US embassy cable - 04GUATEMALA1278

UNCLAS SECTION 01 OF 02 GUATEMALA 001278 
 
SIPDIS 
 
SENSITIVE 
 
DEPARTMENT FOR WHA/CEN 
 
E.O. 12958: N/A 
TAGS: PGOV, PHUM, PINR, MOPS, GT 
SUBJECT: BERGER RECOVERS AFTER STUMBLE 
 
REF: A. GUATEMALA 1241 
 
     B. GUATEMALA 1259 
 
1.  (SBU)  Summary:  Criticism lingers of Berger's handling 
of his private talks with the FRG, but the political storm 
has apparently passed and media criticism has decreased 
considerably.  Berger shored up the GANA coalition after the 
departure of Security Commissioner Otto Perez Molina and his 
Patriot Party by convincing wavering leaders of the National 
Solidarity Party (PSN) that he had not made an alliance with 
the FRG.  After human rights activists suggested she resign 
in protest, Goodwill Ambassador Rigoberta Menchu strongly 
defended the GANA's willingness to work with the FRG to pass 
fiscal reforms.  On May 19, Attorney General Florido denied 
any negotiation with the FRG on impunity issues, and 
announced that the Public Ministry had in fact redoubled its 
efforts to prosecute FRG corruption involving Rios Montt's 
son, Gen. (ret.) Enrique Rios Sosa, and other FRG members. 
Berger announced that Otto Perez Molina would not be replaced 
as Commissioner of Security and Defense, and said he would 
personally direct the modernization of the military. 
 
2.  (SBU) After concerns about further fracturing of the 
ruling GANA coalition passed, media and public attention has 
returned to the fate of the crucial fiscal reform package 
pending before Congress.  A meeting on May 18 between Berger 
and President of Congress Rolando Morales initially fueled 
speculation about an agreement in support of the reforms 
between the GANA and the National Unity for Hope Party (UNE), 
subsequently dashed by UNE leader Alvaro Colom, who denied 
any such deal.  After meeting with FRG leader Efrain Rios 
Montt, FRG Congress members reiterated support for passage of 
the fiscal pact on May 20.  The fiscal pact reforms were 
formally introduced to Congress on May 19 and 20, and sent to 
five Congressional committees for review.  The GANA and FRG 
have majorities in four of the five.  The fifth, the 
Indigenous Affairs Commission, is handling review of the most 
controversial element of the reforms--personal income tax 
changes.  Signaling flexibility, Berger publicly indicated he 
would accept changes to the initiative.  End Summary. 
 
No GANA-FRG Alliance 
-------------------- 
 
2.  (U)  On May 18, Berger and Vice President Stein 
repeatedly denied any "alliance" between the GANA and FRG. 
Instead, Stein characterized the accord as a 
"circumstantial" agreement to approve urgent fiscal reforms. 
Former FRG Vice President Francisco Reyes Lopez also publicly 
denied any such agreement.  PSN leaders met with Berger on 
May 18 and later announced their decision to stick with the 
GANA coalition, but a party leader warned that "if there is 
any other secret agreement with the FRG, we will leave." 
 
 
3.  (U) Attorney General Florido held a press conference on 
May 19 to deny any negotiation with the FRG over pending 
investigations/prosecutions for corruption or other crimes 
committed while in office.  Instead, he announced that the 
investigation of July 24-25, 2003 demonstrations organized by 
the FRG would be broadened from six to ten suspects 
(including FRG leader Gen. (ret.) Efrain Rios Montt, 
currently under house arrest).  He also announced that the 
Public Ministry had requested a travel ban (subsequently 
granted by the court) on Gen. (ret.) Enrique Rios Sosa, who 
is under investigation for his role in corruption when he 
served as Army Finance Director in 2001-2002.  Despite these 
moves, on May 20 FRG Congress members announced their support 
for the fiscal reforms after meeting with their leader, 
Efrain Rios Montt, at home, where he is under house arrest. 
 
4.  (U) In her public statements on May 18, Nobel Peace 
Laureate Menchu defended the GANA's engagement with the FRG 
as necessary, saying "the most important thing to govern the 
country is the institutional relationship among those who 
participate in the political process.  The FRG is one of the 
parties in that process, and the President is thinking of 
asking for their support for the fiscal reforms.  If the 
fiscal reforms are not approved, the State pantry will remain 
bare and an economic crisis could threaten stability."  She 
went on to say that "I hope an investigatory commission (to 
charge him with genocide for human rights violations under 
his leadership in 1982-83) is quickly convoked to judge Rios 
Montt."  Some human rights leaders had earlier suggested 
Menchu, Frank LaRue and Helen Mack resign their government 
positions to protest any cooperation between the GANA and the 
FRG. 
 
5.  (U) President Berger publicly stated on May 18 that Perez 
Molina will not be replaced as Security and Defense 
Commissioner.  A new Security Council including prominent 
human rights defender Helen Mack will assume an advisory role 
on security issues, he said.  Berger said he would personally 
assume charge of implementing the modernization of the Army, 
which Perez Molina had previously championed. 
 
Fiscal Reforms Move Forward 
--------------------------- 
 
6.  (U) After meeting with the President on May 18, President 
of Congress Rolando Morales emerged to say he and Berger had 
agreed to "approve a fiscal reform package we agree upon" 
after receiving alternate proposals from civil society, an 
opposition priority.  Morales also claimed that Berger had 
agreed to send Congress the Executive's proposed budget 
re-allocation plan for the remainder of 2004, another 
opposition priority.  Despite press reports that this 
represented an UNE-GANA agreement, on May 19 UNE leader 
Alvaro Colom denied that Morales had made any agreement 
obliging the UNE to vote in favor of the fiscal reforms.  The 
six separate fiscal reforms were read in Congress on May 19 
and 20, after the Berger budget reallocation plan was 
received as promised.  After the formal reading, the six were 
sent to five Congressional committees for review.  Four of 
the five commissions (Finance, Legislative Issues, Mines and 
Energy, and Health) have GANA-FRG majorities.  The last, 
Indigenous Affairs, does not, and will consider the most 
controversial element of the reforms involving personal and 
corporate tax revisions.  President Berger expressed hope 
that the commissions will vote on the accords after one week. 
 He also signaled flexibility, saying the proposals "are not 
written in stone." 
 
Comment 
------- 
 
7.  (SBU) The political storm over GANA-FRG collaboration to 
speed approval of fiscal reforms has damaged Berger and the 
GANA, effectively ending the new government's honeymoon.  The 
GANA's tactic of engaging the FRG, while pragmatic and 
probably necessary, was abrupt and suffered from its lack of 
transparency.  Most damaging was the fact that it undermined 
the GANA's credibility with its base, which remains shaken. 
 
8.  (SBU) Nevertheless, we are impressed by Berger's 
well-coordinated moves to recover from the buffeting 
precipitated by the May 17 exit from the Executive of Otto 
Perez Molina.  The move against Rios Montt's son was clearly 
meant to signal that, contrary to popular conspiracy 
theories, Berger has not traded impunity for the Rios Montt 
clan for FRG votes.  Rigoberta Menchu's defense of the GANA 
tactics helped salvage the Government's  credibility and 
advance the prospects of fiscal reform.  Those reforms still 
face many hurdles, especially in the Indigenous Affairs 
Commission, and, will undoubtedly be modified by the 
democratic process.  Berger's announcement that he would 
personally assure the modernization which Perez Molina 
championed as key to the military reduction will help keep 
another important Berger initiative on track. 
HAMILTON