GOG ACCORD ON DEEP MILITARY REDUCTIONS

C O N F I D E N T I A L SECTION 01 OF 02 GUATEMALA 000771

SIPDIS

E.O. 12958: DECL: 03/03/2014
TAGS: PREL MOPS MARR GT
SUBJECT: GOG ACCORD ON DEEP MILITARY REDUCTIONS

REF: GUATEMALA 584

Classified By: Acting PolChief Erik Hall for reason 1.5 (b) and (d).


1. (C) Summary: President Oscar Berger told the Ambassador
on March 27 that he had achieved a "political understanding"
with his Minister of Defense to reduce military strength to
15,500 officers and men, and to sharply reduce the military
budget to .33 % of GDP (down from the Peace Accords limit of
.66% of GDP). Some details of the deal, to be announced
April 1, are still being worked out. At Berger's request the
Ambassador publicly supported the idea of reductions at the
inauguration of the New Horizons joint humanitarian military
exercise on March 27. We are tailoring an April 19-20
Seminar to help facilitate implementation. Berger's April 30
meeting with the President will provide a good opportunity to
give political support from the highest level. We also need
to be prepared to provide more concrete support, within
existing restrictions under U.S. law. End Summary.

GOG Moved Quickly Toward Accord
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2. (C) Following up on the GOG's request for US assistance
with developing a plan to shrink the military (reftel),the
Ambassador, MilGroup Commander, visiting Center for Civil
Military Relations (CCMR) Director Tom Bruneau and CCMR
Senior Fellow MG (Ret.) Goetze met with President Berger,
Vice President Stein, Foreign Minister Briz and Presidential
Private Secretary Vila on March 24. The purpose of the
meeting was get Berger's thinking as to how a planned April
19-20 seminar on military reform could best be tailored to
support his initiatives. By way of bringing us up to date,
Berger said he had asked the military to live within a 500
million quetzal budget ($62.5 million, versus $155 million
spent in 2003). The Defense Minister had resisted, however,
and threatened to resign. Berger said he had then requested
the assistance of an unnamed friend (and retired General),
who had produced a study calling for troop strength of 14,869
soldiers, closure of eight major bases, and a budget limited
to .33% of GDP, or roughly 3% of current government revenue.


3. (C) The Berger-ordered study also called for cuts in
administrative expenses of 20-25%, budget transparency, and
investigation of past corruption in the Military Pension
Institute (IPM),which Berger believes (with reason) previous
military leaders have ransacked. Cutting off funding for the
IPM and paying retired military salaries would cost 100
million quetzals annually, according to Finance Ministry
estimates. To prevent further corruption, Berger said he
would also rescind the Army's contracting authority and
oversee contracts through the Controller General's Office.
Asked what roles a reduced Army should have as priorities,
Berger cited peacekeeping, border patrol, counter-narcotics
support, and supporting the civilian police fighting crime
(for two years, until reforms to the police force and
strengthening of civilian intelligence is complete). The
goal is to achieve a smaller Army which is well-trained and
equipped, and more effective.

Army Counter-Offer
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4. (C) In the March 24 meetings, Berger further described
military resistance to his plans and requested USG political
support. Presidential Security Commissioner (and retired
General) Otto Perez Molina might resign over the final budget
figures, he said. Finance Minister Bonilla's efforts to work
out the technical details of a budget reduction had met with
stonewalling from the Army. Berger had therefore turned to
Presidential Commissioner for Finance Richard Aitkenhead to
develop a workable plan for reductions in consultation with
the Army. In a separate March 24 meeting, which took place
at Berger's request, Aitkenhead shared with us the Army's
response to Berger's demands. It provided for a total troop
strength of 16,000 (from current levels of 27,209) and a
budget totaling 871.8 million quetzals ($108 million).
Aitkenhead thus expressed confidence that the differences
between the two plans could be overcome.

Accord Reached March 26
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5. (C) On March 27, at the New Horizons public launch,
Berger told the Ambassador that he (and Aitkenhead) had in
fact reached an accord with the Defense Minister during a
three-hour meeting the day before (the Minister of Defense
confirmed the agreement to the MilGroup Commander). At
Berger's request, the Ambassador supported the need for
downsizing cum modernization in his public remarks at the New
Horizons inaugural ceremony. The accord, which will be made
public April 1, includes the following elements:

-- troop strength reduction to 15,500 by June 30

-- a 2004 budget ceiling of 700 million quetzals (approx.
$87.5 million)

-- 2005 budget ceiling of .33% of GDP

(Note: According to Aitkenhead's figures, military spending
in 2003 amounted to .64 of GDP. However, .33% of projected
2004 GDP totals approximately $108 million. It is unclear to
us if Berger intends the military budget to increase in 2005
to this extent. The increase may be intended to cover needed
equipment modernization, after reductions are complete. End
Note.)

Next Steps; How We Are Helping, Could Help Further
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6. (C) In light of these developments, the CCMR seminar of
April 19-20 will shift its focus slightly to help facilitate
development of an action plan to implement the political
understanding. With respect to officer demobilization,
Aitkenhead said the older ones are no problem, as they are
ready to get out with a financial bonus. Aitkenhead wants
help on retraining/re-education of younger officers who will
have to leave; he had no specific request regarding
middle-ranked officers, who are the biggest problem due to
their numbers and years of service. Aitkenhead also
requested support for equipment modernization, to the degree
that we are able given Congressional restrictions. We expect
VP Stein, in an upcoming (mid-April) visit to Washington,
will have specific requests. One of the most important ways
we could support this initiative would be a public statement
by President Bush during Berger's April 30 visit.


7. (C) Comment: Downsizing the Guatemalan military has been
a long-term USG interest. The evolution of this presidential
initiative has been remarkably swift and the accord with the
military is a tribute to Berger's determination and
pragmatism. Though Berger overcame predictable resistance
from the MOD and his top staff, he may yet face opposition
from within the officer corps. For example, both the MOD and
his Chief of Staff thanked the Ambassador for his March 27
remarks, noting that "the Commanders need to hear what you
said." U.S. political support for Berger's gutsy gambit will
continue to be crucial, as will be any other incentives we
can offer to support modernization as downsizing is completed.
HAMILTON