BERGER'S FIRST 100 DAYS: HONEYMOON ENDING?

UNCLAS E F T O SECTION 01 OF 03 GUATEMALA 001081

SIPDIS

NOFORN
SENSITIVE

E.O. 12958: DECL: 03/02/2014
TAGS: PGOV PINR PREL MOPS GT
SUBJECT: BERGER'S FIRST 100 DAYS: HONEYMOON ENDING?



1. (SBU) Summary: President Oscar Berger,s government is
off to a strong start and retains strong public approval.
Berger and his team have effectively conveyed new energy and
direction, launching significant initiatives to reduce and
modernize the military and to open borders to freer
intra-regional trade. However, the Berger government's
honeymoon with the press and public may be waning. To retain
the support of hopeful Guatemalans, the government must
overcome a fiscal deficit, a divided Congress, a legacy of
government corruption and high levels of crime and start
delivering more to a needy population. An early test will be
Congressional passage of a fiscal reform package. End
Summary.

The Berger Style
--------------


2. (SBU) Throughout his government's first 100 days Berger
has sought to distinguish his government from its discredited
predecessor. He has done so by continuing to attack
corruption of the past government, launching some bold
initiatives and, perhaps most effectively, by conveying a
change in governing style. The result has been that Berger
and his government benefited, with minor exceptions, from a
"honeymoon" with the mainstream press which supported his
candidacy. Independent opinion polls still show Berger's
popularity at over 80%, and faith in democracy reviving.
However, in a sign that the honeymoon may be coming to an
end, most media marked the 100-day milestone expressing
public perceptions that the change in government had not yet
affected them in their daily lives.


3. (SBU) Never a practiced public speaker, Berger,s public
appeal stems instead from his genuine enjoyment of contact
with a hopeful public and generally supportive press. Berger
has set an example of his government's transparency by
inviting the press along at every opportunity and even
opening some Cabinet meetings to the media. He has also
projected an image of austerity by reducing his entourage and
security contingent, permitting closer contact with the
public. The contrast in style between the Portillo
government in its last year, hunkered down against
allegations of systematic corruption from a hostile print
media, could not be more striking.


4. (SBU) Behind the scenes, Berger has fostered a sense
urgency and pragmatism in policy debates, and seems impatient
to demonstrate change. Berger believes that political
capital is not something to be preserved, but rather to be
spent wisely. Most notable among his initial political
investments have been the bold proposed reductions in the
size of the military (by roughly half),which is on track for
completion by June 30; the formal "re-launching" of the Peace
Accords national agenda; and the process of opening the El
Salvador and Honduran borders to free transit of goods to be
completed by July, with a planned extension of the customs
union to Nicaragua shortly.


5. (SBU) Berger,s natural spontaneity and decisiveness have
sometimes led him to make general public statements which
have been misinterpreted (e.g. Berger's statement in favor of
human rights anywhere was misinterpreted by the press to mean
the GOG would vote in Geneva to condemn human rights
violations at Guantanamo Bay). Berger's impulsive style is
complemented by Vice President Stein's more careful one. In
addition, Stein personally leads the Government's delicate
dialogue with campesinos, labor unions and other social
groups. In contrast, Eduardo Gonzalez, Berger's powerful
chief of staff, is suspected of playing a more Machiavellian
role behind the scenes. Rival presidential aspirants suspect
Gonzalez of personally orchestrating media attacks against
them.

Challenges and Expectations
--------------


6. (SBU) From the outset, the Berger government has sought
to manage high public expectations by citing budget
constraints requiring fiscal "austerity." At a ceremony
marking his Administration's first 100 days, President Berger
declared his government "well established" and ready to
confront a burgeoning fiscal crisis. He blamed the crisis on
mismanagement and corruption by the Portillo government, and
launched a campaign to build support for necessary
revenue-raising strategies by reviving and updating the 1999
"fiscal pact" reached by over 600 civil society groups.
These strategies reportedly include a combination of
borrowing, more comprehensive but reduced income taxes, fewer
exemptions from the value added tax, better tax collection, a
crackdown on contraband traffickers, and new taxes on alcohol
and fuel. Berger will personally present the reforms to
Congress on May 5.


7. (SBU) The negotiation of the fiscal pact will be the
first major test of Berger,s ability to tap private sector
support, forge consensus within his own GANA coalition, and
work with a divided Congress. Divisions in the ruling GANA
coalition emerged during the Congressional debate over
electoral reforms. The reforms finally passed on April 21,
after members of the GANA coalition from the Partido Patriota
(PP) broke with a reluctant GANA leadership in support of the
reforms. At the insistence of the GANA, additional electoral
reforms are now being negotiated among the GANA, UNE and PAN.
More recently, Roxana Baldetti, the PP's Congressional
leader, complained publicly that GANA leaders had not shared
details of the proposed fiscal pact. Privately, she told
EmbOffs that the PP will resist unpopular tax hikes. Similar
divisions affect the UNE and PAN.


8. (SBU) GANA, UNE and PAN Congressional leaders have
maintained a "Governability Pact" forged at the outset of the
Berger government, despite severe early strains caused by an
anti-corruption investigation of UNE and PAN financing
derived from public funds diverted by the FRG. After the
Attorney General,s Office declined to issue arrest warrants
against the UNE and PAN leaders, the inter-party cooperation
agreement was patched up and a group of four laws including
the electoral reforms were passed. Negotiations are underway
for a subsequent package of laws to be approved prior to the
Congressional recess starting May 15.


9. (SBU) It seems increasingly unlikely that the
Governability Pact, which divided Congressional Governing
Board positions among the three parties and excluded the FRG,
will survive much beyond the upcoming debate over fiscal
reforms. According to FRG sources, the FRG has sought to
entice the GANA into an alternative power-sharing agreement
by offering it complete control of the Governing Board and
thereby over the Congressional agenda and budget, in exchange
for a working alliance. GANA leaders have told us somewhat
wistfully that the FRG, though reduced by defections, remains
the most disciplined block in Congress. GANA leaders may
also be tempted to violate the Pact for another reason: to
accept into its ranks some of the 21 newly independent
members of Congress who bolted from the opposition parties.
Doing so, however, would still not give the GANA a working
majority in Congress.


10. (U) The current status of forces in Congress, after
taking into account those defections, is: GANA 47 deputies,
FRG 31, UNE 28, PAN 14, Unionista Party 7, ANN 4, and four
other small parties retain a total of 6. Four of the 21
independent deputies have announced the creation of a new
party called "National Welfare" (BIEN) and eight independent
ex-FRG deputies (associated with President Portillo) are
reportedly considering doing the same. With 158 total
deputies, a simple majority requires 80 votes, and a 2/3
majority requires 105.

Security Risks
--------------


11. (SBU) The Berger Government is most vulnerable to
growing press criticism over the lack of progress curbing
high crime levels. Crime was a major campaign issue, and
media reports have contested the new government's claim that
crime has declined during its brief tenure. Minister of
Government Arturo Soto now claims that the GOG has halted the
increase in crime, rather than actually reduced it. GOG
Security Commissioner Otto Perez Molina, the leader of the PP
and a presidential aspirant, is politically vulnerable as a
result of continued public insecurity over crime rates.
Although some areas of law enforcement, including
counter-narcotics, show steady improvement, press and public
opinion is alarmed by rates of violent street crime, which
continues unabated.

Comment: USG Interests
--------------


12. (SBU) While still early to judge, the Berger government
has proven responsive to USG concerns as we have raised them.
To support the new government and advance USG interests the
Ambassador has publicly praised worthy efforts (e.g., the
military reduction, CICIACS, and stepped-up counter-narcotics
activities),and pressed for early action on key bilateral
issues requiring immediate GOG attention (e.g., Article 98,
trafficking in persons, labor rights). On the eve of
Berger's visit to Washington the Ambassador publicly noted
the emergence of a new era in US-Guatemalan relations.
Berger,s recent visit to Washington cemented early gains in
the relationship and his meeting with President Bush boosted
Berger,s credibility at home.


13. (SBU) Over the coming year we will be evaluating the
performance of the Berger government on key issues of USG
interest, including:

-- successful negotiation of the fiscal package;

-- military modernization/reduction;
-- the establishment of a CICIACS;

-- ratification of CAFTA;

-- the fight against corruption and impunity; particularly
when it involves the present government;

-- cooperation against counter-narcotics and trafficking in
persons; and,

-- effective enforcement of labor rights.
WHARTON