US embassy cable - 04GUATEMALA317

C O N F I D E N T I A L SECTION 01 OF 05 GUATEMALA 000317 
 
SIPDIS 
 
E.O. 12958: DECL: 02/05/2014 
TAGS: PREL, PGOV, PINR, EAID, MOPS, KTIA, ETRD, KCOR, PHUM, ELAB, GT 
SUBJECT: WHA A/S ROGER NORIEGA'S FEBRUARY 3-5 VISIT TO 
GUATEMALA 
 
 
Classified By: PolCouns David Lindwall for reason 1.5 (b) and (d). 
 
SUMMARY 
-------- 
1. (C) During a February 3-5 visit to Guatemala, WHA 
Assistant Secretary Roger Noriega met with President Oscar 
Berger and senior members of his government to discuss the 
full range of bilateral issues.  A/S Noriega highlighted the 
importance the Bush Administration places on CAFTA as a means 
of generating economic growth and job creation in Central 
America.  He secured commitments from President Berger to 
restart Mayan Jaguar counter-drug joint exercises, to give 
prompt consideration to an Article 98 Agreement, and to take 
concrete action on TIP and GSP concerns.  Berger said he 
would "do the right thing" in support of Cuban human rights 
at the UNCHR.  The senior GOG officials took on board USG 
concerns on adoptions, and said the Berger government will 
throw its weight behind the creation of CICIACS.  Berger and 
his ministers discussed addressing a growing fiscal deficit 
and their plans for a radical reduction in the military, and 
sought our help on the latter.  Berger also pressed for 
greater protection for illegal Guatemalan migrants in the 
U.S., TPS, concretely.  In meetings with Congressional 
leaders and a subsequent reception with government, 
opposition and civil society representatives, A/S Noriega 
said that the controversial decision by the Bush 
Administration to negotiate CAFTA and promote a major 
immigration reform during an election year was evidence of 
the importance we assign to our neighbors in the region.  The 
extremely cordial reception by Berger and his team, and the 
promises of concrete cooperation made it clear that the new 
government places a high value on its relationship with us. 
End summary. 
 
2.  (U) WHA Assistant Secretary Roger Noriega and Executive 
Assistant Bruce Friedman visited Guatemala February 3-5 for 
meetings with newly elected President Oscar Berger, Vice 
President Eduardo Stein, the Economic and Security Cabinets, 
President of Congress Rolando Morales and a broad range of 
opposition, private sector and civil society leaders.  A/S 
Noriega was accompanied by Ambassador Hamilton, DCM Wharton 
and Embassy officers to all meetings. 
 
Foreign Minister Briz on CAFTA, migrants, Article 98 and more 
--------------------------------------------- ---------------- 
3. (C) At a breakfast at the Residence with Foreign Minister 
Jorge Briz, Vice Minister Marta Altoaguirre and Vice Minister 
Carlos Martinez, Assistant Secretary Noriega expressed our 
satisfaction with the conclusion of CAFTA negotiations and 
said that, while specific industries in both the U.S. and 
Guatemala had some reservations, the agreement has the 
potential for transforming Central America by attracting 
investment, generating economic growth and creating jobs. 
A/S Noriega and the Ambassador urged the Guatemalans (who 
remain disappointed over CAFTA's treatment of beer) to view 
the agreement in terms of its overall positive impact on both 
economies.  A/S Noriega noted that some "adjustments" had 
been made by the US to address the new government's concerns 
over beef, pork and sugar, but said that other concessions 
were politically unsaleable to US industries that would have 
influence over Congressional ratification.  Briz acknowledged 
the historic opportunity CAFTA represents and said the Berger 
government supports the agreement, despite lingering concerns 
that the Portillo government might have negotiated in bad 
faith. 
 
4. (C) Briz said that migrant issues would be very important 
to the Berger government, commenting that Berger met with 
Guatemalan migrants in the US during the campaign and that 
remittances from those migrants -- $2 billion in 2003 -- were 
underpinning the Guatemalan economy.  Briz asked that the US 
consider extending TPS benefits to Guatemalans, similar to 
those enjoyed by nationals of El Salvador, Honduras and 
Nicaragua.  A/S Noriega replied that President Bush shares 
the priority Berger attaches to migrant issues, and said that 
the President's new initiative on immigration is designed to 
address exactly the same problems affecting Guatemalan 
illegal migrants that the GOG wants to resolve.  He urged the 
GOG to participate in the public debate of this proposal in 
the United States, and to seek to use this mechanism -- not 
TPS -- to address the concerns of Guatemala migrants in the 
US. 
 
5. (C) A/S Noriega explained to Foreign Minister Briz the 
importance we attach to concluding an Article 98 Agreement 
with Guatemala, and urged the new government to make this a 
high priority.  Briz said that the GOG is reviewing the 
proposed texts the Ambassador had given him in January, and 
said the GOG "has the will to move this forward" in the short 
term. 
 
6. (C) On the Cuba human rights resolution at the upcoming 
UNCHR session, A/S Noriega detailed the significant 
deterioration of human rights in Cuba during 2003, and said 
that as a matter of moral principle it was important that the 
countries of the hemisphere take the lead along with the EU 
in sponsoring a resolution.  Briz acknowledged that the 
arrest of dissidents and the execution of the "hijackers" 
represented a significant provocation.  He said that 
President Berger had told the Cuban Ambassador that he is 
committed to supporting "freedom" everywhere, and implied to 
us that Guatemala would be helpful to the United States on 
the Cuba resolution at the UNCHR. 
 
7. (C) A/S Noriega told Briz that it is important that the 
new government take concrete action to address our GSP and 
TIP concerns early in its administration.  Briz said that the 
Foreign Ministry was already coordinating with the Embassy to 
convoke the inter-agency working groups on these matters.  On 
CICIACS, A/S Noriega said the USG is prepared to provide 
support, and inquired into the status of setting up the UN 
Mission.  Briz said that Congress had sent the proposal for 
an opinion to the Constitutional Court, and said that 
President Berger firmly supports CICIACS.  Briz noted that 
some "conservative sectors" of the country were beginning to 
express opposition to the Mission, but said Berger is 
convinced there is no better mechanism for taking on 
organized crime. 
 
Security Cabinet on Reducing the Military and Article 98 
--------------------------------------------- ----------- 
8. (C) A/S Noriega met with Commissioner for National 
Security Otto Perez Molina, Minister of Defense Cesar Augusto 
Mendez Pinelo and Minister of Government Arturo Soto at the 
"Casa Presidencial." Perez Molina outlined the Berger 
government's security priorities, which are: 1) restructuring 
the military: reducing the force by 10,000-14,000 officers 
and troops, increasing budget transparency, closing bases and 
professionalization; 2) strengthening police: increasing 
budget, improving training and discipline, cleaning up 
corruption; and 3) creating a civilian intelligence 
capability: managed by the SAE, gradually taking over from 
the military D-2, leaving the D-2 with solely military 
missions.  Berger has temporarily ordered army troops to 
support police units in areas where gangs have intimidated 
the local police, but their role will be one strictly of 
support. 
 
9. (C) A/S Noriega commented that the rule of law is the 
foundation of democratic society, and that Guatemala is 
facing some serious challenges in that regard. The United 
States is prepared to help, but we will need new authorities 
before we can engage in assistance to the military.  A/S 
Noriega told the security team that conclusion of an Article 
98 Agreement is a crucial step to maintaining even the 
limited military-to-military engagement we have now, and 
urged them to weigh-in in favor of this agreement.  The 
Ambassador told the MOG that USAID is contracting a company 
to help ministries conduct internal audits to detect possible 
areas of inefficiency and corruption, and offered to provide 
this support to the MOG (the Minister enthusiastically 
accepting).  He also noted that the Inter-American 
Development Bank (IDB) has approved a $20 million support 
program for security reform (non-military), and urged the 
Minister of Government to take advantage of this program. 
 
10. (C) The security ministers complained of inheriting 
ministries that had no resources.  The Minister of Government 
said that the previous administration had left only 30 cents 
in the checking account of the Immigration Department.  The 
Minister of Defense said that at least one budget 
supplemental authorized by Congress in 2003 for 225 million 
quetzales (roughly $28 million) never reached the military 
and was probably stolen (Note: President Berger later told us 
that he heard from a source in the Military that the money 
was taken in cash by President Portillo, and changed into 
dollars with the complicity of someone from the Central Bank. 
End note). 
 
Economic Cabinet on CAFTA and the Looming Fiscal Deficit 
--------------------------------------------- ----------- 
 
11. (C) A/S Noriega met with members of the Economic Cabinet, 
including Presidential Coordinator for the Plan of Government 
Richard Aitkenhead, Presidential Coordinator for Investment 
and Competitiveness Miguel Fernandez, Finance Minister Maria 
Antonieta Del Cid de Bonilla, Central Bank Vice President 
Mario Garcia Lara, and Secretary of Planning Hugo Eduardo 
Beteta Mendez-Ruiz.  Bonilla made a presentation on the GOG's 
economic policy priorities, which have as their foundation 
probity, transparency and austerity.  The priorities 
included: poverty reduction; decentralization and 
participation; political reform of the state to include 
respect for human rights, strengthening the rule of law, and 
improving efficiency in public administration; and an 
aggressive international strategy of trade, investment and 
tourism promotion.  "Pillars" of the plan include:  social 
investment in education, healthcare, nutrition and housing, 
with emphasis on the most vulnerable groups; "integral 
security" through restructuring national security 
institutions, better coordination among them, and weeding out 
unsuitable personnel; and creating conditions for improved 
production and competitiveness via conservative macroeconomic 
management, reviving the Fiscal Pact and complying with the 
Peace Accords, better tax administration, prioritization of 
the budget toward social investment and basic infrastructure, 
strengthening the banking system and moving forward as 
quickly as possible with the Central American Customs Union. 
 
12. (C) A/S Noriega congratulated the economic team for the 
scope and ambition of its plan, noting that it covered the 
areas needed for Guatemala to take advantage of the 
tremendous opportunity offered by CAFTA.  He commented that 
Mexico had lost a half million jobs, principally to China, 
and would have been far better off if it had prepared for 
free trade with a plan such as Guatemala's.  He said that the 
Guatemalan focus on transparency and good governance was 
essential if CAFTA was to work to Guatemala's benefit as 
President Bush intended.  It was also a prerequisite for 
participation in the Millennium Challenge Account.  He noted, 
however, that Guatemala had to bring its own resources to the 
efforts and that, while he was not known as a fan of taxes or 
big government, Guatemala was not doing enough to the raise 
revenues it needed. 
 
13. (C) Fernandez declared that, at heart, imposing the rule 
of law was the cornerstone of the government's plant for 
attracting trade and investment.  Aitkenhead agreed with A/S 
Noriega that more tax revenues, and not just austerity, were 
needed to meet social investment targets.  He observed that a 
culture of paying taxes was part of the rule of law.  He 
briefly described the history of the Fiscal Pact, which had 
been negotiated with 650 civil society groups, and recalled 
that the FRG Administration had deliberately abandoned it. 
He said that the Fiscal Pact target of current tax receipts 
equivalent to at least 12% of GDP remained the goal. 
President Berger would be convoking civil society the 
following week to resuscitate the Pact, amending it if 
needed.  Aitkenhead said that the reviving the Fiscal Pact 
would be the economic cabinet's top priority in the new 
Congress. 
 
14. (C) Fernandez added that establishment of a customs union 
was a "must" for President Berger.  Guatemala wanted to start 
with El Salvador and Honduras, which he believed were ready 
to join in moving quickly.  Aitkenhead said that he hoped 
CAFTA could be used to prod faster action on integration, but 
he said he worried that different schedules for phasing out 
tariffs on certain products could prevent the removal of 
internal border controls.  He wondered if the USG would be 
willing to reopen only those areas in the CAFTA where 
different treatment might cause problems for starting the 
customs union.  Econ Counselor said he thought USTR would 
probably be delighted if countries wanted to phase out 
tariffs more quickly in order to harmonize with their 
neighbors.  Aitkenhead, laughing, said that wasn't exactly 
what he was thinking.  He took the point, emphasized by the 
Ambassador, that the focus for now had to be on ratifying 
what was negotiated rather than identifying problems that may 
or may not arise down the road.  A/S Noriega added that 
Guatemala was the one country that had yet to be heard in 
Washington as delighted and excited about the treaty. 
Aitkenhead confirmed that Guatemala was all in favor of 
ratification and agreed to look at spreading the word more 
aggressively.  (Comment:  We suspect that beer is at the 
heart of the argument for allowing "harmonization" of tariff 
phase-outs to pave the way for a customs union.  We expected 
to hear more direct pleas for help on beer, which the former 
government is seen to have "given away" as a final act 
vengeance against political enemies.  Aitkenhead's more 
subtle approach is an encouraging sign that the GOG is 
realizing that it has done what it can and is preparing to 
move on. End comment.) 
 
15. (C) Bonilla described a difficult fiscal outlook for 
2004.  She outlined how Congress had failed to pass a budget, 
freezing spending at 2003 budget levels, while the 
Constitutional Court had taken away an important part of the 
tax base, the asset-based IEMA.  She said that 2003 central 
government budget as drafted would allow a deficit of 3.2% of 
GDP, but the loss of the IEMA tax would raise the deficit to 
4.7%, which was unacceptable.  She said that the deficit 
would need to be brought down through austerity and tax 
reform to about 2% of GDP, at the same time while meeting the 
Fiscal Pact's capital investment target of 4% of GDP.  She 
noted that the previous government had claimed to have 
exceeded the 4%, but it had done so only by improperly 
categorizing payments to former militias (ex-PACs) and 
deposit insurance contributions as "investments." 
 
16. (C) A/S Noriega commented that the new government, with 
its focus on good governance and open markets, had come to 
office at an especially propitious moment.  CAFTA will give a 
boost to those who can make use of it, and the MCA was 
conceived for governments that were forward looking and 
welcomed trade and private investment.  He said it was hard 
to overstate how deeply ingrained Guatemala's negative 
international image had become, and he encouraged the GOG to 
get to Washington and let the world know that a new Guatemala 
had emerged. 
 
Berger Asks for Help with Military Reduction, Migrants and 
CAFTA 
--------------------------------------------- --------- 
17. (U) President Oscar Berger hosted a lunch for A/S 
Noriega, the Ambassador, DCM, Executive Assistant Friedman 
and Polcouns at the "Casa Presidencial" on February 4.  Also 
in attendance were Vice President Stein, Foreign Minister 
Briz, Executive Secretary of the Presidency Eduardo Gonzalez, 
and the President's Private Secretary Alfredo Vila. 
 
18. (C) A/S Noriega opened the meeting by telling Berger that 
his election and the selection of his team had created great 
expectations in Guatemala and in Washington.  Guatemala has 
changed dramatically in the past twenty years, and again in 
the past two weeks (note: since Berger took office).  CAFTA, 
the rise in remittances from Guatemalans abroad, the Bush 
immigration initiative and the great interest of the White 
House in Latin America make this a auspicious time for a 
progressive government to be assuming power in Guatemala. 
A/S Noriega said the United States wants to work with the new 
government to take advantage of this unparalleled opportunity 
to foment economic growth and the strengthening of democratic 
institutions and human rights. 
 
19. (C) President Berger welcomed the Assistant Secretary's 
visit and said his government will make a priority of 
strengthening bilateral relations "which suffered under 
Portillo."  He said he would soon be sending Vice President 
Stein to Washington to lobby Congress for funding for his 
bold proposal to greatly reduce the military (price tag: one 
billion quetzales or $125 million), to lift the prohibitions 
on US military assistance, to provide increased funds for 
counter-narcotics programs, and to ratify CAFTA.  Berger 
continued to express interest in securing better protections 
for Guatemalan beer in the CAFTA agreement, but acknowledged 
that the agreement, as it stands, will do a lot to generate 
economic growth in Guatemala.  Berger said that Stein would 
also use his visit to Washington to explore ways of securing 
TPS-like protections for Guatemalan illegal aliens, possibly 
in the context of President Bush's immigration initiative. 
A/S Noriega told Berger that reducing the military was a 
laudable goal not only for budgetary purposes, but also for 
modernizing the state.  He cautioned Berger to have low 
expectations of foreign financing for such a reduction, 
however, and urged him to explore financing it in part by 
selling off military properties.  The Ambassador offered to 
bring a team of experts to Guatemala to provide Berger with 
advice on divesting military properties. 
 
20. (C) President Berger asked about the status of US law 
enforcement investigations into possible money laundering by 
senior officials of the Portillo administration.  The 
Ambassador promised to arrange for Berger to meet with the 
investigators for a briefing (Comment: This is very important 
to Berger, who has asked about it twice earlier when the 
Ambassador had seen him at other events. End comment). 
 
21. (C) In response to the Assistant Secretary's pitch on 
Article 98, Berger said that he was awaiting a recommendation 
from the Foreign Ministry, but said he did not anticipate a 
problem.  Berger said he firmly supports the creation of 
CICIACS, and hopes it will be on the ground in coming months. 
 After discussing the important contribution 600 Cuban 
medical doctors make to rural medicine in Guatemala, Berger 
said that he had, nonetheless, already informed the Cuban 
Ambassador that he would not compromise his democratic values 
(i.e. support for the Cuba human rights resolution at the 
UNCHR) in exchange for the doctors.  He said, "don't worry. 
We will be on the right side on this." 
 
22. (C) Over drinks at the Residence that evening, Vice 
President Stein told A/S Noriega and the Ambassador that 
Guatemala will ultimately be helpful on the Cuba resolution 
at the UNCHR, but that with the government just getting off 
the ground (and with opposition from the human rights NGO's 
to the Cuba resolution), it would be difficult for Guatemala 
to play a leadership role on a draft resolution.  The 
Ambassador asked that, notwithstanding their desire to keep a 
low profile for now, they give serious consideration to 
cosponsoring the resolution. 
 
President of Congress Supports Mayan Jaguar Legislation 
--------------------------------------------- ---------- 
23. (C) In a courtesy call on President of Congress Rolando 
Morales and members of the Congressional leadership board, 
A/S Noriega said that his time working in the US legislative 
branch had convinced him of the critical role Congress plays 
in guaranteeing governability.  He congratulated Morales for 
the governability pact reached between President Berger's 
GANA coalition, Morales' UNE party and the PAN to ensure 
agreement on a basic legislative agenda.  A/S Noriega told 
Morales that he had just met with the Economic Cabinet, and 
that they had outlined a bold plan for jump-starting economic 
growth and reducing the fiscal deficit, and expressed hope 
that Congress would be able to support this important 
initiative. 
 
24. (C) Morales said that he was convinced that Guatemala 
would become a narco-state if it were not for foreign 
assistance to fight the war on drugs.  He said that he 
supports extension of legislation authorizing the Mayan 
Jaguar counter-drug joint exercises, and will take expedited 
action on the proposal once it is received from the 
Executive.  Other members of the leadership board similarly 
expressed support for renewing Mayan Jaguar.  Several of the 
legislators voiced concern about the potential negative 
effects of CAFTA on specific economic sectors, but all agreed 
that overall CAFTA will spur job creation and generate 
economic growth. 
 
25. (C) A/S Noriega urged the legislators to pass 
Hague-consistent adoption legislation, and noted that it is 
extremely important that language in the new law permit 
completing old cases under the old law during the transition, 
so that already begun cases don't fall into a legal limbo 
with the enacting of a new law.  The legislators took the 
point, and said that the new adoption law had gone through 
its first reading that very morning. 
 
Meeting Civil Society 
--------------------- 
26. (C) On the evening of February 4, A/S attended a 
reception at the Residence with a large cross-section of 
representatives of civil society organizations, opposition 
political parties, senior GOG officials and the private 
sector.  In private conversations and in brief public 
remarks, A/S Noriega urged the Guatemalans to work together 
to take advantage of the opportunities that CAFTA, the 
President's immigration initiative and CICIACS offer for 
generating real and lasting change in Guatemala. 
 
Comment 
------- 
27. (C) Assistant Secretary Noriega's visit was interpreted 
by President Berger and his team as a sign of our public 
embrace of the new government, and of a shared desire for a 
closer bilateral relationship.  It came at a time of great 
public expectations of the Berger government, and highlighted 
for Berger and his ministers the importance of seizing the 
day on CAFTA and other critical areas that can't be ignored. 
 
28. (U) This cable was cleared by A/S Roger Noriega. 
HAMILTON