MEETING WITH PRESIDENT PROTILLO

C O N F I D E N T I A L SECTION 01 OF 03 GUATEMALA 000770

SIPDIS

E.O. 12958: DECL: 03/24/2013
TAGS: PREL ELAB PGOV KTIA MARR SNAR KDEM PHUM EFIN ETRD CU IR GT
SUBJECT: MEETING WITH PRESIDENT PROTILLO

REF: A) STATE 66351 B) GUATEMALA 0735

Classified By: AMBASSADOR JOHN R. HAMILTON FOR REASON 1.5 (b)


1. (C) Summary: Over dinner at the residence March 22,
President Portillo acknowledged that Guatemala ought to
support a UNHCR resolution on Cuba but said he has a problem
with General Rios Montt's resentment over U.S. opposition to
his presidential candidacy. Portillo said Guatemala agreed
with us that Iraq should stay in the UNSC. He promised to
look into allegations reported by MINUGUA that a recent drug
bust was facilitated by illegal detentions and torture, as
the Ambassador warned him that such methods are totally
unacceptable. He also pledged greater protection of labor
rights, particularly in areas highlighted by the AFL-CIO GSP
petition. On his agenda: neutralizing perceived USG
opposition to a controversial bond issue and venting over
last October's congressional testimony that "did me
irreparable harm." End Summary


2. (C) The Ambassador reciprocated March 22 Portillo's
February 25 dinner for the Ambassador. Like that dinner,
this was a one-on-one that got down immediately to discussion
of a (mostly) pre-agreed agenda.

Iraq
--------------

3. (C) Portillo said he had been watching CNN all day and
agreed with the Ambassador's observation that U.S. forces
were taking extraordinary precautions to minimize loss of
life and damage to infrastructure. He did not commit to
coming any further toward support of our position in public
but did agree that the UNSC is the appropriate venue for any
further UN consideration of the issue.

Cuba
--------------

4. (C) Portillo said he completely agreed with the Ambassador
that Castro has again showed his true colors in the arrests
of the last week and mustered a seemingly genuine show of
indigation. To the Ambassador's observation that surely,
after this, Guatemala would vote in favor of a resolution,
Portillo acknowledged that a yes vote is in order. After
passing allusion to the views of FonMin Gutierrez (old line
leftist reluctance to fall in with the U.S. to condemn
Castro),however, Portillo said his main problem is with
General Rios Montt, who resents U.S. opposition to his
presidential ambitions. The Ambassador again reviewed our
position on this (up to the FRG and the Guatemalan
constitutional court to decide whether Rios Montt runs but,
as President, Rios Montt could not expect warm relations with
the U.S.) Portillo said he finds the U.S. position
understandable and realistic and said he tried to make the
General understand it but that Rios Montt is angry and the
subject pops up whenever the Cuba resolution is raised. The
Ambassador was loaded for bear to refute the Guatemalan claim
(made by FonMin Gutierrez during the visit of Cuban FonMin
Perez Roque) that Cuban doctors here have achieved a "70
percent reduction in infant mortality" but with Portillo
candidly admitting that Rios Montt is the problem, the
subject did not come up.

Narcotics Certification
--------------

5. (C) The Ambassador went over re-certification criteria in
detail with Portillo and gave him copy of the diplomatic
note, drawn from ref a, that explains the entire process and
sets forth the general and specific criteria. Portillo made
a pitch for funds to repair Guatemalan helos. The Ambassador
pointed him instead to quick adoption of asset forfeiture
legislation, saying aid to the military would violate the
spirit of U.S. legislative prohibitions on FMF. Portillo
appeared to accept this answer and was aware that the FRG
caucus is busy on such an asset forfeiture bill. The
Ambassador told Portillo that we have received a report of
testimony taken by MINUGUA to the effect that Guatemalan
police illegally detained and tortured two individuals to
extract information that led to the March 6 drug bust (ref
b). The Ambassador said such actions, if true (and he noted
that we are checking) are totally unacceptable. They would
be, moreover, extremely prejudicial to Guatemala's
possibiliies for re-certification, as one of the most
damaging charges against Guatemala last year was the
anti-drug police conduct at Chocon. The Ambassador also
noted that, in this instance, it is possible that military
intelligence, not police, were responsible -- all the worse,
if true, the Ambassador said, repeating that this has to stop
immediately. Portillo said he would find out immediately and
make sure it stopped. He said he had already fired one
military intelligence official for a misguided effort to push
anti-drug efforts forward (note: which takes credit for
our/our insistence that this official be removed, but the
Ambassador led that point pass).
Article 98
--------------

6. (C) The Ambassador walked Portillo through this issue in
some detail. Portillo was vaguely aware of it and promised
to consult with FonMin Gutierrez and get back to us.

Labor Rights
--------------

7. (C) The Ambassador briefed Portillo on the AFL-CIO GSP
labor petition, urging that he personally involve himself to
push for rapid progress in the three areas of deficiency:
lack of prosecution in cases of violence against labor
leaders; a clogged system of labor justice, and the system's
inability to force the re-hiring of illegally fired workers.
Portillo is familiar with the most egregious case of fired
workers (the Maria Lourdes finca case),said Labor Minister
Moreira is pushing for reforms to the labor code that could
clear up the backing of labor fines and other issues and
pledged to push for more vigorous investigations.

"Eurobonds"
--------------

8. (C) Portillo as expected made a strong pitch for the USG
not to oppose the placing of a bond issue that includes US$63
million for a first payment of US$225 compensation for
wartime services rendered to each of some 250,000 ex-civilian
patrol members. He seemed to accept the Ambassador's reply
that, despite our deep misgivings over the appropriateness of
such compensation, especially in an election year, we had not
opposed the bond issue. Portillo spoke at some length and
with some anxiety about the danger to public security and
order that the so-called Ex-Pacs represent. He claimed that
their ambitions and resentments have been egged on
irresponsible elements in the ruling FRG, by the URNG (former
guerrillas) and by the PAN (center-right, leading
oppposition) and that a march on Guatemala City, if they make
one, could turn extremely violent. Hence the importance of
buying them off.

The October Testimony
--------------

9. (C) At one point Portillo went off on a tear, prefaced
only by "the spirit of candor that informs our discussions"
to complain bitterly of State Department congressional
testimony last October that he had links to organized crime.
He seemed particularly hurt by the criticism of then A/S
Reich, with whom he thought he had had a strong personal
relationship. The Ambassador said we could understand how he
felt, but what about financial contributions and his other
ties to the Ortega Menaldo crime syndicate of ex-military
officers? Indignant (or with a good show of indignation),
Portillo responded with some heat that his entire campaign
was funded by banker Francisco Alvarado Maldonado. Portillo
pointed out that Alvarado is currently being prosecuted for
the failure of his two banks, i.e., Portillo has not come to
his aid despite the past political support. The Ambassador
let the subject drop without giving any indication that we
accept that reply at face value.

CONTIERRA
--------------

10. (C) Portillo assured the Ambassador that CONTIERRA, the
government agency that seeks to resolve land tenure
conflicts, would be funded and kept in operation (note: there
has been doubt on this).

Leadership of Guatemalan tax authority
--------------

11. (C) The Ambassador told Portillo that the quality of
performance at the Guatemalan tax authority (SAT) is
deteriorating badly since Marco Tulio Abadio took over as
Director in late 2002. All the donor countries and the IFI's
are losing confidence in the SAT and are backing away from
their programs of support. Portillo, showing no surprise,
said he would take (unspecified) action. (Comment: Portillo
picked the mercurial Abadio to serve as an attack dog against
Portillo's private sector opponents. He has not been
effective in his or other roles.)

April 10 meeting with the President
--------------

12. (C) Portillo understands that CAFTA is the only issue for
discussion in the meeting between the President and the
Central American presidents, though he equally understands
that Cuba, Iraq and narcotics cooperation will come up in any
side meetings with senior U.S. officials.

Comment
--------------

13. (C) Even on the subject of Eurobonds and Ortega Menaldo,
this was a civil exchange and it is clear that earning
re-certification and avoiding other blows to Guatemala's
image is high on Portillo's agenda in his final months.
HAMILTON