SCENESETTER FOR CODEL BLUNT'S AUGUST 20-21 VISIT

UNCLAS SECTION 01 OF 04 MEXICO 004390

SIPDIS

SENSITIVE
SIPDIS

FOR CODEL BLUNT FROM AMBASSADOR GARZA

E.O. 12958: N/A
TAGS: OREP ECON PGOV PREL MX OVIP BLUNT ROY
SUBJECT: SCENESETTER FOR CODEL BLUNT'S AUGUST 20-21 VISIT
TO MEXICO CITY

Sensitive but unclassified, entire text.


1. (SBU) My staff and and I warmly welcome you to Mexico
City. President Calderon recognizes the broad-ranging
challenges his country faces and has the vision and political
will to address them strategically. Having completed his
first 9 months in office, he has demonstrated resolve in
implementing his key policy objectives: improving security
and the rule of law, attacking poverty, and creating jobs.
The U.S. and Mexico have developed a solid set of
institutional relationships that allow us to work
productively on most of our priorities, including fundamental
issues of homeland security and North American prosperity.
Those links are set to expand. Your visit is a sign of U.S.
support for the Calderon government and dedication to this
complex, interdependent relationship.


2. (SBU) Mexico's democratic institutions weathered a
contentious presidential election, and Calderon has been
quick to emerge as an activist president with a strong and
respected cabinet, particularly in the security and economic
areas. His security efforts are designed to reassure foreign
investors and Mexicans worried about drug-related crime and
lawlessness that organized criminals will no longer act with
impunity. He knows that attracting investment, particularly
from the U.S., is pivotal to curbing migration and narrowing
the social and economic inequalities that undercut Mexican
society and result in bitter political divisions. Calderon
also recognizes that his vision of Mexico becoming a more
prosperous country and a regional leader depends first on
security and the rule of law.

Bilateral Relations
--------------


3. (SBU) Calderon has demonstrated pragmatism in his posture
toward the United States and is building on an already modern
and mature U.S.-Mexico relationship. The President's message
is that Mexico will seek what it needs from us on the basis
of equality, respect, and the close cooperation expected of
neighbors that share wide-ranging interests and challenges.
Our common border, responsible for extensive commercial,
community, and family ties, is transforming our societies
into two of the most deeply and broadly connected on earth.


4. (SBU) Far more than his predecessor, President Calderon
recognizes that immigration reform is a U.S. domestic matter
that is dependent upon U.S. congressional action. He will
seek progress in a low-key effort that avoids making
migration the dominant bilateral issue. He places great
emphasis on creating opportunities and jobs for Mexicans
inside Mexico. In a February 2007 speech before the American
Chamber of Commerce, President Calderon said the solution to
the immigration problem is the responsibility of the Mexican
government, and must be done by bringing capital to the
workers in Mexico, rather than having Mexican labor flow to
the U.S. Nevertheless, the Mexican public draws little
distinction between documented and undocumented migrants,
seeing both as hard-working countrymen who have been driven
to the U.S. by domestic economic adversity and U.S. economic
demands. As such, domestic political considerations require
that he and his cabinet raise the issue with USG officials
and that he publicly criticize measures that most Mexicans
find offensive. In your meetings with your Mexican
interlocutors, we encourage you to explain U.S. domestic
political factors affecting the issue of migration and help
your Mexican interlocutors maintain realistic expectations.


5. (SBU) Similarly, the proposed border fence is an
extremely sensitive issue, and in public settings, Mexican
government officials frequently posture on it. Likewise,
minor incidents on the border, associated with infrastructure
development, can quickly become public disputes. The
occasional cases in which Border Patrol agents (often acting
in self-defense) injure or kill undocumented aliens
inevitably provoke a sharp reaction here. Your visit can
reinforce our message that we are concerned by the violence
that is an unfortunate bi-product of illegal migration and
that we need to work together to ensure safe, orderly and
legal border crossings, while stemming the flow of illegal
migrants. Should the issue arise, we believe it is useful to
emphasize that given the rampant violence in the border
region -- as well as the threat of international terrorism --
the USG has the responsibility to take all available measures
to protect its citizens and enforce its laws.

Security
--------------


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6. (SBU) The new administration has moved forcefully to
improve public security, significantly increasing the
security budget; launching surge operations against drug
traffickers in six of the most conflictive states; working to
overhaul Mexico's national police organization; advancing
justice reform; and authorizing the extradition to the United
States of 15 wanted criminals, including 4 drug king-pins.
The president's initial actions reflect his commitment to
intensify security-related cooperation with the U.S., and his
willingness to incur political risk in doing so.


7. (SBU) The president fully understands the depth of U.S.
concerns about international terrorism and the
transformational effect of the 9/11 attacks on USG policy,
and he has signaled his strong commitment to work with us to
preempt terrorist activity or entry through our shared
border. While a solid foundation for joint counter-terrorism
cooperation has been established, and the Mexican
government's efforts should be recognized, we also need to
press for further progress on information sharing. With
respect to weapons of mass destruction, the Mexican
government -- on its own initiative -- has requested our
assistance in strengthening its detection capabilities.


8. (SBU) Mexico is a central partner in USG efforts to combat
drug trafficking and other trans-border threats. While
taking aggressive measures to tackle organized crime at home,
Calderon has also publicly urged the U.S. to boost our own
efforts to drive down demand for narcotics and improve
controls on arms, cash, and precursor chemicals smuggled into
Mexico. He acknowledges that Mexico cannot effectively
confront narco-trafficking without our cooperation and is
eager for expanded assistance, including help with combating
money laundering. During his February 2007 trip to Mexico,
Secretary Chertoff heard from Mexican Attorney General Medina

SIPDIS
Mora that Mexico's most critical law enforcement challenges
are: improving the institutional strength of local, state,
and federal police forces; dismantling the sophisticated
business operations run by the drug cartels; and crafting a
regional strategy encompassing the U.S., Mexico, and Central
America. In recent days, there has been media speculation
regarding a possible expansion of USG counter-narcotics
assistance to Mexico. President Bush has made clear that he
supports President Calderon in his fight against narcotics
traffickers. He also understands that this is a shared
problem for which there must be shared responsibility. The
USG is engaged with the Mexican government to determine how
we can strengthen our cooperation in this area.

The Southern Border
--------------


9. (SBU) Mexico's southern border remains extremely
vulnerable to illegal immigration, trafficking in persons,
and the smuggling of all manner of contraband, including
drugs/precursors. It is an issue of great concern to the
Mexican government, which attributes its lack of success in
dealing with the problem to the difficult local terrain; the
lack of enforcement infrastructure; the historically
informal nature of the border, particularly among local
residents; and the inadequate border security efforts of its
southern neighbors, Guatemala and Belize. Mexican law
enforcement agencies have begun factoring southern border
security considerations into ongoing programs and are seeking
to expand/improve operations in southern Mexico.
Nevertheless, progress in securing Mexico's southern border
is of vital importance in achieving our own security
objectives. In your meetings, you may wish to inquire about
current the status of Mexican efforts to develop a
comprehensive strategy to secure the southern frontier.

Strong Leader in a Conflictive Environment
--------------


10. (SBU) President Felipe Calderon is off to a strong
start, demonstrating leadership at home and abroad in a
manner much appreciated by Mexicans: although he won election
with a bare 36% plurality in a three-way race, a recent
opinion poll showed that 64% of Mexicans approve of his
performance to date. Nevertheless, the political climate
overall remains conflictive, with a congress closely divided
between the president's right-of-center National Action Party
(PAN),the leftist Democratic Revolutionary Party (PRD),and
the left-of-center Institutional Revolutionary Party (PRI).
Calderon faces significant domestic challenges in pursuing
his security, economic and social reform agendas. At the
same time, he must chip away at the historic Mexican
ambivalence toward the U.S. that has slowed progress on many
common fronts, including security.

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Stable but Vulnerable Economy
--------------


11. (SBU) President Calderon inherited a stable, growing
economy tightly linked to U.S. economic cycles. Mexico
chalked up an estimated 4.7% growth rate in 2006, rebounding
from near zero growth in the first years of the decade. Real
GDP growth is expected to slow to around 3.3% this year.
Inflation has risen in recent months to around 4%, but is
under control. Many here are growing concerned, however,
about Mexico's ability to compete in an increasingly
globalized world, as it loses market share to India, China
and other emerging economies. We agree with Finance Minister
Carstens that Mexico needs broad reform to improve tax
collection, reduce reliance on oil income, confront growing
pension liabilities and payments on government borrowing
outside the federal budget, and provide needed spending on
poverty alleviation, education, health and infrastructure to
compete internationally and develop the poorest parts of
Mexico. The Mexican government has begun the process with a
National Infrastructure Plan, pension reform and a fiscal
reform proposal currently before Congress.


12. (SBU) Our official U.S. assistance budget for FY07 is US
$50.6 million, a 24.4 percent cut from FY06, and funds much
of our efforts to help the Calderon government fight crime,
secure borders, reform the justice system, increase economic
opportunity, and protect the environment. Just as the
President has demonstrated commitment to work collaboratively
with the U.S. on a broad agenda, an increasing number of
Mexican state governors are working constructively with both
U.S. federal agencies and border states to achieve common
goals. Of our total US $50.6 million in official assistance,
USAID manages $19 million in projects that support overall
U.S. efforts to address two key causes of immigration
pressure: lack of economic opportunity and weak public
safety. USAID projects work directly with Mexican
institutions (including NGOs) at the federal, state, and
local levels to: increase economic opportunities at home;
strengthen security; raise Mexican competitiveness via policy
reform; improve the judicial system; expand access to credit;
and link marginalized producers in poorer areas to national
and international markets. Education and health programs
also build the capacity of Mexico's work force.

Facilitating Legitimate Trade
--------------


13. (SBU) Numerous studies and trade groups, including the
private sector North American Competitiveness Council, have
stressed that border facilities and procedures must be
improved significantly to accommodate current trade flows and
expected future growth. In 2006, U.S. Mexico trade in goods
and services grew to over USD 367 billion (more than one
billion dollars a day). We can accomplish this by, inter
alia: extending and/or synchronizing operating hours at U.S.
and Mexican facilities at the same border crossing; sharing
best practices among ports of entry; cutting back on
redundant inspections; employing new technologies to track
and speed the secure movement of cargo; identifying critical
infrastructure investments needed on both sides of the
border; and involving the private sector to make the North
American supply chain more secure and efficient. At the
March 2007 summit between President Bush and Calderon, both
governments agreed to increase efforts to facilitate
legitimate trade across the border. In response, the U.S.
and Mexican governments have each formed a senior-level
working group and plan to announce progress made toward trade
facilitation during the August 2007 SPP Leader's Meeting.

Energy
--------------


14. (SBU) After Canada, Mexico is the largest source of U.S.
oil imports. We therefore have a strong strategic interest
in continued stable supplies of Mexican oil. Within Mexico,
energy is an extremely sensitive topic tied to national
sovereignty, but the energy sector requires difficult reforms
urgently. Because the Constitution prohibits private
investment in many areas of the energy sector, the government
must provide the tens of billions of investment dollars that
the state oil monopoly Pemex needs. The current system will
not withstand the expected steep drop in Mexican oil
production, or a fall in oil prices. President Calderon, a
former Energy Secretary, is looking at how to head off the
ongoing drop in oil production.

Consular Issues

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15. (SBU) One of the clearest indicators of the deep links
between our two societies is our consular workload in Mexico.
About one third of all USG employees stationed in Mexico are
dedicated to providing consular services. An estimated one
million American citizens reside in Mexico and about 12
million visit every year. Most Americans rarely encounter
problems here, but each year hundreds are arrested,
assaulted, die, fall ill, or become destitute, and seek
assistance from consular employees. More abductions of U.S.
citizen children take place (in both directions) between the
U.S. and Mexico than anywhere else in the world. The
migration of U.S. citizen retirees to Mexico has provided
impetus to improving property rights protections in Mexico,
including the introduction of title insurance offered by U.S.
insurance companies. The air phase of the Western Hemisphere
Travel Initiative went into effect January 23 with few
problems and 99 percent of U.S. citizen passengers bound for
the U.S. carried passports. The land and sea phase, which
will go into effect before June 2009, will present a greater
challenge due to the fact that there may be as many as
700,000 U.S. citizens residing in Mexico without
documentation who will need passports.


16. (SBU) U.S. Consular Sections in Mexico processed about
1.3 million nonimmigrant visa applications in fiscal year
2006, including 114,000 temporary worker (H2) visas (71
percent of the world total),of which almost 35,000 were
temporary agricultural workers (92 percent of the world
total). There are no numerical limits on temporary
agricultural worker visas and Mission Mexico stands ready to
process much greater numbers of these visas if U.S.
agribusiness chooses to make greater use of this program.
All immigrant visas in Mexico are issued in Ciudad Juarez,
where we processed about 86,000 immigrant visa applications
in 2006, of which 54,000 were issued. This is the greatest
number of immigrant visas issued to any one nationality in
the world. This fluid legal movement of Mexicans northward,
along with long-standing documented and undocumented
communities in the U.S., make the USD 23 billion in
remittances that Mexicans send home Mexico's second largest
source of foreign exchange revenues, behind petroleum and now
ahead of tourism.


Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity and the North American
Partnership Blog at http://www.intelink.gov/communities/state/nap /
BASSETT