CAPITALIZING ON POLITICAL CHANGE IN GUATEMALA

C O N F I D E N T I A L SECTION 01 OF 02 GUATEMALA 002956

SIPDIS

E.O. 12958: DECL: 11/14/2013
TAGS: PREL PGOV PINR EAID PHUM MASS ETRD SNAR GT
SUBJECT: CAPITALIZING ON POLITICAL CHANGE IN GUATEMALA


Classified By: Ambassador John Hamilton for reasons 1.5 (b) and (d).


1. (C) Summary: The assumption of power on January 14, 2004
of a new government more aligned with USG interests offers an
opportunity to advance our priority goals in Guatemala by
engaging creatively up front on our shared interests in free
trade, human rights, strengthening democracy and
counter-narcotics cooperation. Key elements of this
engagement will be sending a high-level delegation to the
inaugural, seeking an invitation from Mexico for the
President-elect to attend the special SOA and increasing our
FY-04 assistance to the GOG, including DA, ESF and INL funds.
For only the second time since the restoration of democracy,
the incoming government will not have a majority in Congress,
and an unequivocal embrace by us in its early days and weeks
will be key to securing domestic support for moving our
priorities to the forefront of the new government's action
plans. The Department may wish to give consideration to
holding a PPC to discuss ways in which we can take advantage
of this opportunity. End summary.


2. (C) The change of government on January 14, 2004, and with
it the departure of the Portillo administration,
characterized by corruption and political confrontation,
offers us the best opportunity we have had in several years
to advance USG interests in Guatemala. Both of the contenders
in the final round of Guatemala's elections share our views
on free trade, human rights, strengthening democracy and the
war on drugs, and are committed to addressing these issues
concretely early on. They will have to work with a deeply
divided Congress, however, and will inherit a depleted
treasury, a poorly functioning judiciary and government
institutions that suffer from congenital bureaucratic
inertia. Our decisive engagement with the new government at
the outset will be crucial to generating popular and
legislative support for the new government's efforts in these
areas and will ensure that these priorities receive the new
GOG's prompt attention.


3. (C) By sending a Cabinet-led Presidential delegation to
the January 14 inaugural, we would send an unmistakable
message to the new government and the people of Guatemala
that the USG is prepared to engage seriously with the new
administration in the pursuit our common objectives. The new
government will need that vote of USG confidence to convince
its opponents -- and there will be many in Congress -- to
give it time to prove it can bring about change. This will
prove particularly important in reassuring Guatemalans that
the free trade agreement, negotiated by the old, discredited
government, is good for both Guatemalans and Americans, and
that we are negotiating free trade in a much broader context
of growing cooperation.


4. (C) We should also review all of our engagement options in
Guatemala -- from FY-04 assistance levels and the Millennium
Challenge Account, to support for rule of law and
counter-narcotics assistance -- to see how we can take
maximum advantage of the election of a like-minded government
in Guatemala. The new government inherits macroeconomic
stability, but it will be desperately short of resources.
Fiscal reforms as called for in the Peace Accords and
ill-fated Fiscal Pact will be needed before government
revenues can begin to sustain meaningful reforms in such
critical areas as education and health care. We, and the
rest of the international donor community, will need to
engage early with the new government so that it has the basic
fiscal tools to mobilize more resources and prevent them from
being lost to corruption. However, it will take time to
raise revenues internally. ESF and DA levels to Guatemala
have been declining in the past years, in large part because
of concerns regarding the lack of vision or political will of
the Portillo government to address the country's social and
economic problems. We ask that serious consideration be
given to increasing FY-04 ESF and DA, especially in support
of trade capacity building and rule of law programs and, by
extension, to CICIACS. Delaying review of assistance levels
until FY-05 would limit our ability to help the new
government get its reforms off the ground and would risk
squandering the early months, when it might count on greater
support in Congress. Similarly, increasing INL assistance
would send a concrete signal to the new government that
combating narcotics trafficking has got to be an early
priority of the GOG, and that we are prepared to back up
their political will with increased USG engagement in support
of counter-narcotics programs.


5. (C) President Portillo has announced that he will
participate for Guatemala at the Presidential Summit in
Monterrey, Mexico on January 12-13, only hours before leaving
office. It is in the USG's interest that the president-elect
participate in that forum in order to get to know his
regional counterparts and to show Guatemalans that their new
government enjoys international support. We believe it is
important that we impress upon the Mexican hosts the
importance of inviting the new Guatemalan president to
participate in this event as well, as was done with the
out-going and in-coming presidents of Brazil at the 1994 SOA
in Miami.


6. (C) In view of the window of opportunity the change of
government in Guatemala offers to advance USG interests here,
consideration might be given to holding a PCC to explore
further ways to capitalize. Many of the failures that are
associated with Guatemala -- from rising crime to falling
social indicators -- are a product of the poor governance and
corruption of Alfonso Portillo. His departure and
replacement by a more progressive government -- whichever of
the two is elected -- offers an opportunity we can not afford
to miss.


7. (C) We will send in a separate cable with recommendations
on adjusting our military-to-military relationship with the
new government.
HAMILTON