US embassy cable - 03GUATEMALA2956

C O N F I D E N T I A L SECTION 01 OF 02 GUATEMALA 002956 
 
SIPDIS 
 
E.O. 12958: DECL: 11/14/2013 
TAGS: PREL, PGOV, PINR, EAID, PHUM, MASS, ETRD, SNAR, GT 
SUBJECT: CAPITALIZING ON POLITICAL CHANGE IN GUATEMALA 
 
 
Classified By: Ambassador John Hamilton for reasons 1.5 (b) and (d). 
 
1. (C) Summary: The assumption of power on January 14, 2004 
of a new government more aligned with USG interests offers an 
opportunity to advance our priority goals in Guatemala by 
engaging creatively up front on our shared interests in free 
trade, human rights, strengthening democracy and 
counter-narcotics cooperation.  Key elements of this 
engagement will be sending a high-level delegation to the 
inaugural, seeking an invitation from Mexico for the 
President-elect to attend the special SOA and increasing our 
FY-04 assistance to the GOG, including DA, ESF and INL funds. 
 For only the second time since the restoration of democracy, 
the incoming government will not have a majority in Congress, 
and an unequivocal embrace by us in its early days and weeks 
will be key to securing domestic support for moving our 
priorities to the forefront of the new government's action 
plans.  The Department may wish to give consideration to 
holding a PPC to discuss ways in which we can take advantage 
of this opportunity. End summary. 
 
2. (C) The change of government on January 14, 2004, and with 
it the departure of the Portillo administration, 
characterized by corruption and political confrontation, 
offers us the best opportunity we have had in several years 
to advance USG interests in Guatemala. Both of the contenders 
in the final round of Guatemala's elections share our views 
on free trade, human rights, strengthening democracy and the 
war on drugs, and are committed to addressing these issues 
concretely early on.  They will have to work with a deeply 
divided Congress, however, and will inherit a depleted 
treasury, a poorly functioning judiciary and government 
institutions that suffer from congenital bureaucratic 
inertia.  Our decisive engagement with the new government at 
the outset will be crucial to generating popular and 
legislative support for the new government's efforts in these 
areas and will ensure that these priorities receive the new 
GOG's prompt attention. 
 
3. (C) By sending a Cabinet-led Presidential delegation to 
the January 14 inaugural, we would send an unmistakable 
message to the new government and the people of Guatemala 
that the USG is prepared to engage seriously with the new 
administration in the pursuit our common objectives.  The new 
government will need that vote of USG confidence to convince 
its opponents -- and there will be many in Congress -- to 
give it time to prove it can bring about change.  This will 
prove particularly important in reassuring Guatemalans that 
the free trade agreement, negotiated by the old, discredited 
government, is good for both Guatemalans and Americans, and 
that we are negotiating free trade in a much broader context 
of growing cooperation. 
 
4. (C) We should also review all of our engagement options in 
Guatemala -- from FY-04 assistance levels and the Millennium 
Challenge Account, to support for rule of law and 
counter-narcotics assistance -- to see how we can take 
maximum advantage of the election of a like-minded government 
in Guatemala.  The new government inherits macroeconomic 
stability, but it will be desperately short of resources. 
Fiscal reforms as called for in the Peace Accords and 
ill-fated Fiscal Pact will be needed before government 
revenues can begin to sustain meaningful reforms in such 
critical areas as education and health care.  We, and the 
rest of the international donor community, will need to 
engage early with the new government so that it has the basic 
fiscal tools to mobilize more resources and prevent them from 
being lost to corruption.  However, it will take time to 
raise revenues internally.  ESF and DA levels to Guatemala 
have been declining in the past years, in large part because 
of concerns regarding the lack of vision or political will of 
the Portillo government to address the country's social and 
economic problems.  We ask that serious consideration be 
given to increasing FY-04 ESF and DA, especially in support 
of trade capacity building and rule of law programs and, by 
extension, to CICIACS.  Delaying review of assistance levels 
until FY-05 would limit our ability to help the new 
government get its reforms off the ground and would risk 
squandering the early months, when it might count on greater 
support in Congress.  Similarly, increasing INL assistance 
would send a concrete signal to the new government that 
combating narcotics trafficking has got to be an early 
priority of the GOG, and that we are prepared to back up 
their political will with increased USG engagement in support 
of counter-narcotics programs. 
 
5. (C) President Portillo has announced that he will 
participate for Guatemala at the Presidential Summit in 
Monterrey, Mexico on January 12-13, only hours before leaving 
office.  It is in the USG's interest that the president-elect 
participate in that forum in order to get to know his 
regional counterparts and to show Guatemalans that their new 
government enjoys international support.  We believe it is 
important that we impress upon the Mexican hosts the 
importance of inviting the new Guatemalan president to 
participate in this event as well, as was done with the 
out-going and in-coming presidents of Brazil at the 1994 SOA 
in Miami. 
 
6. (C) In view of the window of opportunity the change of 
government in Guatemala offers to advance USG interests here, 
consideration might be given to holding a PCC to explore 
further ways to capitalize.  Many of the failures that are 
associated with Guatemala -- from rising crime to falling 
social indicators -- are a product of the poor governance and 
corruption of Alfonso Portillo.  His departure and 
replacement by a more progressive government -- whichever of 
the two is elected -- offers an opportunity we can not afford 
to miss. 
 
7. (C) We will send in a separate cable with recommendations 
on adjusting our military-to-military relationship with the 
new government. 
HAMILTON