US embassy cable - 04GUATEMALA771

C O N F I D E N T I A L SECTION 01 OF 02 GUATEMALA 000771 
 
SIPDIS 
 
E.O. 12958: DECL: 03/03/2014 
TAGS: PREL, MOPS, MARR, GT 
SUBJECT: GOG ACCORD ON DEEP MILITARY REDUCTIONS 
 
REF: GUATEMALA 584 
 
Classified By: Acting PolChief Erik Hall for reason 1.5 (b) and (d). 
 
1.  (C) Summary:  President Oscar Berger told the Ambassador 
on March 27 that he had achieved a "political understanding" 
with his Minister of Defense to reduce military strength to 
15,500 officers and men, and to sharply reduce the military 
budget to .33 % of GDP (down from the Peace Accords limit of 
.66% of GDP).  Some details of the deal, to be announced 
April 1, are still being worked out.  At Berger's request the 
Ambassador publicly supported the idea of reductions at the 
inauguration of the New Horizons joint humanitarian military 
exercise on March 27.  We are tailoring an April 19-20 
Seminar to help facilitate implementation.  Berger's April 30 
meeting with the President will provide a good opportunity to 
give political support from the highest level.  We also need 
to be prepared to provide more concrete support, within 
existing restrictions under U.S. law.  End Summary. 
 
GOG Moved Quickly Toward Accord 
------------------------------- 
 
2.  (C) Following up on the GOG's request for US assistance 
with developing a plan to shrink the military (reftel), the 
Ambassador, MilGroup Commander, visiting Center for Civil 
Military Relations (CCMR) Director Tom Bruneau and CCMR 
Senior Fellow MG (Ret.) Goetze met with President Berger, 
Vice President Stein, Foreign Minister Briz and Presidential 
Private Secretary Vila on March 24.  The purpose of the 
meeting was get Berger's thinking as to how a planned April 
19-20 seminar on military reform could best be tailored to 
support his initiatives.  By way of bringing us up to date, 
Berger said he had asked the military to live within a 500 
million quetzal budget ($62.5 million, versus $155 million 
spent in 2003).  The Defense Minister had resisted, however, 
and threatened to resign.  Berger said he had then requested 
the assistance of an unnamed friend (and retired General), 
who had produced a study calling for troop strength of 14,869 
soldiers, closure of eight major bases, and a budget limited 
to .33% of GDP, or roughly 3% of current government revenue. 
 
3.  (C) The Berger-ordered study also called for cuts in 
administrative expenses of 20-25%, budget transparency, and 
investigation of past corruption in the Military Pension 
Institute (IPM), which Berger believes (with reason) previous 
military leaders have ransacked.  Cutting off funding for the 
IPM and paying retired military salaries would cost 100 
million quetzals annually, according to Finance Ministry 
estimates.  To prevent further corruption, Berger said he 
would also rescind the Army's contracting authority and 
oversee contracts through the Controller General's Office. 
Asked what roles a reduced Army should have as priorities, 
Berger cited peacekeeping, border patrol, counter-narcotics 
support, and supporting the civilian police fighting crime 
(for two years, until reforms to the police force and 
strengthening of civilian intelligence is complete).  The 
goal is to achieve a smaller Army which is well-trained and 
equipped, and more effective. 
 
Army Counter-Offer 
------------------ 
 
4.  (C) In the March 24 meetings, Berger further described 
military resistance to his plans and requested USG political 
support.  Presidential Security Commissioner (and retired 
General) Otto Perez Molina might resign over the final budget 
figures, he said.  Finance Minister Bonilla's efforts to work 
out the technical details of a budget reduction had met with 
stonewalling from the Army.  Berger had therefore turned to 
Presidential Commissioner for Finance Richard Aitkenhead to 
develop a workable plan for reductions in consultation with 
the Army.  In a separate March 24 meeting, which took place 
at Berger's request, Aitkenhead shared with us the Army's 
response to Berger's demands.  It provided for a total troop 
strength of 16,000 (from current levels of 27,209) and a 
budget totaling 871.8 million quetzals ($108 million). 
Aitkenhead thus expressed confidence that the differences 
between the two plans could be overcome. 
 
Accord Reached March 26 
----------------------- 
 
5.  (C) On March 27, at the New Horizons public launch, 
Berger told the Ambassador that he (and Aitkenhead) had in 
fact reached an accord with the Defense Minister during a 
three-hour meeting the day before (the Minister of Defense 
confirmed the agreement to the MilGroup Commander).  At 
Berger's request, the Ambassador supported the need for 
downsizing cum modernization in his public remarks at the New 
Horizons inaugural ceremony.  The accord, which will be made 
public April 1, includes the following elements: 
 
-- troop strength reduction to 15,500 by June 30 
 
-- a 2004 budget ceiling of 700 million quetzals (approx. 
$87.5 million) 
 
-- 2005 budget ceiling of .33% of GDP 
 
(Note:  According to Aitkenhead's figures, military spending 
in 2003 amounted to .64 of GDP.  However, .33% of projected 
2004 GDP totals approximately $108 million.  It is unclear to 
us if Berger intends the military budget to increase in 2005 
to this extent.  The increase may be intended to cover needed 
equipment modernization, after reductions are complete.  End 
Note.) 
 
Next Steps; How We Are Helping, Could Help Further 
--------------------------------------------- ----- 
 
6.  (C) In light of these developments, the CCMR seminar of 
April 19-20 will shift its focus slightly to help facilitate 
development of an action plan to implement the political 
understanding.  With respect to officer demobilization, 
Aitkenhead said the older ones are no problem, as they are 
ready to get out with a financial bonus.  Aitkenhead wants 
help on retraining/re-education of younger officers who will 
have to leave; he had no specific request regarding 
middle-ranked officers, who are the biggest problem due to 
their numbers and years of service.  Aitkenhead also 
requested support for equipment modernization, to the degree 
that we are able given Congressional restrictions.  We expect 
VP Stein, in an upcoming (mid-April) visit to Washington, 
will have specific requests.  One of the most important ways 
we could support this initiative would be a public statement 
by President Bush during Berger's April 30 visit. 
 
7.  (C) Comment:  Downsizing the Guatemalan military has been 
a long-term USG interest.  The evolution of this presidential 
initiative has been remarkably swift and the accord with the 
military is a tribute to Berger's determination and 
pragmatism.  Though Berger overcame predictable resistance 
from the MOD and his top staff, he may yet face opposition 
from within the officer corps.  For example, both the MOD and 
his Chief of Staff thanked the Ambassador for his March 27 
remarks, noting that "the Commanders need to hear what you 
said."  U.S. political support for Berger's gutsy gambit will 
continue to be crucial, as will be any other incentives we 
can offer to support modernization as downsizing is completed. 
HAMILTON