US embassy cable - 04GUATEMALA1081

UNCLAS E F T O SECTION 01 OF 03 GUATEMALA 001081 
 
SIPDIS 
 
NOFORN 
SENSITIVE 
 
E.O. 12958: DECL: 03/02/2014 
TAGS: PGOV, PINR, PREL, MOPS, GT 
SUBJECT: BERGER'S FIRST 100 DAYS: HONEYMOON ENDING? 
 
 
1. (SBU) Summary:  President Oscar Berger,s government is 
off to a strong start and retains strong public approval. 
Berger and his team have effectively conveyed new energy and 
direction, launching significant initiatives to reduce and 
modernize the military and to open borders to freer 
intra-regional trade.  However, the Berger government's 
honeymoon with the press and public may be waning.  To retain 
the support of hopeful Guatemalans, the government must 
overcome a fiscal deficit, a divided Congress, a legacy of 
government corruption and high levels of crime and start 
delivering more to a needy population.  An early test will be 
Congressional passage of a fiscal reform package.  End 
Summary. 
 
The Berger Style 
---------------- 
 
2.  (SBU) Throughout his government's first 100 days Berger 
has sought to distinguish his government from its discredited 
predecessor.  He has done so by continuing to attack 
corruption of the past government, launching some bold 
initiatives and, perhaps most effectively, by conveying a 
change in governing style.  The result has been that Berger 
and his government benefited, with minor exceptions, from a 
"honeymoon" with the mainstream press which supported his 
candidacy.  Independent opinion polls still show Berger's 
popularity at over 80%, and faith in democracy reviving. 
However, in a sign that the honeymoon may be coming to an 
end, most media marked the 100-day milestone expressing 
public perceptions that the change in government had not yet 
affected them in their daily lives. 
 
3.  (SBU) Never a practiced public speaker, Berger,s public 
appeal stems instead from his genuine enjoyment of contact 
with a hopeful public and generally supportive press.  Berger 
has set an example of his government's transparency by 
inviting the press along at every opportunity and even 
opening some Cabinet meetings to the media.  He has also 
projected an image of austerity by reducing his entourage and 
security contingent, permitting closer contact with the 
public.  The contrast in style between the Portillo 
government in its last year, hunkered down against 
allegations of systematic corruption from a hostile print 
media, could not be more striking. 
 
4.  (SBU) Behind the scenes, Berger has fostered a sense 
urgency and pragmatism in policy debates, and seems impatient 
to demonstrate change.  Berger believes that political 
capital is not something to be preserved, but rather to be 
spent wisely.  Most notable among his initial political 
investments have been the bold proposed reductions in the 
size of the military (by roughly half), which is on track for 
completion by June 30; the formal "re-launching" of the Peace 
Accords national agenda; and the process of opening the El 
Salvador and Honduran borders to free transit of goods to be 
completed by July, with a planned extension of the customs 
union to Nicaragua shortly. 
 
5.  (SBU) Berger,s natural spontaneity and decisiveness have 
sometimes led him to make general public statements which 
have been misinterpreted (e.g. Berger's statement in favor of 
human rights anywhere was misinterpreted by the press to mean 
the GOG would vote in Geneva to condemn human rights 
violations at Guantanamo Bay).  Berger's impulsive style is 
complemented by Vice President Stein's more careful one.  In 
addition, Stein personally leads the Government's delicate 
dialogue with campesinos, labor unions and other social 
groups.  In contrast, Eduardo Gonzalez, Berger's powerful 
chief of staff, is suspected of playing a more Machiavellian 
role behind the scenes.  Rival presidential aspirants suspect 
Gonzalez of personally orchestrating media attacks against 
them. 
 
Challenges and Expectations 
--------------------------- 
 
6.  (SBU) From the outset, the Berger government has sought 
to manage high public expectations by citing budget 
constraints requiring fiscal "austerity."  At a ceremony 
marking his Administration's first 100 days, President Berger 
declared his government "well established" and ready to 
confront a burgeoning fiscal crisis.  He blamed the crisis on 
mismanagement and corruption by the Portillo government, and 
launched a campaign to build support for necessary 
revenue-raising strategies by reviving and updating the 1999 
"fiscal pact" reached by over 600 civil society groups. 
These strategies reportedly include a combination of 
borrowing, more comprehensive but reduced income taxes, fewer 
exemptions from the value added tax, better tax collection, a 
crackdown on contraband traffickers, and new taxes on alcohol 
and fuel.  Berger will personally present the reforms to 
Congress on May 5. 
 
7.  (SBU) The negotiation of the fiscal pact will be the 
first major test of Berger,s ability to tap private sector 
support, forge consensus within his own GANA coalition, and 
work with a divided Congress.  Divisions in the ruling GANA 
coalition emerged during the Congressional debate over 
electoral reforms.  The reforms finally passed on April 21, 
after members of the GANA coalition from the Partido Patriota 
(PP) broke with a reluctant GANA leadership in support of the 
reforms.  At the insistence of the GANA, additional electoral 
reforms are now being negotiated among the GANA, UNE and PAN. 
 More recently, Roxana Baldetti, the PP's Congressional 
leader, complained publicly that GANA leaders had not shared 
details of the proposed fiscal pact.  Privately, she told 
EmbOffs that the PP will resist unpopular tax hikes.  Similar 
divisions affect the UNE and PAN. 
 
8.  (SBU) GANA, UNE and PAN Congressional leaders have 
maintained a "Governability Pact" forged at the outset of the 
Berger government, despite severe early strains caused by an 
anti-corruption investigation of UNE and PAN financing 
derived from public funds diverted by the FRG.  After the 
Attorney General,s Office declined to issue arrest warrants 
against the UNE and PAN leaders, the inter-party cooperation 
agreement was patched up and a group of four laws including 
the electoral reforms were passed.  Negotiations are underway 
for a subsequent package of laws to be approved prior to the 
Congressional recess starting May 15. 
 
9.  (SBU) It seems increasingly unlikely that the 
Governability Pact, which divided Congressional Governing 
Board positions among the three parties and excluded the FRG, 
will survive much beyond the upcoming debate over fiscal 
reforms.  According to FRG sources, the FRG has sought to 
entice the GANA into an alternative power-sharing agreement 
by offering it complete control of the Governing Board and 
thereby over the Congressional agenda and budget, in exchange 
for a working alliance.  GANA leaders have told us somewhat 
wistfully that the FRG, though reduced by defections, remains 
the most disciplined block in Congress.  GANA leaders may 
also be tempted to violate the Pact for another reason: to 
accept into its ranks some of the 21 newly independent 
members of Congress who bolted from the opposition parties. 
Doing so, however, would still not give the GANA a working 
majority in Congress. 
 
10.  (U) The current status of forces in Congress, after 
taking into account those defections, is: GANA 47 deputies, 
FRG 31, UNE 28, PAN 14, Unionista Party 7, ANN 4, and four 
other small parties retain a total of 6.  Four of the 21 
independent deputies have announced the creation of a new 
party called "National Welfare" (BIEN) and eight independent 
ex-FRG deputies (associated with President Portillo) are 
reportedly considering doing the same.  With 158 total 
deputies, a simple majority requires 80 votes, and a 2/3 
majority requires 105. 
 
Security Risks 
-------------- 
 
11.  (SBU) The Berger Government is most vulnerable to 
growing press criticism over the lack of progress curbing 
high crime levels.  Crime was a major campaign issue, and 
media reports have contested the new government's claim that 
crime has declined during its brief tenure.  Minister of 
Government Arturo Soto now claims that the GOG has halted the 
increase in crime, rather than actually reduced it.  GOG 
Security Commissioner Otto Perez Molina, the leader of the PP 
and a presidential aspirant, is politically vulnerable as a 
result of continued public insecurity over crime rates. 
Although some areas of law enforcement, including 
counter-narcotics, show steady improvement, press and public 
opinion is alarmed by rates of violent street crime, which 
continues unabated. 
 
Comment:  USG Interests 
----------------------- 
 
12.  (SBU) While still early to judge, the Berger government 
has proven responsive to USG concerns as we have raised them. 
 To support the new government and advance USG interests the 
Ambassador has publicly praised worthy efforts (e.g., the 
military reduction, CICIACS, and stepped-up counter-narcotics 
activities), and pressed for early action on key bilateral 
issues requiring immediate GOG attention (e.g., Article 98, 
trafficking in persons, labor rights).  On the eve of 
Berger's visit to Washington the Ambassador publicly noted 
the emergence of a new era in US-Guatemalan relations. 
Berger,s recent visit to Washington cemented early gains in 
the relationship and his meeting with President Bush boosted 
Berger,s credibility at home. 
 
13.  (SBU) Over the coming year we will be evaluating the 
performance of the Berger government on key issues of USG 
interest, including: 
 
-- successful negotiation of the fiscal package; 
 
-- military modernization/reduction; 
-- the establishment of a CICIACS; 
 
-- ratification of CAFTA; 
 
-- the fight against corruption and impunity; particularly 
when it involves the present government; 
 
-- cooperation against counter-narcotics and trafficking in 
persons; and, 
 
-- effective enforcement of labor rights. 
WHARTON