NO GOOD OPTIONS ON CAFTA FOR EL SALVADOR:

C O N F I D E N T I A L SAN SALVADOR 000116 SIPDIS E.O. 12958: DECL: 01/12/2016 TAGS: ETRD PREL ES CAFTA SUBJECT: NO GOOD OPTIONS ON CAFTA FOR EL SALVADOR: IMMEDIATE DELIVERY OF SYSTEMS EQUIVALENCE AND DELAY BEYOND FEBRUARY 1 BOTH RAISE RISKS REF: A. A) SAN SALVADOR 109 ¶B. B) SAN SALVADOR 65 Classified By: AMB. H. DOUGLAS BARCLAY. REASON: 1.4 (D) ¶1. (C) Foreign Minister Francisco Lainez and Minister of Economy Yolanda de Gavidia met the Ambassador in the evening of January 12 to continue the discussion of CAFTA implementation, in anticipation of a January 13 morning call from President Bush to President Saca. De Gavidia repeated that the problem El Salvador has in issuing a finding of equivalence between the U.S. and Salvadoran sanitary/phytosanitary (SPS) systems before January 16 (the deadline in order to permit a February 1 entry into force) is a legal one, not a political one. Salvadoran law required the GOES to walk through certain steps in order to promulgate a regulation that defined how to implement systems equivalence. De Gavidia said that the Legal Advisor in the Presidency, Luis Mario Rodriguez, had determined that a finding of equivalence would be illegal if the GOES did not follow this process. To illustrate GOES sincerity on this point, she commented that the GOES had had political problems in revising its proposed system for tariff rate quota (TRQ) administration, but had worked through this to make the necessary changes for entry into force. ¶2. (C) The Ambassador presented de Gavidia and Lainez a copy of Ambassador Susan Schwab's letter response to a communication from De Gavidia dated January 12 in which she laid out an argument about legal requirements the GOES must meet. The Ambassador told her that the USG believed that such requirements did not exist. De Gavidia raised the concern that any legal misstep by the GOES in rulemaking or execution would open the door to an FMLN (the far left political opposition) suit against CAFTA in the Supreme Court which could hang up the whole CAFTA agreement in the Salvadoran legal system; she and Lainez believed that the FMLN would have no grounds to pursue this course if the GOES were to follow the correct procedures in working out SPS systems equivalence. The risk of a lawsuit was unacceptable. As a result - if the legal opinion about a law governing rulemaking is correct - the GOES will miss Feb 1 entry into force whether the regulatory process they define is lengthy or brief. ¶3. (C) If El Salvador misses a February 1 entry into force date, we expect that the U.S. disagreement with El Salvador and other CAFTA signatories over the legal status of the commitment in the SPS Working Group to systems equivalence will come out in the open. It will come out because de Gavidia said she will have to tell the public that the GOES missed the February 1 date because the USG insisted on obtaining a benefit that was not in CAFTA. Such a tack by the GOES would put the USG on the defensive and raise the profile of an underlying concern that current practices in allocating economic opportunity in the Salvadoran economy may be exclusionary. We cannot predict what impact a public discussion of this issue would have on our trade relations elsewhere. De Gavidia also said that the GOES would have to go back to the Legislative Assembly to reform the December legal reforms undertaken for CAFTA implementation, since these reforms could not go forward without CAFTA. ¶4. (C) Comment: we recognize how difficult it would be technically to find a solution to allow February 1 entry into force, as Foreign Minister Lainez sought, in particular the necessary assurances that a finding of equivalence would be forthcoming. Any solution for El Salvador may elicit a backlash in Central America and in other trade negotiations. It is hard to envision an exception for El Salvador that did not extend to all of Central America. Still, the political arguments for finding a solution for February 1 are compelling. We do not know the specific legal citation that de Gavidia believes applies and await that information. However, the FMLN has made statements in the past that it would mount a legal challenge to CAFTA. Our experience with the Salvadoran courts (in cases involving contract enforcement with McDonald's and AIG, or telecommunications regulation) tells us that the court could well take on such a challenge and that the case could take years to work out. Barclay