WHA/CEN DIRECTOR TRIVELLI DISCUSSES CAFTA,

C O N F I D E N T I A L SECTION 01 OF 04 GUATEMALA 000403

SIPDIS

E.O. 12958: DECL: 02/10/2013
TAGS: PREL PGOV SNAR PHUM ECON ETRD MARR GT
SUBJECT: WHA/CEN DIRECTOR TRIVELLI DISCUSSES CAFTA,
COUNTER-DRUG COOPERATION AND HUMAN RIGHTS WITH GUATEMALANS


Classified By: PolCouns David Lindwall for reason 1.5 (d).


1. (C) Summary: During a two-day visit to Guatemala, WHA/CEN
Director Paul Trivelli discussed counter-narcotics
certification and free trade with Vice President Reyes and
the Acting Foreign Minister; CAFTA and fiscal responsibility
with the economic cabinet and business leaders; and support
for human rights programs with human rights leaders. He
visited the site of an exhumation from the internal conflict
to show support for the work of threatened human rights
activists seeking to heal wounds left over from the war.
GOG and private sector interlocutors were uniformly excited
about the prospects of a free trade agreement with the US,
and recognize that many non-trade related issues must be
addressed in order for CAFTA to be approved. Human rights
leaders are refining their proposals for the creation of an
international commission to investigate the operations of
clandestine groups and welcomed our support. Guatemalans
view 2003 as a pivotal year for the future of the country, as
elections and CAFTA negotiations will determine if Guatemala
will embrace the 21st century at the same pace as its
neighbors. End summary.

Vice President bullish on CAFTA
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2. (C) The Ambassador, visiting WHA/CEN Director Trivelli and
visiting AID Assistant Administrator Franco met with Vice
President Franciso Reyes on February 6 to discuss the full
range of bilateral issues. The meeting was frank and
cordial. AID/LAC Franco said the USG was pleased to see
Guatemala field a capable team of negotiators to the first
CAFTA meeting in Costa Rica, and said the U.S. views a free
trade agreement as the best hope for reducing poverty in the
region. Franco noted that CAFTA would bring with it a deeper
relationship between our governments and societies, and said
that Congress would have to consider a range of non-trade
issues in the bilateral relationship as "background" to
ultimately approving CAFTA. The Ambassador, Trivelli and
Franco all noted that corruption, counter-narcotics
cooperation, effective investigation of Amcit murders, and
human and labor rights performance were matters that would be
raised by critics of globalization who will question why the
United States is seeking a special relationship with
Guatemala at this time. Vice President Reyes acknowledged
that these issues are ultimately inseparable from a free
trade relationship, calling them "links in the same chain,"
and said the GOG has the political will to address them. He
said that President Portillo has asked him to coordinate the
efforts of the different GOG entities that were participating
in the trade talks.


3. (C) Vice President Reyes said that the GOG would like to
have CAFTA ready to sign by September, 2003 (note: two months
before national elections. end note). He believes the
agreement with Chile could serve as a point of departure, but
said that Central America's unique situation would require
modifications. He said that many in the private sector
oppose a free trade agreement because they believe it will
threaten their long-held monopolies. AID/LAC Franco
responded that it is important that the government address
these concerns by consulting the private sector and civil
society throughout the negotiating process.


4. (C) WHA/CEN Trivelli told the Vice President that it is
critical that Guatemala's counter-narcotics cooperation
improve rapidly. He also observed that continuing
decertification status for Guatemala would seriously
complicate finalization of a free trade agreement. Trivelli
noted that there will be a formal review of Guatemala's
counter-narcotics performance in September, and it is crucial
that major advances take place before that. Vice President
Reyes said that bi-weekly consultations had been set up
between the GOG and the Embassy to address our specific
concerns, and that the GOG would like to achieve
re-certification as soon as possible.


5. (C) Trivelli also told the Vice President that the USG
applauded the Human Rights Ombudsman's recent call for the
creation of an international commission to investigate the
illegal activities of "clandestine groups," and that we hope
the GOG will support the proposal. Vice President Reyes said
that President Portillo had already expressed his support for
this endeavor, but that he (Vice President Reyes) was
withholding judgment until he knew more about its goals.


6. (C) The Ambassador raised our request for GOG support for
Secretary Powell's February 5 UNSC statement on Iraq

SIPDIS
(reported septel),and asked the Vice President to urge the
Ministers of Agriculture and Environment to resolve quickly a
dispute that has put a temporary halt to a joint
U.S.-Mexico-Guatemalan program to eradicate the Mediterranean
fruit fly. The Vice President promised to get in touch with
the Ministers of Agriculture and Environment that day to see
how this problem, which could have serious consequences for
the eradication program in Guatemala, could be resolved
expeditiously.

Foreign Ministry makes CAFTA priority
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7. (C) The Ambassador and WHA/CEN Director Trivelli met with
Acting Foreign Minister Rony Abiu at the MFA on February 6 to
discuss CAFTA, border talks with Belize and an Article 98
agreement. Vice Minister Abiu, who had only been appointed
two weeks previously and who handles the MFA's economic and
trade portfolios, said that the MFA has made securing a free
trade agreement with the U.S. its "highest priority." He
said that the Ministry of Economy had the lead in the
negotiations, but that the MFA had responsibility for matters
involving regional integration. In that vein, he said that
the MFA was tasked with managing the parallel talks with the
other Central American partners to establish a customs union
as a foundation for CAFTA. The Ambassador and WHA/CEN
Trivelli noted that it would be crucial to address
counter-narcotics cooperation, threats against human rights
workers and the unresolved murders of Amcits before the CAFTA
process can be finalized. Abiu acknowledged that "free trade
agreements have important underlying political components,"
and said the GOG is determined to address those issues.


8. (C) Trivelli raised USG disappointment at the failure of
Guatemala to embrace the recommendations of the facilitators
regarding the border demarcation with Belize, noting that it
is crucial at this juncture that both sides agree to
confidence and security building measures (CSBM's) that will
reduce border tensions. Abiu said the GOG also placed a high
value on extending the CSBM's, and said the GOG was hopeful
that there would be an agreement with Belize which would
allow Foreign Minister Gutierrez to sign a CSBM's agreement
with Belize on February 8.


9. (C) Trivelli closed the meeting by noting that the USG was
hopeful that Guatemala would sign an agreement with us
extending to U.S. military personnel in Guatemala protections
under Article 98 of the Treaty of Rome. He noted that U.S.
military assistance to countries that had not signed these
agreements would be limited by law, making it difficult for
the U.S. to continue carrying out humanitarian exercises in
those countries that had not signed Article 98 agreements.
The Embassy sent a diplomatic note to the MFA in 2002
proposing the signing of an agreement, but had not received a
response. Abiu said he was unfamiliar with the matter, but
promised to look into it and get back to us soonest.

Economic Cabinet: CAFTA and fiscal discipline
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10. (C) The Ambassador and WHA/CEN Trivelli met with Minister
of Finance Eduardo Weymann, Minister of Economy Patricia
Ramirez and chief GOG CAFTA negotiator Salomon Cohen on
February 7. Cohen, just returned from the first CAFTA
negotiating session in San Jose, said that the first round of
free trade talks had gone well, and that all sides were
energized by the possibilities. He said that the Chilean
agreement was a good starting point, but noted that Guatemala
would require "special attention" to issues not covered in
the Chilean agreement, including sugar, poultry and textiles.
On textiles, Cohen said that Guatemala is interested in
talking about "cotton-forward," a concept he said USG
negotiators had neither accepted nor discounted. Cohen and
Ramirez both said Guatemala was concerned that the
negotiations would "start at zero," (applied MFN tariffs) not
taking into consideration that Guatemala already had
significant benefits under GSP and CBI. They acknowledged
that market access talks with Chile had started with applied
tariff rates, but feared that Guatemala producers would find
it unacceptable that Guatemala would have to negotiate from a
base which did not take into consideration tariff concessions
they already have. Negotiator Cohen said that for CAFTA to
work, it would be critical for the USG to provide significant
infrastructure assistance to Guatemala (he mentioned
irrigation specifically),noting that otherwise Guatemala was
unlikely to compete well in any free trade arrangement.
Trivelli noted that it is critical that the GOG bring the
private sector and civil society along by consulting
regularly with them, as their support will be crucial if
CAFTA is to work.


11. (C) Finance Minister Weymann, overwhelmed by the ongoing
teachers' protest demanding a 60% salary increase, said that
the GOG must impose fiscal discipline. He said the IMF
agreement is the only lever he has to compel the cabinet to
exercise some discipline in spending in an election year. He
acknowledged USG concerns over Guatemala's low rate of
taxation (just over 10 percent),and said that taxes will
have to be raised. He said that even so he does not know how
the GOG will pay the 100 Quetzales (roughly $13) monthly
increase being offered teachers, and he fears it could create
unmanageable expectations from the rest of the public sector.
Weymann said that the government is floating eurobonds for
the purpose of financing a major reduction in the military,
providing counterpart funds for foreign aid projects,
providing support for victims of the internal conflict and
former civil patrol members, and armor-plating the Quetzal in
an election year. The Ambassador expressed the international
community's concern that the proposed uses of the bond's
proceeds had not been clearly explained. Weymann countered
that he and Central Bank President Sosa has stated clearly to
the press how the funds would be used. He then mentioned
some of the changes that had been made to the original plan.
(Comment: In fact the FRG is trying to float the Eurobonds
for some projects of dubious economic benefit but with
potential political payoffs in an election year.)

Business leaders optimistic despite confrontation with
government
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12. (C) Following lunch with the Economic Cabinet, WHA/CEN
Trivelli met with representatives of Guatemala's private
sector -- Peter Lamport, Richard Aitkenhead and William
Stixrud, former Finance Ministers and/or Ambassadors to
Washington during the PAN administration of Alvaro Arzu. All
agreed that the private sector strongly supports the
conclusion of a free trade agreement with the U.S. While
they acknowledged that there was some concern over the lack
of dialogue with the GOG on CAFTA, they believe that
ultimately they will be consulted by Guatemala's new
negotiating team. Lamport commented that some members of the
private sector are concerned about the fate of poultry and
sugar in the negotiations, and are not convinced that the
GOG, currently confronted with the private sector, will look
after their interests in these areas.


13. (C) The business leaders said that they would welcome
dialogue with the GOG, but said the Portillo Administration
had consistently shunned contact with them. They said that
former Minister of Economy Arturo Montenegro lost his job for
trying to establish a dialogue with the private sector. The
private sector leaders acknowledged the need for increased
tax collection, but said the government had reneged on its
promises made regarding the fiscal pact. They do not believe
Portillo can be trusted to stick to any agreement they reach,
and have placed their hopes in the election of a new
government this fall. The businessmen said that if the FRG
is re-elected this fall, it would be calamitous for
Guatemala, and investment would disappear.


14. (U) Guatemala's organized private sector views El
Salvador as a model for just about everything -- pragmatic
government, strong political parties (read ARENA),and a
private sector that is deeply involved in social development.
The private sector leaders said that they are in constant
contact with their Salvadoran counterparts for the purpose of
adapting their successes to Guatemala's situation. Lamport
nevertheless agreed with Trivelli that the Salvadoran example
was not perfect, as ARENA lacked a credible counterweight on
the moderate left.

Human Rights groups welcome USG support for commission
against clandestine groups
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15. (SBU) WHA/CEN Director Trivelli met with human rights
leaders Helen Mack, Mario Polanco, Claudia Samayoa, and
Orlando Blanco at the Myrna Mack Foundation on February 6.
After a brief press conference, Trivelli thanked the
activists for the meeting and reiterated our strong support
for advancing human rights in Guatemala and our specific
interest in the latest initiative to investigate the illegal
activities of clandestine groups. Mack thanked him for the
overwhelming USG support and advice. Polanco cautioned that
the human rights groups still needed more guidance to make
the commission effective. Trivelli mentioned that the USG is
looking into ways to help technically support as well as fund
the international commission which will look into the
operations of clandestine groups and that we hope other
donors follow suit. Trivelli also recommended that the human
rights groups finalize the details of their proposal before
entering into negotiations with the GOG. Mack agreed and
said they hoped to formulate a proposal that was credible and
realistic.


16. (SBU) After discussion of the clandestine groups
proposal, Mack expressed concern over the new law regulating
NGO's which is currently being discussed in Congress. The
human rights groups worry that this law will allow the
government to control the activities of NGO's at a time when
civil society has been in the forefront of opposition to the
Portillo Administration. Trivelli recognized their concern
and said that we would review the law closely.


17. (SBU) In response to a question about the status of
threats against human rights workers, Samayoa responded that
the threats have been cyclical. Some months there are
numerous new threats and others are relatively quiet.
Overall, she said threats were continuing and were a grave
concern to human rights activists. Trivelli and the DCM
responded that the USG views the protection of human rights
workers as one of our highest priorities in Guatemala and
that they should never hesitate to solicit our support in
specific cases of threats.

Healing scars from the internal conflict in San Jose Poaquil
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18. (U) On February 7, WHA/CEN Director Trivelli, PolCouns,
HROff, and ConOff drove out to San Jose Poaquil, in the
remote mountainous region of Chimaltenango Department where
the Army and the guerrillas had turned the sparsely inhabited
river valleys into a no-mans land during the early 1980's. On
the banks of the Motagua River we observed an exhumation of
war victims' remains performed by the Guatemalan Forensic
Anthropology Foundation (FAFG). The remains were those of a
family, including small children, who had been murdered by
"armed, uniformed men" as the family tried to protect their
seed corn from pillaging. The only survivors were small
children at the time, and they did not know if the
perpetrators had been military, PACs or guerrillas, all of
whom operated in the area. FAFG director Fredy Peccerelli
described the process by which the sites are identified and
the legal process the FAFG must follow so that all of the
information collected during the exhumation can be preserved
for future legal cases. Family members of the victims were
also present to observe the exhumation of their loved ones.
They were effusive in their thanks to the FAFG and the USG,
and said they had been waiting over 20 years to give their
slain relatives a proper burial.


19. (U) Trivelli thanked the FAFG for all of their brave work
and asked Peccerelli what his personal motivation was to
soldier on with the exhumations (this was the FAFG's site
number 252) despite the multiple death threats and
intimidations he encounters. Peccerelli responded that while
in the long term the information the FAFG collects may be
used to put war criminals behind bars, he said his motivation
is the thousands of family members they have helped heal. He
said, "the wounds left by the internal conflict run deep and
the people of Guatemala have suffered. If I can help my
country heal, one exhumation at a time, then I feel like I am
helping to make a difference."

Comment:
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20. (C) WHA/CEN Trivelli's visit came at a time of growing
internal political confrontation, revolving around the
upcoming election, and increasing hope of economic
opportunities generated by a free trade agreement with the
U.S. All sides view 2003 as a pivotal year for Guatemala,
and acknowledged that Guatemala will have to successfully
address long festering problems of human and labor rights,
counter-narcotics cooperation, the murders of Amcits,
official corruption and political confrontation if it is to
join its Central American neighbors in reaching a new trade
relationship with the United States. Guatemalans are
optimistic that they meet this challenge.


21. (U) This cable was cleared by WHA/CEN Director Paul
Trivelli.
Hamilton