US embassy cable - 05GUATEMALA1204

UNCLAS SECTION 01 OF 02 GUATEMALA 001204 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PGOV, ECON, GT 
SUBJECT: LETTER FROM GUATEMALA (8) 
 
What's Up with Eddie? 
--------------------- 
 
1. (SBU) There has been some buzz about Vice President 
Eduardo Stein's unhappiness with the government's direction, 
triggered by an interview in "Prensa Libre" where he 
intimated he would leave the administration if the GOG failed 
to boost social spending in next year's budget.  Stein is a 
Euro-style social democrat, and Berger recruited him to be 
his running mate to provide reassuring balance as well as 
some government experience to his ticket.  For the last 
sixteen months, Berger and Stein have worked together very 
well, and Stein has been the "go-to man" (if not the "Mr. 
Fix-it") on a broad array of issues. 
 
2. (SBU) Lately, however, the center-left Stein is viewed as 
increasingly isolated in the pro-business Berger 
administration, particularly after the recent departures of 
Edmundo Urrutia from the Strategic Analysis Secretariat (SAE) 
and Victor Montejo from the Presidential Peace  Secretariat 
(Sepaz).  Although there are other prominent left-leaning 
figures in the Berger administration (human rights activist 
Frank LaRue and Nobel Peace Prize winner Rigioberta Menchu 
come to mind), Urrutia and Montejo were considered to be 
Stein's only proteges in senior positions, and their 
replacements have no special ties to the Vice President. 
 
3. (SBU) Stein's public brainstorming that the GOG should 
explore fuel subsidies to lessen the impact of rising 
gasoline prices was quickly shot down by Berger himself. 
Chastened perhaps by that experience, Stein in his "Prensa 
Libre" interview ridiculed "trickle-down" economic theory and 
staked out next year's social spending as his battleground, 
leading one prominent op-ed columnist to ask, in his 
headline, "Will Stein resign in 2005 or 2006?"  Another 
newspaper's well-read gossip column claimed that Stein had 
gone ballistic over Berger's decision to support us on the 
Cuba resolution at the Human Rights Commission in Geneva. 
(Stein told the Ambassador that he did advocate an 
abstention.) 
 
4. (SBU) FM Briz gave credence to the latter in a meeting 
with the DCM on April 20 when he alluded to the internal 
wrangling that had left Stein on one side, Briz on the other, 
and President Berger in the middle.  Briz won that battle, as 
Guatemala voted with us on Cuba, but he was already looking 
for conciliatory gestures to unruffle Stein's feathers.  Briz 
told us he would like to arrange a trip to the United States 
for the VP and, since then, Stein has made one trip to our 
East Coast and another to California.  We believe that 
Guatemala's "yes" vote on the Guantanamo resolution was also 
intended (by Briz) to mollify Stein and bring him back into 
the fold. 
 
5.  Comment:  The Ambassador had not yet had an opportunity 
to draw Stain out on this subject.  A few-plugged-in 
observers believe the press has exagerated the possibility of 
Stein's departure.  End comment. 
 
Filibusters, Guatemalan-Style 
----------------------------- 
 
6. (SBU) We, along with many Guatemalans, were astonished to 
see Congress brought to a standstill for the better part of 
three weeks by one deputy's interpellation of Health Minister 
Marco Tulio Sosa.  The interpellating deputy, Mario Bolanos, 
was Health Minister in the disgraced Portillo administration 
but switched last year from Portillo's FRG to the UNE. 
Bolanos unilaterally convoked Sosa to testify before 
Congress. 
 
7. (SBU) Under Guatemalan parliamentary procedure, once an 
interpellation begins, no other legislative business can be 
brought to the floor until it is completed.  However, to keep 
an interpellation going, a quorum of at least one half the 
deputies (or 80 of the 158) must physically be present in 
plenary.  Bolanos presented 385 questions, ostensibly to 
cross-examine Sosa on the GOG's administration of health 
services.  It quickly became evident from Bolanos's line of 
questioning that his real purpose in interpellating Sosa was 
to mount a defense of former Vice President Reyes, who is 
awaiting criminal trial for embezzlement.  Bolanos's new UNE 
comrades, aghast at the thought of coming to the defense of 
the discredited former VP, were the first to abandon the 
plenary, breaking quorum.  During the following three weeks, 
however, the interpellation was repeatedly suspended as the 
deputies failed to reach a quorum. 
 
8. (SBU) In the meanwhile, no other business could be brought 
to the floor.  The congressional leadership had hoped to 
schedule votes in plenary on a number of initiatives, 
possibly including a new adoptions law, a land title 
registry, restoration of a fuel tax, anti-terrorist financing 
legislation, and authorization of an office of the UN High 
Commissioner on Human Rights.  With the Congress scheduled to 
begin a two-month recess on May 15, the congressional 
leadership made no secret of its annoyance with Bolanos for 
holding things up with his interpellation.  The media and a 
large number of Bolanos's congressional colleagues took to 
questioning his insistence on completing his interpellation 
of Sosa to the detriment of legislative activity.  President 
Berger weighed in, calling Bolanos "impertinent" for putting 
everyone to sleep with his questions.  Bolanos, unfazed, 
responded that Berger was "ignorant." 
 
Nineth Makes Her Exit 
--------------------- 
 
9. (SBU) We speculated in an earlier letter that 
congressional deputy Nineth Montenegro's days in the ANN were 
numbered.  The moderate center-left Montenegro, by far the 
ANN's biggest vote-getter in the 2003 election, was 
increasingly uncomfortable in the ANN, which had been 
hijacked by Pablo Monsanto, the former URNG guerrilla. 
 
10. (SBU) Montenegro has now formally announced her 
resignation from the ANN, taking with her two of the ANN's 
five other deputies.  She is in the preliminary stages of 
creating a social democrat party, yet to be named. 
Montenegro has long been in the public eye as a co-founder of 
GAM, a human rights NGO, which she started after the 
disappearance twenty years ago of her first husband.  In 
Congress, Montenegro has focused her efforts on military 
transparency and accountability, and "Prensa Libre" named her 
as its "Person of the Year" for 2004.  She is often mentioned 
as a potential presidential candidate or running mate in 
2007, but people close to her have told us she has her eye 
set on the mayoral race. 
 
With Prosecutors Like These...:  The Continuing 
Saga of Alvarado MacDonald's Twin Banks 
--------------------------------------------- -- 
 
11.  (U)  Central Bank President Lizardo Sosa was recently 
featured in the press complaining that the Public Ministry 
(Attorney General's Office) was incapable of understanding 
the four-year old banking scandal surrounding Francisco 
Alvarado MacDonald.  Alvarado's "twin banks," Promotor and 
Metropolitano, went into receivership in early 2001. 
Alvarado, a leading financier of Alfonso Portillo's 1999 
presidential campaigner who then fell out of Portillo's 
favor, has been dueling with prosecutors and the courts ever 
since to stay out of jail on bail.  Periodically, he also 
protests his innocence to the public through full page 
newspaper adds in the name of the banks' "majority 
shareholders."  He has filed criminal charges against Sosa 
and the Monetary Board, who have been trying to achieve final 
liquidation of the banks' assets.  Sosa told the press that 
one of the "big obstacles" to liquidation was that the Public 
Ministry's prosecutors were having trouble "understanding ... 
what the case was about."  He found it "incredible" that 
prosecutors were now looking into Alvarado's charges against 
the authorities.  Attorney General Florido responded with a 
brief defense of the prosecutor handling the case. 
 
12.  (SBU)  The case itself is as uncomplicated as Sosa 
describes.  Alvarado's banks made large unsecured loans to 
businesses he owned that were not repaid.  The banks 
predictably ran out of cash and were unable to meet the 
minimum reserve requirements at the Central Bank, so the 
Central Bank shut them down.  We hadn't realized how simple 
the issue really was until Alvarado sent us a document 
purporting to explain why he was the victim.  Instead, it 
demonstrates in clearest detail that Sosa did what he was 
supposed to do.  The document describes how Alvarado drew 
checks to overdraw two of his banks' accounts with the 
Central Bank and used the proceeds to create positive 
balances in others.  His core argument is that the law 
doesn't say you have to subtract your negative balances from 
your positive ones to calculate the amount on deposit for 
reserve requirement purposes.  The effrontery of the argument 
is breathtaking, but so is the prosecutors' inability to get 
beyond form to substance and grasp the simplest concepts of 
banking and finance, an inability that leaves them hopelessly 
unprepared to prosecute financial crimes.  Sosa is right to 
be frustrated. 
HAMILTON