2004-02-10 17:12:00
Embassy Guatemala
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E.O. 12958: DECL: 02/05/2014

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



E.O. 12958: DECL: 02/05/2014

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


1. (C) During a February 3-5 visit to Guatemala, WHA
Assistant Secretary Roger Noriega met with President Oscar
Berger and senior members of his government to discuss the
full range of bilateral issues. A/S Noriega highlighted the
importance the Bush Administration places on CAFTA as a means
of generating economic growth and job creation in Central
America. He secured commitments from President Berger to
restart Mayan Jaguar counter-drug joint exercises, to give
prompt consideration to an Article 98 Agreement, and to take
concrete action on TIP and GSP concerns. Berger said he
would "do the right thing" in support of Cuban human rights
at the UNCHR. The senior GOG officials took on board USG
concerns on adoptions, and said the Berger government will
throw its weight behind the creation of CICIACS. Berger and
his ministers discussed addressing a growing fiscal deficit
and their plans for a radical reduction in the military, and
sought our help on the latter. Berger also pressed for
greater protection for illegal Guatemalan migrants in the
U.S., TPS, concretely. In meetings with Congressional
leaders and a subsequent reception with government,
opposition and civil society representatives, A/S Noriega
said that the controversial decision by the Bush
Administration to negotiate CAFTA and promote a major
immigration reform during an election year was evidence of
the importance we assign to our neighbors in the region. The
extremely cordial reception by Berger and his team, and the
promises of concrete cooperation made it clear that the new
government places a high value on its relationship with us.
End summary.

2. (U) WHA Assistant Secretary Roger Noriega and Executive

Assistant Bruce Friedman visited Guatemala February 3-5 for
meetings with newly elected President Oscar Berger, Vice
President Eduardo Stein, the Economic and Security Cabinets,
President of Congress Rolando Morales and a broad range of
opposition, private sector and civil society leaders. A/S
Noriega was accompanied by Ambassador Hamilton, DCM Wharton
and Embassy officers to all meetings.

Foreign Minister Briz on CAFTA, migrants, Article 98 and more
-------------- --------------

3. (C) At a breakfast at the Residence with Foreign Minister
Jorge Briz, Vice Minister Marta Altoaguirre and Vice Minister
Carlos Martinez, Assistant Secretary Noriega expressed our
satisfaction with the conclusion of CAFTA negotiations and
said that, while specific industries in both the U.S. and
Guatemala had some reservations, the agreement has the
potential for transforming Central America by attracting
investment, generating economic growth and creating jobs.
A/S Noriega and the Ambassador urged the Guatemalans (who
remain disappointed over CAFTA's treatment of beer) to view
the agreement in terms of its overall positive impact on both
economies. A/S Noriega noted that some "adjustments" had
been made by the US to address the new government's concerns
over beef, pork and sugar, but said that other concessions
were politically unsaleable to US industries that would have
influence over Congressional ratification. Briz acknowledged
the historic opportunity CAFTA represents and said the Berger
government supports the agreement, despite lingering concerns
that the Portillo government might have negotiated in bad

4. (C) Briz said that migrant issues would be very important
to the Berger government, commenting that Berger met with
Guatemalan migrants in the US during the campaign and that
remittances from those migrants -- $2 billion in 2003 -- were
underpinning the Guatemalan economy. Briz asked that the US
consider extending TPS benefits to Guatemalans, similar to
those enjoyed by nationals of El Salvador, Honduras and
Nicaragua. A/S Noriega replied that President Bush shares
the priority Berger attaches to migrant issues, and said that
the President's new initiative on immigration is designed to
address exactly the same problems affecting Guatemalan
illegal migrants that the GOG wants to resolve. He urged the
GOG to participate in the public debate of this proposal in
the United States, and to seek to use this mechanism -- not
TPS -- to address the concerns of Guatemala migrants in the

5. (C) A/S Noriega explained to Foreign Minister Briz the
importance we attach to concluding an Article 98 Agreement
with Guatemala, and urged the new government to make this a
high priority. Briz said that the GOG is reviewing the
proposed texts the Ambassador had given him in January, and
said the GOG "has the will to move this forward" in the short

6. (C) On the Cuba human rights resolution at the upcoming
UNCHR session, A/S Noriega detailed the significant
deterioration of human rights in Cuba during 2003, and said
that as a matter of moral principle it was important that the
countries of the hemisphere take the lead along with the EU
in sponsoring a resolution. Briz acknowledged that the
arrest of dissidents and the execution of the "hijackers"
represented a significant provocation. He said that
President Berger had told the Cuban Ambassador that he is
committed to supporting "freedom" everywhere, and implied to
us that Guatemala would be helpful to the United States on
the Cuba resolution at the UNCHR.

7. (C) A/S Noriega told Briz that it is important that the
new government take concrete action to address our GSP and
TIP concerns early in its administration. Briz said that the
Foreign Ministry was already coordinating with the Embassy to
convoke the inter-agency working groups on these matters. On
CICIACS, A/S Noriega said the USG is prepared to provide
support, and inquired into the status of setting up the UN
Mission. Briz said that Congress had sent the proposal for
an opinion to the Constitutional Court, and said that
President Berger firmly supports CICIACS. Briz noted that
some "conservative sectors" of the country were beginning to
express opposition to the Mission, but said Berger is
convinced there is no better mechanism for taking on
organized crime.

Security Cabinet on Reducing the Military and Article 98
-------------- --------------

8. (C) A/S Noriega met with Commissioner for National
Security Otto Perez Molina, Minister of Defense Cesar Augusto
Mendez Pinelo and Minister of Government Arturo Soto at the
"Casa Presidencial." Perez Molina outlined the Berger
government's security priorities, which are: 1) restructuring
the military: reducing the force by 10,000-14,000 officers
and troops, increasing budget transparency, closing bases and
professionalization; 2) strengthening police: increasing
budget, improving training and discipline, cleaning up
corruption; and 3) creating a civilian intelligence
capability: managed by the SAE, gradually taking over from
the military D-2, leaving the D-2 with solely military
missions. Berger has temporarily ordered army troops to
support police units in areas where gangs have intimidated
the local police, but their role will be one strictly of

9. (C) A/S Noriega commented that the rule of law is the
foundation of democratic society, and that Guatemala is
facing some serious challenges in that regard. The United
States is prepared to help, but we will need new authorities
before we can engage in assistance to the military. A/S
Noriega told the security team that conclusion of an Article
98 Agreement is a crucial step to maintaining even the
limited military-to-military engagement we have now, and
urged them to weigh-in in favor of this agreement. The
Ambassador told the MOG that USAID is contracting a company
to help ministries conduct internal audits to detect possible
areas of inefficiency and corruption, and offered to provide
this support to the MOG (the Minister enthusiastically
accepting). He also noted that the Inter-American
Development Bank (IDB) has approved a $20 million support
program for security reform (non-military),and urged the
Minister of Government to take advantage of this program.

10. (C) The security ministers complained of inheriting
ministries that had no resources. The Minister of Government
said that the previous administration had left only 30 cents
in the checking account of the Immigration Department. The
Minister of Defense said that at least one budget
supplemental authorized by Congress in 2003 for 225 million
quetzales (roughly $28 million) never reached the military
and was probably stolen (Note: President Berger later told us
that he heard from a source in the Military that the money
was taken in cash by President Portillo, and changed into
dollars with the complicity of someone from the Central Bank.
End note).

Economic Cabinet on CAFTA and the Looming Fiscal Deficit
-------------- --------------

11. (C) A/S Noriega met with members of the Economic Cabinet,
including Presidential Coordinator for the Plan of Government
Richard Aitkenhead, Presidential Coordinator for Investment
and Competitiveness Miguel Fernandez, Finance Minister Maria
Antonieta Del Cid de Bonilla, Central Bank Vice President
Mario Garcia Lara, and Secretary of Planning Hugo Eduardo
Beteta Mendez-Ruiz. Bonilla made a presentation on the GOG's
economic policy priorities, which have as their foundation
probity, transparency and austerity. The priorities
included: poverty reduction; decentralization and
participation; political reform of the state to include
respect for human rights, strengthening the rule of law, and
improving efficiency in public administration; and an
aggressive international strategy of trade, investment and
tourism promotion. "Pillars" of the plan include: social
investment in education, healthcare, nutrition and housing,
with emphasis on the most vulnerable groups; "integral
security" through restructuring national security
institutions, better coordination among them, and weeding out
unsuitable personnel; and creating conditions for improved
production and competitiveness via conservative macroeconomic
management, reviving the Fiscal Pact and complying with the
Peace Accords, better tax administration, prioritization of
the budget toward social investment and basic infrastructure,
strengthening the banking system and moving forward as
quickly as possible with the Central American Customs Union.

12. (C) A/S Noriega congratulated the economic team for the
scope and ambition of its plan, noting that it covered the
areas needed for Guatemala to take advantage of the
tremendous opportunity offered by CAFTA. He commented that
Mexico had lost a half million jobs, principally to China,
and would have been far better off if it had prepared for
free trade with a plan such as Guatemala's. He said that the
Guatemalan focus on transparency and good governance was
essential if CAFTA was to work to Guatemala's benefit as
President Bush intended. It was also a prerequisite for
participation in the Millennium Challenge Account. He noted,
however, that Guatemala had to bring its own resources to the
efforts and that, while he was not known as a fan of taxes or
big government, Guatemala was not doing enough to the raise
revenues it needed.

13. (C) Fernandez declared that, at heart, imposing the rule
of law was the cornerstone of the government's plant for
attracting trade and investment. Aitkenhead agreed with A/S
Noriega that more tax revenues, and not just austerity, were
needed to meet social investment targets. He observed that a
culture of paying taxes was part of the rule of law. He
briefly described the history of the Fiscal Pact, which had
been negotiated with 650 civil society groups, and recalled
that the FRG Administration had deliberately abandoned it.
He said that the Fiscal Pact target of current tax receipts
equivalent to at least 12% of GDP remained the goal.
President Berger would be convoking civil society the
following week to resuscitate the Pact, amending it if
needed. Aitkenhead said that the reviving the Fiscal Pact
would be the economic cabinet's top priority in the new

14. (C) Fernandez added that establishment of a customs union
was a "must" for President Berger. Guatemala wanted to start
with El Salvador and Honduras, which he believed were ready
to join in moving quickly. Aitkenhead said that he hoped
CAFTA could be used to prod faster action on integration, but
he said he worried that different schedules for phasing out
tariffs on certain products could prevent the removal of
internal border controls. He wondered if the USG would be
willing to reopen only those areas in the CAFTA where
different treatment might cause problems for starting the
customs union. Econ Counselor said he thought USTR would
probably be delighted if countries wanted to phase out
tariffs more quickly in order to harmonize with their
neighbors. Aitkenhead, laughing, said that wasn't exactly
what he was thinking. He took the point, emphasized by the
Ambassador, that the focus for now had to be on ratifying
what was negotiated rather than identifying problems that may
or may not arise down the road. A/S Noriega added that
Guatemala was the one country that had yet to be heard in
Washington as delighted and excited about the treaty.
Aitkenhead confirmed that Guatemala was all in favor of
ratification and agreed to look at spreading the word more
aggressively. (Comment: We suspect that beer is at the
heart of the argument for allowing "harmonization" of tariff
phase-outs to pave the way for a customs union. We expected
to hear more direct pleas for help on beer, which the former
government is seen to have "given away" as a final act
vengeance against political enemies. Aitkenhead's more
subtle approach is an encouraging sign that the GOG is
realizing that it has done what it can and is preparing to
move on. End comment.)

15. (C) Bonilla described a difficult fiscal outlook for

2004. She outlined how Congress had failed to pass a budget,
freezing spending at 2003 budget levels, while the
Constitutional Court had taken away an important part of the
tax base, the asset-based IEMA. She said that 2003 central
government budget as drafted would allow a deficit of 3.2% of
GDP, but the loss of the IEMA tax would raise the deficit to
4.7%, which was unacceptable. She said that the deficit
would need to be brought down through austerity and tax
reform to about 2% of GDP, at the same time while meeting the
Fiscal Pact's capital investment target of 4% of GDP. She
noted that the previous government had claimed to have
exceeded the 4%, but it had done so only by improperly
categorizing payments to former militias (ex-PACs) and
deposit insurance contributions as "investments."

16. (C) A/S Noriega commented that the new government, with
its focus on good governance and open markets, had come to
office at an especially propitious moment. CAFTA will give a
boost to those who can make use of it, and the MCA was
conceived for governments that were forward looking and
welcomed trade and private investment. He said it was hard
to overstate how deeply ingrained Guatemala's negative
international image had become, and he encouraged the GOG to
get to Washington and let the world know that a new Guatemala
had emerged.

Berger Asks for Help with Military Reduction, Migrants and
-------------- --------------

17. (U) President Oscar Berger hosted a lunch for A/S
Noriega, the Ambassador, DCM, Executive Assistant Friedman
and Polcouns at the "Casa Presidencial" on February 4. Also
in attendance were Vice President Stein, Foreign Minister
Briz, Executive Secretary of the Presidency Eduardo Gonzalez,
and the President's Private Secretary Alfredo Vila.

18. (C) A/S Noriega opened the meeting by telling Berger that
his election and the selection of his team had created great
expectations in Guatemala and in Washington. Guatemala has
changed dramatically in the past twenty years, and again in
the past two weeks (note: since Berger took office). CAFTA,
the rise in remittances from Guatemalans abroad, the Bush
immigration initiative and the great interest of the White
House in Latin America make this a auspicious time for a
progressive government to be assuming power in Guatemala.
A/S Noriega said the United States wants to work with the new
government to take advantage of this unparalleled opportunity
to foment economic growth and the strengthening of democratic
institutions and human rights.

19. (C) President Berger welcomed the Assistant Secretary's
visit and said his government will make a priority of
strengthening bilateral relations "which suffered under
Portillo." He said he would soon be sending Vice President
Stein to Washington to lobby Congress for funding for his
bold proposal to greatly reduce the military (price tag: one
billion quetzales or $125 million),to lift the prohibitions
on US military assistance, to provide increased funds for
counter-narcotics programs, and to ratify CAFTA. Berger
continued to express interest in securing better protections
for Guatemalan beer in the CAFTA agreement, but acknowledged
that the agreement, as it stands, will do a lot to generate
economic growth in Guatemala. Berger said that Stein would
also use his visit to Washington to explore ways of securing
TPS-like protections for Guatemalan illegal aliens, possibly
in the context of President Bush's immigration initiative.
A/S Noriega told Berger that reducing the military was a
laudable goal not only for budgetary purposes, but also for
modernizing the state. He cautioned Berger to have low
expectations of foreign financing for such a reduction,
however, and urged him to explore financing it in part by
selling off military properties. The Ambassador offered to
bring a team of experts to Guatemala to provide Berger with
advice on divesting military properties.

20. (C) President Berger asked about the status of US law
enforcement investigations into possible money laundering by
senior officials of the Portillo administration. The
Ambassador promised to arrange for Berger to meet with the
investigators for a briefing (Comment: This is very important
to Berger, who has asked about it twice earlier when the
Ambassador had seen him at other events. End comment).

21. (C) In response to the Assistant Secretary's pitch on
Article 98, Berger said that he was awaiting a recommendation
from the Foreign Ministry, but said he did not anticipate a
problem. Berger said he firmly supports the creation of
CICIACS, and hopes it will be on the ground in coming months.
After discussing the important contribution 600 Cuban
medical doctors make to rural medicine in Guatemala, Berger
said that he had, nonetheless, already informed the Cuban
Ambassador that he would not compromise his democratic values
(i.e. support for the Cuba human rights resolution at the
UNCHR) in exchange for the doctors. He said, "don't worry.
We will be on the right side on this."

22. (C) Over drinks at the Residence that evening, Vice
President Stein told A/S Noriega and the Ambassador that
Guatemala will ultimately be helpful on the Cuba resolution
at the UNCHR, but that with the government just getting off
the ground (and with opposition from the human rights NGO's
to the Cuba resolution),it would be difficult for Guatemala
to play a leadership role on a draft resolution. The
Ambassador asked that, notwithstanding their desire to keep a
low profile for now, they give serious consideration to
cosponsoring the resolution.

President of Congress Supports Mayan Jaguar Legislation
-------------- --------------

23. (C) In a courtesy call on President of Congress Rolando
Morales and members of the Congressional leadership board,
A/S Noriega said that his time working in the US legislative
branch had convinced him of the critical role Congress plays
in guaranteeing governability. He congratulated Morales for
the governability pact reached between President Berger's
GANA coalition, Morales' UNE party and the PAN to ensure
agreement on a basic legislative agenda. A/S Noriega told
Morales that he had just met with the Economic Cabinet, and
that they had outlined a bold plan for jump-starting economic
growth and reducing the fiscal deficit, and expressed hope
that Congress would be able to support this important

24. (C) Morales said that he was convinced that Guatemala
would become a narco-state if it were not for foreign
assistance to fight the war on drugs. He said that he
supports extension of legislation authorizing the Mayan
Jaguar counter-drug joint exercises, and will take expedited
action on the proposal once it is received from the
Executive. Other members of the leadership board similarly
expressed support for renewing Mayan Jaguar. Several of the
legislators voiced concern about the potential negative
effects of CAFTA on specific economic sectors, but all agreed
that overall CAFTA will spur job creation and generate
economic growth.

25. (C) A/S Noriega urged the legislators to pass
Hague-consistent adoption legislation, and noted that it is
extremely important that language in the new law permit
completing old cases under the old law during the transition,
so that already begun cases don't fall into a legal limbo
with the enacting of a new law. The legislators took the
point, and said that the new adoption law had gone through
its first reading that very morning.

Meeting Civil Society

26. (C) On the evening of February 4, A/S attended a
reception at the Residence with a large cross-section of
representatives of civil society organizations, opposition
political parties, senior GOG officials and the private
sector. In private conversations and in brief public
remarks, A/S Noriega urged the Guatemalans to work together
to take advantage of the opportunities that CAFTA, the
President's immigration initiative and CICIACS offer for
generating real and lasting change in Guatemala.


27. (C) Assistant Secretary Noriega's visit was interpreted
by President Berger and his team as a sign of our public
embrace of the new government, and of a shared desire for a
closer bilateral relationship. It came at a time of great
public expectations of the Berger government, and highlighted
for Berger and his ministers the importance of seizing the
day on CAFTA and other critical areas that can't be ignored.

28. (U) This cable was cleared by A/S Roger Noriega.