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07ASUNCION396 17 May 2007 Secreto Embassy Asuncion

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DE RUEHAC #0396/01 1371328
P 171328Z MAY 07 ZDK





E.O. 12958: DECL: 04/20/2027

REF: A. 06 ASUNCION 0709
C. STATE 66324

Classified By: DCM MICHAEL J. FITZPATRICK; Reasons 1.4(b),(d)

1. (C) SUMMARY: During May 8-9 Southern Cone / Brazil COM
Conference in Rio de Janiero, the five Southern Cone
Ambassadors discussed aggressive plans of Venezuela’s Hugo
Chavez to create a unified Bolivarian movement throughout
Latin America, particularly focusing on activities within
their respective countries. This report is the product of
observations and analyses provided by all these posts.
Venezuelan President Hugo Chavez is aggressively seeking to
divide Latin America between those who buy into his populist,
anti-American policies and authoritarian message and those
who seek to establish and strengthen free-market, democratic
based policies and institutions. In the Southern Cone,
Chavez is working to win adherents to his camp through what
appears to be a multi-faceted plan that relies heavily on his
ability to offer energy and grandiose (and graft-inspiring)
petrodollar-based projects. Some regional leaders and some
of the region,s dispossessed may find the rhetoric
attractive but many more seem willing to take Chavez,s money
while paying only lip service to his politics. And still
others in the region find him frankly distasteful. In the
end, however, Chavez shouldn,t be underestimated. Money
talks, democratic institutions in the region are still weak,
and free market economics have yet to provide consistent
solutions to the Southern Cone,s social and political ills.
Septel will offer our posts’ collective views about how to
best address the threat this campaign represents to U.S.
interests, but it is clear we need more (and more flexible)
resources and tools to counter Chavez’s efforts to assume
greater dominion over Latin America at the expense of U.S.
leadership and interests. END SUMMARY.


2. (C) The Venezuelan Embassy in 2006 outlined in detail its
strategy for Paraguay in a document somewhat like our MSP.
This playbook articulates the following as Venezuela’s
principal political and economic goals for the region:

— Stimulate Multipolarity in the International Community
— Promote Latin American and Caribbean Integration
— Strengthen Venezuela’s Position in the International
— Promote a New Regime of Integrated Hemispheric Defense
— Consolidate and Diversify International Relations

While the terms are rather grandiose and nebulous, writ large
they reinforce Chavez’ desire to transform the playing field
in Latin America positioning Venezuela at the lead.


3. (S/NF) Chavez has engaged political leaders of countries
in the region promoting his vision for the region under the
banner of "Latin American Solidarity and Integration" as part
of a campaign that invests a high premium in personal
contact. He has also taken pains to engage local populations
to foster his image as the standard bearer for the
common-person, often times extending generous aid for social
projects, and painting an image of the U.S. as elitist and
favoring only big business. Meanwhile, clandestinely, the
Venezuelan Government has provided money and material support
to Bolivarian and sympathetic leftist groups through its
embassies in the region often as part of a campaign to expand
influence, including in the results of key elections.

— In Argentina, Chavez enjoys the support of a number of
political leaders and organizations, some of which have close
ties to President Kirchner. Kirchner presently sees little
downside to maintaining a close relationship with Chavez,
particularly in an election year, since Chavez remains
relatively popular in Argentina — 52 percent of Argentines

viewed Chavez favorably in December 2006 — and the U.S. is
not. Kirchner has attempted to distance himself publicly
from Chavez’s anti-U.S. position and has tried to maintain
the perception of a more independent line to meet mainstream
voter approval, but his economic strategy clearly envisions
closer commercial and financial ties with Chavez and
positioning himself between Chavez and Lula on the regional
political spectrum. At the same time, Kirchner seeks to
balance his relationship with Chavez. This is evident in the
support Kirchner and his wife have shown for Venezuela’s
Jewish community, while he has refrained from any public
calls in support of press freedom or RCTV, for example.

— In Bolivia, Venezuelan personnel/advisors are likely
present in all of Bolivia’s nine departments and are active
in many, if not all, sectors of the Bolivian government. The
Morales Government frequently consults with Chavez and their
relationship runs deep. Venezuelan Ambassador to Bolivia,
Julio Montes, publicly pledged in October 2006, "Venezuelan
blood will be shed if the Bolivian revolution were

— Brazilian leaders have become more wary of Chavez over the
course of the past year, and Chavez is unpopular in both the
political class (politicians, journalists) and with the
general public. Chavez is increasingly seen here as an
emerging rival to Lula for regional leadership, and a threat
to the kind of integrated, progressive and outward-looking
South America that successive Brazilian governments have
sought to encourage. Against this negative backdrop, Lula has
performed an awkward balancing act: publicly supporting
Chavez’s re-election and touting the benefits of economic
integration with Venezuela, while privately seething with
frustration at Chavez’s unpredictable behavior and rhetorical
grandstanding. It appears Lula will continue in this mode,
and he seems prepared to let political criticism of his role
vis-a-vis Chavez roll off his back. This is because of both
traditional Brazilian foreign policy priorities with
Venezuela and some residual ideological sympathy among Lula
and his inner circle for Chavez’s fading socialist-populist

— Chile is generally not fertile ground for Chavez or his
"Bolivarian revolution." But Chilean leaders recognize that
Chavez is aggressive and that he bears close watch. Chilean
Army Intelligence (DINE) reports that the Venezuelan Embassy
is funding Bolivarian and leftist groups.While President
Bachelet is a socialist with a certain ideological sympathy
for Chavez, she is a also a pragmatist who recognizes that
Chile’s successful free market economic policies and stable
democratic political model is preferable to what Chavez
offers. As a result, Chile will continue to quietly promote
its own model, although Bachelet will not likely challenge
Chavez openly.

— Many Paraguayan leaders (both from the opposition and the
ruling Colorado Party) are suspicious of Chavez’s motives and
voice concern about his "interference into internal
politics." The Venezuelan agreement with Bolivia to
strengthen Bolivia’s military adds to the concerns. At the
same, President Duarte, has tilted leftward in his rhetoric
and applauded Chavez’ vision over the last two months. He is
seeking to fend off the challenge posed to Colorado control
of the government in the 2008 election by leftist priest
Fernando Lugo who is leading the polls. While Lugo’s
campaign evinces little evidence of significant funding, it
has been alleged that he has been offered assistance by the
Venezuela Embassy on orders from Chavez and has signaled
interest in receiving funds. Several small mostly student or
social interest based groups in Paraguay receive financial
and material support from Venezuela but presently register
little influence on the political scene; local municipal
officials have told emboffs that Venezuela has provided
peasant leaders training in leading social movements.
Venezuela has funded flights for hundreds of poor Paraguayans
to fly to Cuba for eye surgery and Venezuela appears to be
winning converts at the mass levels, while the elites are
increasingly nervous.

— In Uruguay, Venezuela’s influence is growing but is not
yet great. Chavez was most active and visible on the eve of
Venezuela’s entry into Mercosur, but soon after his interest
seemed to have waned. Some officials privately snicker at
his antics behind his back. In public, though, they are
happy to congratulate Chavez and take advantage of any
economic benefits (especially oil) that he is willing to
bestow. For example, Chavez donated USD 20 million for a
cancer center at a local public hospital. (President Vazquez
is an oncologist so the donation seemed especially aimed at
pleasing him.) Chavez has also invested in failing companies
and financial institutions.


4. (U) Chavez uses his petrodollars to advance economic and
political objectives in the region. He has aggressively
pursued energy agreements in exchange for support of
political objectives including Venezuela admission into
Mercosur and the creation of Bancosur. In the process, he
has contributed to an increased politicization of Mercosur
and shored up resistance to ALCA.

— In Argentina, though Kirchner shares some of Chavez’s
leftist perspective, he is primarily a pragmatist; his
affable ties with Caracas are driven more by Venezuela’s
attractive offers of high-profile investments, placement of
GoA sovereign debt (USD 4.2 billion to date), loans to
Argentine national companies and trade deals than by
ideological affinity. In return for Chavez’s economic
largesse, Kirchner supported Venezuela’s failed bid for a UN
Security Council seat, its early entry into Mercosur and
allowed him to stage an anti-Bush rally on March 9.

— In Bolivia, Venezuela spent USD 195 million on Bolivian
products, mostly soy, in 2006. In April 2006, Bolivia signed
onto the Bolivarian Alternative for America (ALBA), an
agreement with Venezuela, Cuba, Nicaragua, and Ecuador, under
which Venezuela has pledged at least USD 200 million in
support of a national development bank, development projects,
and financial assistance.

— Brazil is not directly vulnerable to Chavez in financial
terms. Brazil has been running sustained current account
surpluses, which have allowed it to pay down external debt
and build up foreign reserves. However, Venezuela and
Bolivia’s championing of a Bank of the South, an idea
resisted by Brazil, is starting to create demarcations within
South America, something that will work against Brazilian
integration plans. Chavez’s obsession with opposing the
U.S.-Brazil partnership on biofuels pushed President Lula for
the first time to lay down a red line with respect to Chavez.
(ref. B)

— Venezuela’s direct foreign investment in Chile is tiny,
little more than USD 100,000 between 1995 and-2000.
Chile-Venezuela bilateral trade is also fairly small,
representing less than 10 percent of Chile’s trade with Latin
America. There has been discussion in the press of an
alliance between the Chilean oil company ENAP and Petrolera
Venezolana (PDVSA) but nothing has been finalized. Earlier
this year the head of ENP said publicly that Venezuela was
not in Chile’s plans for 2007. That said, many Chileans
expect that, given Chile’s precarious energy situation,
Chavez could eventually use oil to foster greater sympathy
for his political agenda. However, opinion polling in
January suggested that eight-in-ten Chileans had heard
something of what Chavez has been saying and doing vis—vis
Chile. Among those, 77 percent rejected his conduct and 81
percent believed Chavez,s motivation was self promotion.

— Paraguay signed an energy agreement with Venezuela April
17. Under the agreement which has come under harsh attack by
Paraguay’s conservative business community and which still
must be approved by the Congress, Venezuela’s PDVSA would
invest an astounding (for Paraguay) USD 600 million to
modernize Petropar’s oil refinery. The modernization project
is expected to bring the refinery’s capacity up to about

35,000 barrels per day (bpd). This is hardly cost-effective
strictly speaking as the smallest refinery in neighboring
Argentina has a capacity of approximately 120,000 bpd. But,
it offers current leaders plenty of "grease." Venezuela has
offered to help Paraguay prospect for gas in the western part
of Paraguay. In addition, Paraguay is considering joining
the Venezuelan Bancosur project.

— Uruguay’s President Vazquez plays to centrists in his
economic policy, so Chavez’s economic populism will likely
not take root in Uruguay. At the same time, Uruguay has a
heavy debt burden and no known hydrocarbon deposits. As
such, Venezuelan oil and money could prove tempting as part
of a bid to boost the economy. Venezuela’s PDVSA has invited
Uruguay’s state oil company ANCAP to prospect for oil in
Uruguay and in Venezuela and to associate itself with ANCAP’s
refinery through a USD 600 million investment.


5. (C) The entry of Venezuela into Mercosur clearly altered
the power balance and dynamics of the organization. Mercosur
has increasingly devolved from an imperfect customs union
into a more restrictive and anti-American political
organization. A prime example of Mercosur’s unflinching
support for Venezuela was demonstrated on the UNSC
semi-permanent seat bid. After more than 50 successive
votes, Mercosur members continued to support Venezuela’s
candidacy. Mercosur solidarity held fast until Uruguay was
mentioned as a possible compromise candidate. Argentina is
said to have vetoed the move and Brazil was reportedly not
supportive of Uruguay either. On numerous occasions
Paraguayan and Uruguayan MFA officials have signaled that
they must consult closely with their Mercosur partners on key
matters relating to foreign policy.

6. (C) It is widely believed in Uruguay that the inspiration
for Brazil’s supporting Venezuela’s admission to Mercosur was
the belief that Chavez could better be controlled from within
the organization than if left to his own devices on the
outside. It appears in hindsight, however, that Chavez has
proved to be more difficult to contain than originally
thought by Mercosur members. Chavez has openly challenged the
Brazilians by supporting and allegedly encouraging Evo
Morales’s move to grab Petrobras’ assets in Bolivia, and has
frequently stolen the stage at Mercosur gatherings from
Brazil’s President Lula. That friction, however, provides an



7. (C) Venezuela has expanded its reach into the region using
military advisors and intelligence officers to reach out to
leftist groups as well as directly engage military
counterparts through exchange programs. In some cases this is
creating animosity and raising concerns among military
personnel and political figures alike.

— Although the Argentine military does not have a natural
affinity for their Venezuelan counterparts, it has
participated in military exchanges with Venezuela. Argentina
has established a one-man liaison office with the Venezuelan
Army. Venezuelan officers also have a presence in the
Argentine Army and Air War Colleges (equivalent to US Command
and General Staff College (CGSC)). In 2006, Venezuelan
military officers briefed the Argentine Army War College on
the BRV’s concept of asymmetric warfare, and Venezuelan
officers are reportedly attending the Argentine National
Defense University. The Venezuelans do not yet appear to
have cultivated formal ties with the Argentine Navy. DAO
contacts also report a Venezuelan office at the Prefectura,
although Post is unaware of the person’s status or
activities. This cooperation does not appear very
significant yet.

— In Bolivia, there has been an increased presence of
Venezuelan military personnel, although the exact number is

unknown. Estimates indicate that there are at least one
hundred, if not several hundred, Venezuelan military advisors
and intelligence operators scattered throughout Bolivia.
Venezuelan military personnel are reportedly conducting
intelligence and counterintelligence activities in La Paz and
Santa Cruz, in coordination with Cuban intelligence agents.
In November 2006, the Bolivian Senate approved a
Bolivian-Venezuelan military agreement which called for
increased military cooperation between the two countries and
the construction of two military bases in eastern Bolivia.
There are reports of Venezuelan weapons entering Bolivia, but
these reports have not been corroborated. There are also
reports that Venezuela may be helping Bolivia to broker arms
deals with Russia and Iran in an effort to help Bolivia move
away from U.S. military assistance.

— The Brazilian military is more wary than some other
segments of the Brazilian government of the potential for
regional instability caused by Chavez, especially in light of
the military buildup of the Venezuelan Armed Forces. In
addition, the developing threats from Bolivia to militarily
reoccupy Petrobras refineries in Bolivia, and to abrogate a
recently concluded contract, is creating additional friction
between Brazil and Bolivia, and, by extension between Brazil
and Venezuela, who is seen as the driving force behind
Bolivia’s extreme actions. Of added concern is Iran’s
interest in capitalizing on the influence of Venezuelan
President Chavez to improve Iran’s relations with certain
Latin American countries. (ref. B)

— Chile has not reported any military exchange or
significant engagement. However, Venezuelan material support
for leftist groups along the border with Bolivia raised
tensions between Bolivia and Chile.

— Bolivia and Venezuela announced a deal to build a new
military base along the disputed Chaco border region (at
Puerto Quijarro) raising tensions between Paraguay and
Bolivia in late 2006. President Duarte reportedly confronted
Bolivian President Morales at the UN requesting an
explanation. Ensuing border crossings by Bolivian military
personnel into Paraguay further raised eyebrows. Tensions
have since abated but Paraguayan military personnel and many
politicians are still suspicious of Bolivian and Venezuelan
intentions. DAO reported that there is a Venezuelan student
at the Paraguayan War College. It is unclear what his status
or activities are at this point. Post has learned that
retired Paraguayan military officers have met with Argentine
and Venezuelan Bolivarian groups.

— Uruguay is not aware of any specific security or military
agreements reached or in the works between Venezuela and
Uruguay, although there are obvious linkages under regional
agreements such as the Rio Group and Mercosur. Military
cooperation so far is limited to military student exchanges.
However, President Vazquez’ security detail is run by his
brother Jorge, a former OPR-33 guerilla. The "secret service
agents" he manages are recruited from the Communist-dominated
PIT-CNT umbrella labor union and trained in Caracas or Havana.


8. (U) In various countries, aggressive media indoctrination
campaigns prompt support for Chavez, primarily, and his plan
for a united Bolivarian South American bloc to challenge the
U.S. Venezuela’s Telesur is the main source to broadcast
anti-U.S. propaganda and targets mostly the poor and rural
sections of countries in the region.

— In Argentina, Post suspects the Venezuelan government may
be involved in influencing the Argentine press, mostly by
feeding media outlets anti-American rhetoric. The clear
Chavez advocate in Argentine print media is the leftist and
pro-government Pagina/12. Pagina/12 has not criticized the
closing of RCTV, an issue about which other major Argentine
print media, such as La Nacion and Clarin, raised press
freedom concerns. The Clarin Group, in character with its
style of journalism, is essentially neutral towards Chavez

and avoids both outright criticism and open support of him.
Several papers are strongly opposed to Chavez, including La
Nacion, Ambito Financiero and La Prensa.
The GoA owns a 20 percent non-voting share in Telesur and
mainly contributes to Telesur via content, such as television
material. Miami-based Direct TV has a channel dedicated to
Telesur, but the service reaches only a small percentage of
Argentines. Some direct programming of Telesur news shows
appears on state-owned Channel 7, but Channel 7 recently
moved the Telesur programming to off-peak airtime, after
midnight. A network of approximately ten independent,
neighborhood, left-leaning radio stations in Argentina have
been receptive to Chavez’ media promotion campaigns and are
regularly broadcasting parts of his program "Alo Presidente"
live, according to media reports.

— In April 2006, Bolivia bought a five percent stake in
Caracas-based Telesur, proposed by Chavez as a Latin American
alternative to CNN programming. Most of the Telesur
broadcasting is out of Venezuela, with only 20 hours per
month dedicated to Bolivian local broadcasting. In addition,
the Venezuelan government pledged USD 1.5 million for 30
community radio stations, targeting the most rural
populations in Bolivia. To date, 8 out of the 30 stations
have been inaugurated.

— In Chile, Chavez and his model do not seem to be striking
a chord even with the common people. In general, much of the
general population, including even among the working class,
are cynical about Chavez’s motives. Recent polls show that
some 77 percent of Chileans aren,t buying what Chavez is
selling, with 81 percent ascribing to Chavez motives based
solely on his self-aggrandizement. Negative news stories in
2006 noted that Chavez,s "Miracle Flights" taking poor
Chileans to Venezuela for eye surgery ended with patients

— Venezuela’s Telesur channel has been running a steady
stream of high-quality, anti-U.S. propaganda pieces in
Uruguay via Direct TV from Argentina. The "Injerencia"
(interference) series about CIA "meddling" in Latin America
is a particularly slick product that incorporates documentary
segments, present day interviews with witnesses and liberal
use of selected declassified FOIA documents. Uruguay has a
ten percent stake in Telesur (which it pays by donating
content) and the local government-owned channel has increased
its broadcasting of conspiratorial, anti-U.S. propaganda in
recent months. In the print media, Chavez gathers serious
support only from the one major leftist daily, "La
Republica", which boldly supports him in its headlines, while
the body of the articles is generally more moderate. The
centrist papers and mainstream media are generally
unsympathetic to Chavez.

9. (S) As of early April 2007, Brazil reporting indicates
that Venezuela was attempting to discreetly influence
Brazilian views in favor of Venezuela in various ways. For
example, in late 2006 Venezuelan Embassy officers in Brasilia
reportedly approached a Brazilian media source and offered
monthly payments in exchange for the placement of pro-Chavez
articles and anti-U.S. article. (ref. B)

10. (S) As of mid-April 2006, the Venezuelan and Cuban
Embassies in Paraguay and the Venezuelan Embassy in Argentina
were supporting a covert action media campaign in various
newspapers and magazines in Paraguay to discredit the U.S.
Ambassador to Paraguay and enhance the image of the FARC.
The media campaign used the Paraguayan newspaper "Ultima
Hora" as the principal medium for the campaign.
Venezuelan-supported Bolivarian movements have regularly
produced disinformation campaigns propagating the myth the
U.S. has a military base in northwestern, largely uninhabited
region of Paraguay, contributing to resistance to an
agreement for U.S. military exercises in Paraguay. They have
effectively used Prensa Latina stories, blogs and Clarin to
build an artificial ground-swell of opposition.


11. (S/NF) Chavez’s campaign to expand his influence in
Southern Cone is multi-faceted, relying heavily but not
exclusively on generous energy assistance and investment
agreements. It is also attractive to many of the region,s
dispossessed, who are still waiting for globalization to
bring them the benefits of free trade and truly democratic
governance. By integrating Venezuela into existing
institutions and creating new region-wide bodies, he aims to
unite the Southern Cone region behind his vision. The
campaign has produced mixed results. Few countries have
proven capable of resisting the appeal Venezuela’s aid and
investment packages inspire. While Chavez’s influence within
the region has expanded significantly, regional leaders are
suspicious of his motives and objectives. Many agree with
his message that the Southern Cone, and indeed, South
America, should establish an identity separate from U.S.
"hegemony," but are uncomfortable with the "us or them" that
defines his message. The U.S. cannot expect the region’s
leaders to rally to our defense; rather we need to more
proactively make the case for and implement our transparent
strategy for the region. Our view of an inclusive,
democratic community of nations that delivers prospects for a
more prosperous future for its citizens is the right response
to Chavez. Septel will offer the views of the region’s posts
about how we should respond. It is clear that we need better
resources and tools to counter Venezuela’s political efforts
to disrupt democracy, economic strategies to strangle free
trade, politicization of MERCOSUR, expansion of defense ties,
and mass media campaign.

12. (U) Amembassies Asuncion, Brasilia, Buenos Aires, La Paz,
Montevideo and Santiago contributed to this cable.