LETTER FROM GUATEMALA

C O N F I D E N T I A L SECTION 01 OF 03 GUATEMALA 003071

SIPDIS

E.O. 12958: DECL: 12/01/2014
TAGS: PREL ECON GT
SUBJECT: LETTER FROM GUATEMALA


Classified By: Ambassador John Hamilton for reasons 1.4 (b) & (d).


1. (U) This is the first of a series of biweekly cables with
which, in a more discursive style than the standard telegram,
the Embassy intends to report on newsworthy political and
economic developments and provide some context to Guatemalan
policy-making.

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Cabinet Changes Coming
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2. (SBU) There is much speculation that President Berger,
nearing completion of his first year in office, is
considering changes in his cabinet. It is already public
that his young, dynamic Minister of Energy and Mines, Roberto
Gonzalez, will move over to the presidential palace in
January to become chief of staff. At lunch with the
Ambassador, Gonzalez displayed a detailed knowledge of the
mining and energy issues he had been working as Minister and
a lively curiosity about new issues outside his current
portfolio. He said that in his new position he hoped to work
closely with the Embassy and intended to pay special
attention to the bilateral agenda.


3. (SBU) At the Ministry of Energy and Mines, Gonzalez is to
be replaced by his competent, respected and energetic Vice
Minister, Carolina Roca. She will have her hands full over
the coming weeks. Guatemala's Constitutional Court
unexpectedly ruled against the regulatory authority for
electricity (CNEE),ordering reversal of the CNEE's decision
to limit subsidized electricity rates to those who consume
less than 100 KWH per month. The Court also ordered
reimbursement of all who were affected. The court was
responding to a motion filed by the Human Rights Ombudsman,
who is known to argue that inexpensive electricity is a basic
human right. Guatemala's model legislation and regulatory
structure were not affected, but the court-ordered firing of
the CNEE's board sets a potentially damaging precedent of
intrusion into the board's autonomy. This week, Roca has
organized a major forum on mining in Guatemala that has
become a magnet for anti-mining activists of all stripes.
The Marriott decided late last week to cancel its offer to
host the event when local groups (Madre Selva and Marielos
Monzon) demanded equal time and space for an event they
wished to organize. Consequently, the event was moved to a
hotel away from the city center. Finally, Roca and the
revenue collection service (SAT) are under pressure to do
something about the mushrooming problem of gasoline and
diesel contraband, which the major distributors claim is
driving them out of business. We are working with Roca to
try to get TDA assistance in establishing better controls.


4. (C) Berger, who is leaving this weekend for Miami to be
one of the keynote speakers at the opening plenary dinner of
the Miami Conference on the Caribbean Basin (CCAA),has been
openly pressing for the well-respected Lizardo Sosa to quit
his job at the Central Bank. Sosa's star lost some luster
over his support for the Portillo Administration's Eurobond
issuances. More recently, Sosa is rumored to have incurred
the displeasure of exporters over monetary policy,
particularly exchange rates. Berger reportedly wants to move
Finance Minister Toni Bonilla to the Central Bank, inviting
speculation about who will take over the Finance Ministry.
Berger cannot legally force Sosa out of the Central Bank but
with his public comments is clearly trying to make Sosa
uncomfortable and leave. There is some criticism that
Berger's campaign against Sosa is not only unseemly but
encroaches on the Central Bank's autonomy. Likewise, having
moved Willy Zapata from the SAT to the Superintendence of
Banks, we hope he will find someone equally respected, and
possibly more operational than the able but sometimes
ethereal Zapata, for the SAT position.


5. (SBU) MinDef Mendez Pinelo is expected to move out in
January because he is already past the military's mandatory
retirement deadline. We have also heard that Health Minister
Sosa, having dragged Berger into IPR grief by pushing new
legislation on generic pharmaceutical drugs, may be moving
on. Thanks to Sosa, intellectual property rights are
consuming much of our time. Sosa took advantage of a lull to
stampede a bill through the Congress on November 19 that
eviscerates data protection for pharmaceuticals and
agricultural chemicals. We and others had been assured that
the bill was dormant. The bill is a case study in cynicism,
guaranteeing the rights of developers of new products in its
operational language and then defining "new products" so as
to ensure that none will ever exist. The Ambassador told
Berger in the clearest terms that this was exactly the sort
of issue that was getting the Dominican Republic kicked out
of CAFTA. Berger has fifteen days to veto the bill once he
receives it (he has not) and has thus ordered Sosa to launch
a process to come up with something acceptable with which to
replace it. Berger told the Ambassador December 1 that it
would be too politically costly simply to veto the bill.
Berger and Vice President Stein seem to recognize that
Minister Sosa will not be helpful in producing a decent
substitute and have now inserted presidential advisor and FTA
advocate Mickey Fernandez into the process -- a good sign.

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Congress Gets a D; Changes May Improve Grade
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6. (C) The Congress went into recess November 25 and was
pretty much panned by the critics, who noted that it was the
least productive session in at least eight years. This is
due in large measure to it being the most fractious congress
in recent memory. In addition to its lack of legislative
accomplishments, however, the Congress was buffeted by
nagging scandals, ranging from revelations of exorbitant
salaries paid to ghost advisors, questions about the
procurement of a new telephone system and the contracting of
a security firm, the end-use of vehicles donated by Taiwan
and congressional junkets. The most egregious of the last
appears to be an all-expenses paid trip for the departing
president of congress, Rolando Morales, to Thailand and
Indonesia in the company of a female "advisor" whose name
does not show up anywhere in personnel files of the congress.
UNE leader Alvaro Colom told the Ambassador that Morales,
who also belongs to UNE, did not have the managerial skills
or experience to run Congress. It is widely believed,
however, that Colom and Morales were treating each other as
rivals within UNE. Colom told the Ambassador (and, the
following day, announced to the press) that he was asking
UNE's "Discipline Tribunal" to review allegations against
Morales of corruption and mismanagement.


7. (SBU) In the last month, however, the Congress elected new
leadership for 2005. It also approved some changes to its
internal procedures that could help make it more productive
next year. These include reducing to 25% the quorum
necessary for committees to do their work, eliminating the
requirement for multiple readings (literally) in plenary of
the full text of all legislation and making the texts of all
bills available electronically. With these new rules and the
leadership of the new "junta directiva" headed by president
Jorge Mendez Herbruger, who belongs to President Berger's
coalition, there is reason to hope that next year the
Congress might accomplish more.


8. (SBU) Mendez Herbruger told the Ambassador he was fully
aware that the Congress had plummeted to an all-time low in
public prestige. He said his task was to rescue the image of
Congress by putting it to work. He noted that he and his
junta directiva had been elected without an opposing slate,
although UNE and PAN absented themselves from the vote. JMH
claimed to enjoy direct access to President Berger and all
the cabinet ministers but also expected to consult with key
presidential adviser Eduardo "Guayo" Gonzalez on political
issues.


9. (SBU) Until the Congress comes back into session January
14, it will be under the care of a five-member Permanent
Committee that is to dispatch all urgent business requiring
immediate attention. The press, however, is speculating that
the Permanent Committee is conspiring to vote a pay raise for
all 158 congressional deputies of an additional $15,000 per
year. Public opposition to the pay raise when it was first
floated earlier this year was so intense that the congress
quickly backed off. The press is convinced that the
Permanent Committee members will somehow pull a fast one and
push through a pay raise, thus absolving their congressional
colleagues from responsibility.

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Military Mystery: Whodunit and Who Is it?
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10. (SBU) Meanwhile, some of the public's attention has
focused on last week's "discovery" of the alleged burial site
of Col. Raul Cerna. As finance chief of the now-dissolved
EMP, Cerna was a key witness in efforts to track down the
whereabouts of at least $30 million of the $115 million or
more that went missing in military hands under the Portillo
administration. Cerna dropped out of sight in April, but
only now is it surfacing that he may have died at that time
in a city hospital of poisoning. The hospital report
concluded that he accidentally poisoned himself by drinking
muriatic acid, a conclusion that is raising eyebrows.
Although the dead hospital patient had identification
documents with Cerna's name and address, neither the hospital
nor the morgue notified Cerna's family. For that matter,
many Guatemalans are wondering why Cerna's family did not
report him missing and therefore conclude that Cerna may be
alive and hiding. An exhumation at Cerna's burial site has
been ordered, and it is hoped (but not fully expected) that
it will lead to a determination of whether the cadaver is
indeed Cerna's. Even for a Guatemalan public long-inured to
jaw-dropping displays of incompetence among police,
prosecutors and courts, the handling of the Cerna case is
disturbing. The Prosecutor's Office has announced an
internal investigation into why its staff failed to pursue
leads on Cerna's whereabouts.

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Rios Sosa the 6th Beatle?
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11. (SBU) Another episode of the military corruption soap
opera starred the appearance in court of retired General
Enrique Rios Sosa, the 56-year-old former Army Chief of Staff
and Minister of Defense accused of diverting $4 million from
the coffers of the National Mortgage Fund (CHN). Rios Sosa
is also the son of Efrain Rios Montt, the former president,
who is accused by human rights activists of genocide against
indigenous in the early 1980s. Prosecutors failed to get the
judge who temporarily took over the Rios Sosa case to recuse
herself, and through some questionable maneuvers she
proceeded to let Rios Sosa free on a $12,000 bail bond.
Prosecutors allege she railroaded the hearing to preclude
them from making their case. A self-satisfied Rios Sosa
(whose grinning visage made all the front pages November 30)
reportedly chanted "Peace and Love" in English to mystified
journalists as he departed the courtroom.

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Politics at the MFA?
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12. (C) Without much notice or fanfare, Juan Jose Cabrera
joined the MFA last week as a vice foreign minister. We were
impressed by his hands-on responsiveness to us in getting our
CNIES dip note turned around in time to meet our December 1
deadline -- in his first week in office. It is noteworthy
that this very pleasant fellow, with no known prior
diplomatic or international relations experience, moved to
the MFA directly from Eduardo Gonzalez's office (Executive
Secretary) in the Presidency. Earlier this year we had heard

SIPDIS
that Gonzalez was one of the people behind the sniping
against and anonymous criticism of FM Briz, who is widely
expected to be Gonzalez's rival in the 2007 elections. This
makes us wonder whether Cabrera might be a "political
commissar."

HAMILTON