst areas of the
North coast, putting five to ten per cent in their pockets
and using the rest to buy off government officials and pay
allies. Duncan notes that by stealing local resources,
paramilitaries also crippled government's ability to deliver
basic services and infrastructure. In some areas, this
eroded government legitimacy and helped produce an illegal

5. (C) Poloffs talked to six mayors from the department of
Casanare who claim they were forced to sign a secret
agreement to pay the "Martin Llanos" para block a percentage
of public funds. Payments were made through "contracts" for
services that were never provided. The mayors said prior to
the 2002 elections, all mayoral candidates were forced to

sign the agreement after their families were threatened.
After the elections, and with a reinforced Police presence in
their region for the first time in years, they felt safe
enough to tell authorities, including President Uribe and the
Prosecutor General's Office (Fiscalia), about the forced
payments. The mayors, who claim they filed official reports
seeking help and denouncing the threats, now face charges of
having colluded with the paras.

--------------------------------------------- -------------
"Armed Clientelism" at the Municipal and Department Levels
--------------------------------------------- -------------

6. (U) Soledad, a manufacturing center of over 300,000
located in the north coast department of Atlantico, is a case
study of paramilitary infiltration and "armed clientelism" at
the municipal level. Paramilitary Edgar Fierro Florez ("Don
Antonio"), who worked for Rodrigo Tovar Pupo ("Jorge 40"),
dominated Soledad's local government from the late 1990s to
2006. "Don Antonio" is estimated to have stolen over USD 4
million from the city's health and education funds, and
diverted far more through corrupt contracts.

7. (C) Educational funds were a lucrative source of money
and votes in Soledad. Alfredo Noya, Soledad's secretary of
Education, set up a deal where 20 percent of all the city's
educational funds were split between the AUC, the mayor, and
local politicians. Juan Carlos Garzon, paramilitary analyst
for the Organization of American States Mission (MAPP/OAS) in
Colombia, explained educational funds were skimmed through
the use of fake contracts to build schools, provide school
lunches, and hire teachers. Garzon said controlling the
education system also helped paramilitaries influence
elections as families often turn to teachers for guidance on
how to vote. Don Antonio ensured the election of Soledad's
mayor--Rosa Stella Ibanez Alonso--an election that was later
overturned for fraud.

8. (C) Sucre Department on the Atlantic coast was a major
narcotrafficking corridor and paramilitary stronghold.
Three Sucre national legislators and four departmental
legislators, including the president and vice-president of
the departmental assembly and the department's most powerful
local politicians, were arrested for paramilitary links (ref
B). Paramilitary leader Salvatore Mancuso testified that
paras controlled the majority of all council members in
Sucre's major cities. Duncan estimates that, in addition to
drug money, paramilitaries pocketed ten to twenty percent of
local revenues and controlled contracts worth another twenty
to thirty percent. Opposition Polo Democratico Senator
Gustavo Petro called Sucre a "typical case" of paramilitary

9. (U) Paramilitaries also exploited the GOC's health
system for the poor in their zones of influence, a huge cash
cow at the municipal and department level. The GOC provides
coverage for the poor through "Instituciones Prestadoras de
Servicios" (IPS), health services companies contracted by
local governments. The central government transfers funds to
local governments for IPS coverage based on the number of
poor in the area. Paramilitaries--and their either complicit
or coerced local officials--easily milked the system. IPS
would frequently use only 25 percent of funds received to
provide services (rent offices, hire doctors, buy medicine,
etc.) while stealing the rest.

=======================CABLE ENDS============================

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