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 �A;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 -------------- MEXICO 00004390 002 OF 004 ¶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. MEXICO 00004390 003 OF 004 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 MEXICO 00004390 004 OF 004 -------------- ¶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