Identifier
Created
Classification
Origin
05GUATEMALA1204
2005-05-13 18:31:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Guatemala
Cable title:  

LETTER FROM GUATEMALA (8)

Tags:  PGOV ECON GT 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 GUATEMALA 001204 

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: PGOV ECON GT
SUBJECT: LETTER FROM GUATEMALA (8)

What's Up with Eddie?
---------------------

UNCLAS SECTION 01 OF 02 GUATEMALA 001204

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: PGOV ECON GT
SUBJECT: LETTER FROM GUATEMALA (8)

What's Up with Eddie?
--------------


1. (SBU) There has been some buzz about Vice President
Eduardo Stein's unhappiness with the government's direction,
triggered by an interview in "Prensa Libre" where he
intimated he would leave the administration if the GOG failed
to boost social spending in next year's budget. Stein is a
Euro-style social democrat, and Berger recruited him to be
his running mate to provide reassuring balance as well as
some government experience to his ticket. For the last
sixteen months, Berger and Stein have worked together very
well, and Stein has been the "go-to man" (if not the "Mr.
Fix-it") on a broad array of issues.


2. (SBU) Lately, however, the center-left Stein is viewed as
increasingly isolated in the pro-business Berger
administration, particularly after the recent departures of
Edmundo Urrutia from the Strategic Analysis Secretariat (SAE)
and Victor Montejo from the Presidential Peace Secretariat
(Sepaz). Although there are other prominent left-leaning
figures in the Berger administration (human rights activist
Frank LaRue and Nobel Peace Prize winner Rigioberta Menchu
come to mind),Urrutia and Montejo were considered to be
Stein's only proteges in senior positions, and their
replacements have no special ties to the Vice President.


3. (SBU) Stein's public brainstorming that the GOG should
explore fuel subsidies to lessen the impact of rising
gasoline prices was quickly shot down by Berger himself.
Chastened perhaps by that experience, Stein in his "Prensa
Libre" interview ridiculed "trickle-down" economic theory and
staked out next year's social spending as his battleground,
leading one prominent op-ed columnist to ask, in his
headline, "Will Stein resign in 2005 or 2006?" Another
newspaper's well-read gossip column claimed that Stein had
gone ballistic over Berger's decision to support us on the
Cuba resolution at the Human Rights Commission in Geneva.
(Stein told the Ambassador that he did advocate an
abstention.)


4. (SBU) FM Briz gave credence to the latter in a meeting
with the DCM on April 20 when he alluded to the internal
wrangling that had left Stein on one side, Briz on the other,
and President Berger in the middle. Briz won that battle, as
Guatemala voted with us on Cuba, but he was already looking
for conciliatory gestures to unruffle Stein's feathers. Briz

told us he would like to arrange a trip to the United States
for the VP and, since then, Stein has made one trip to our
East Coast and another to California. We believe that
Guatemala's "yes" vote on the Guantanamo resolution was also
intended (by Briz) to mollify Stein and bring him back into
the fold.


5. Comment: The Ambassador had not yet had an opportunity
to draw Stain out on this subject. A few-plugged-in
observers believe the press has exagerated the possibility of
Stein's departure. End comment.

Filibusters, Guatemalan-Style
--------------


6. (SBU) We, along with many Guatemalans, were astonished to
see Congress brought to a standstill for the better part of
three weeks by one deputy's interpellation of Health Minister
Marco Tulio Sosa. The interpellating deputy, Mario Bolanos,
was Health Minister in the disgraced Portillo administration
but switched last year from Portillo's FRG to the UNE.
Bolanos unilaterally convoked Sosa to testify before
Congress.


7. (SBU) Under Guatemalan parliamentary procedure, once an
interpellation begins, no other legislative business can be
brought to the floor until it is completed. However, to keep
an interpellation going, a quorum of at least one half the
deputies (or 80 of the 158) must physically be present in
plenary. Bolanos presented 385 questions, ostensibly to
cross-examine Sosa on the GOG's administration of health
services. It quickly became evident from Bolanos's line of
questioning that his real purpose in interpellating Sosa was
to mount a defense of former Vice President Reyes, who is
awaiting criminal trial for embezzlement. Bolanos's new UNE
comrades, aghast at the thought of coming to the defense of
the discredited former VP, were the first to abandon the
plenary, breaking quorum. During the following three weeks,
however, the interpellation was repeatedly suspended as the
deputies failed to reach a quorum.


8. (SBU) In the meanwhile, no other business could be brought
to the floor. The congressional leadership had hoped to
schedule votes in plenary on a number of initiatives,
possibly including a new adoptions law, a land title
registry, restoration of a fuel tax, anti-terrorist financing
legislation, and authorization of an office of the UN High
Commissioner on Human Rights. With the Congress scheduled to
begin a two-month recess on May 15, the congressional
leadership made no secret of its annoyance with Bolanos for
holding things up with his interpellation. The media and a
large number of Bolanos's congressional colleagues took to
questioning his insistence on completing his interpellation
of Sosa to the detriment of legislative activity. President
Berger weighed in, calling Bolanos "impertinent" for putting
everyone to sleep with his questions. Bolanos, unfazed,
responded that Berger was "ignorant."

Nineth Makes Her Exit
--------------


9. (SBU) We speculated in an earlier letter that
congressional deputy Nineth Montenegro's days in the ANN were
numbered. The moderate center-left Montenegro, by far the
ANN's biggest vote-getter in the 2003 election, was
increasingly uncomfortable in the ANN, which had been
hijacked by Pablo Monsanto, the former URNG guerrilla.


10. (SBU) Montenegro has now formally announced her
resignation from the ANN, taking with her two of the ANN's
five other deputies. She is in the preliminary stages of
creating a social democrat party, yet to be named.
Montenegro has long been in the public eye as a co-founder of
GAM, a human rights NGO, which she started after the
disappearance twenty years ago of her first husband. In
Congress, Montenegro has focused her efforts on military
transparency and accountability, and "Prensa Libre" named her
as its "Person of the Year" for 2004. She is often mentioned
as a potential presidential candidate or running mate in
2007, but people close to her have told us she has her eye
set on the mayoral race.

With Prosecutors Like These...: The Continuing
Saga of Alvarado MacDonald's Twin Banks
-------------- --


11. (U) Central Bank President Lizardo Sosa was recently
featured in the press complaining that the Public Ministry
(Attorney General's Office) was incapable of understanding
the four-year old banking scandal surrounding Francisco
Alvarado MacDonald. Alvarado's "twin banks," Promotor and
Metropolitano, went into receivership in early 2001.
Alvarado, a leading financier of Alfonso Portillo's 1999
presidential campaigner who then fell out of Portillo's
favor, has been dueling with prosecutors and the courts ever
since to stay out of jail on bail. Periodically, he also
protests his innocence to the public through full page
newspaper adds in the name of the banks' "majority
shareholders." He has filed criminal charges against Sosa
and the Monetary Board, who have been trying to achieve final
liquidation of the banks' assets. Sosa told the press that
one of the "big obstacles" to liquidation was that the Public
Ministry's prosecutors were having trouble "understanding ...
what the case was about." He found it "incredible" that
prosecutors were now looking into Alvarado's charges against
the authorities. Attorney General Florido responded with a
brief defense of the prosecutor handling the case.


12. (SBU) The case itself is as uncomplicated as Sosa
describes. Alvarado's banks made large unsecured loans to
businesses he owned that were not repaid. The banks
predictably ran out of cash and were unable to meet the
minimum reserve requirements at the Central Bank, so the
Central Bank shut them down. We hadn't realized how simple
the issue really was until Alvarado sent us a document
purporting to explain why he was the victim. Instead, it
demonstrates in clearest detail that Sosa did what he was
supposed to do. The document describes how Alvarado drew
checks to overdraw two of his banks' accounts with the
Central Bank and used the proceeds to create positive
balances in others. His core argument is that the law
doesn't say you have to subtract your negative balances from
your positive ones to calculate the amount on deposit for
reserve requirement purposes. The effrontery of the argument
is breathtaking, but so is the prosecutors' inability to get
beyond form to substance and grasp the simplest concepts of
banking and finance, an inability that leaves them hopelessly
unprepared to prosecute financial crimes. Sosa is right to
be frustrated.
HAMILTON