US embassy cable - 05SANSALVADOR3298

UNCLAS SECTION 01 OF 02 SAN SALVADOR 003298 
 
SIPDIS 
 
STATE FOR U/S HUGHES 
 
E.O. 12958: N/A 
TAGS: KPAO, EAID, PREL, ECON, ES, OVIP 
SUBJECT: SCENESETTER FOR U/S HUGHES, VISIT TO EL SALVADOR, 
DECEMBER 6, 2005 
 
Introduction 
------------ 
1. Embassy San Salvador extends a warm welcome to you and 
your party on December 6, 2005. We expect your visit will 
underscore the U.S. commitment to the people of El Salvador 
in assisting their recovery from Hurricane Stan and the 
eruption of the Santa Ana volcano in early October. Combined, 
these natural disasters killed 128 people and in the 
immediate aftermath left 67,000 people temporarily homeless; 
another 5,000 were permanently displaced. The twin disasters 
caused about $355.6 million in economic damages according to 
the United Nations, equivalent to 2.2 percent of GDP. To 
date, international donors have offered $7 million in 
disaster relief funding. The government is also reprogramming 
loans from the Inter-American Development Bank and other 
sources for reconstruction. 
 
2. El Salvador is particularly prone to natural disasters, 
suffering from hurricanes, earthquakes, and volcanic 
eruptions on a regular basis. These natural disasters, 
compounded by the country's war-torn past, have posed 
significant development challenges for El Salvador. One 
defining characteristic of the Salvadoran people, however, is 
their ability to face adversity and rebuild their lives. 
 
United States - El Salvador Relations 
------------------------------------- 
3. El Salvador is one of our strongest allies in the Western 
Hemisphere, and is a bedrock of economic and political 
stability in the region. In broad terms, U.S. goals in El 
Salvador are to build prosperity, enhance security, promote 
democracy, and invest in people. El Salvador is committed to 
open markets, fiscal responsibility, individual freedoms, 
rule of law, and the fight against terrorism and other 
international criminal activity. El Salvador is the only 
other country in the Western Hemisphere to maintain troops in 
Iraq. 
 
4. El Salvador was the first country to ratify CAFTA-DR, and 
President Saca is hopeful the agreement will be implemented 
January 1, 2006, to give the economy a much needed shot in 
the arm. The Millennium Challenge Corporation recently 
declared El Salvador eligible for MCC funding in 2006; El 
Salvador has identified a possible compact that would 
integrate transportation links and health and education 
improvements for the impoverished northern part of the 
country. The United States is the largest foreign investor in 
El Salvador, principally in electricity generation and 
distribution, but also in textiles and apparel, financial 
services, and call centers. The Department of Homeland 
Security recently notified El Salvador that it would not 
participate in the U.S. Container Security Initiative, 
significantly lowering the country's attractiveness as a 
transshipment hub. 
 
Domestic Political Overview 
--------------------------- 
5. President Elias Antonio "Tony" Saca of the governing 
Nationalist Republican Alliance (ARENA) party assumed office 
June 1, 2004, after winning a hotly-contested presidential 
race by 22 percentage points. President Saca's ARENA party 
holds only 29 of 84 seats in the Legislative Assembly, but 
through alliances with smaller parties, regularly passes 
legislation requiring a simple majority. ARENA's major 
political opposition is the leftist Farabundo Marti National 
Liberation Front (FMLN), which has been weakened recently by 
internal struggles and defections. Attention is already 
focusing on municipal and Legislative Assembly elections 
scheduled for March of next year; early polls suggest that 
ARENA may win additional legislative representation. 
 
Domestic Economic Overview 
-------------------------- 
6. El Salvador's stable economy, the result of a broad reform 
agenda implemented by three successive ARENA governments, has 
earned El Salvador an investment-grade debt rating from 
Moody's, and provides a measure of economic predictability. 
The government views foreign investment as crucial for 
economic growth and development and has taken numerous steps 
in recent years to improve the investment climate. 
Nonetheless, the economy has been growing at a disappointing 
rate of about two percent per year since 1999, despite its 
excellent macroeconomic fundamentals. 
 
7. President Saca's highest priorities are reinvigorating El 
Salvador's economy, creating jobs, and improving the nation's 
infrastructure. Roughly 40 percent of the population still 
lives in poverty, though poverty rates have declined in 
recent years thanks in part to remittance flows from 
Salvadorans in the United States that may top $3 billion in 
2006. A recently announced anti-poverty program will provide 
direct subsidies to the poorest Salvadorans; participants 
will be expected to send their children to school and 
participate in public health programs to receive the subsidy. 
 
El Salvador's Foreign Policy 
---------------------------- 
8. El Salvador is the only other country in the Western 
Hemisphere with troops in Iraq and has recently sent its 
fifth contingent to serve there with coalition forces. El 
Salvador's postwar ARENA governments have generally been 
reliable in their support for U.S. positions in international 
fora such as the United Nations, including on issues such as 
U.N. reform, human rights abuses in Cuba, the Middle East 
peace process, and free trade in Latin America. 
 
Migration Issues 
---------------- 
9. As many as two million Salvadorans live in the United 
States, most illegally. Since the 2001 earthquakes, between 
250,000-280,000 Salvadorans have benefited from Temporary 
Protected Status (TPS), living and working legally in the 
United States. The U.S. announcement in January 2005 of a 
further 18-month extension of TPS was of paramount importance 
to the Saca Administration. El Salvador is focused on 
obtaining permanent status for TPS recipients, claiming it 
cannot absorb that number of returnees--President Saca raised 
this topic with President Bush during their meeting on the 
margins of the Summit of the Americas, and President Saca may 
raise this issue with you, linking it directly with Hurricane 
Stan. 
 
Terrorism and Crime 
------------------- 
10. El Salvador has been a strong supporter of the United 
States in the fight against terrorism and international 
organized crime. Drug trafficking has received significant 
government attention and cooperation; El Salvador hosts a 
Cooperative Security Location at Comalapa Airport, one of 
three in the region. Trafficking in persons remains a serious 
problem, but the police are conducting raids against those 
suspected of exploiting children. Gang violence is a growing 
concern for all levels of society and has a serious impact on 
economic development. The FBI will soon open a permanent 
office at the Embassy to exchange intelligence on gang 
organizations. 
 
Civilian-Military Relations 
--------------------------- 
11. The Armed Forces of El Salvador (ESAF) are capable, 
professional, and subordinate to civilian authority. The 
military consistently receives high approval ratings in 
public opinion polls, reflecting its dramatic transformation 
since the 1980-1992 war. The fifth contingent of a 380-person 
"Cuscatlan Battalion" task force that rotates every six 
months departed for Iraq in August 2005; nearly 2,000 
Salvadoran soldiers have now served with coalition forces in 
Iraq. The Battalion has suffered two fatal casualties in 
Iraq, one combat death in Najaf on April 4, 2004 and one 
non-combat-related traffic death in Hilla on June 27 of this 
year. The ESAF has performed admirably in humanitarian and 
reconstruction efforts in support of the Iraqi people. 
Barclay