SCENESETTER FOR SECRETARY LEAVITT'S ATTENDANCE AT

UNCLAS GUATEMALA 000010 SIPDIS DEPT PLS PASS TO USAID FOR LAC/CAM - K. STENKIEWICZ E.O. 12958: N/A TAGS: PGOV PREL GT SUBJECT: SCENESETTER FOR SECRETARY LEAVITT'S ATTENDANCE AT GUATEMALAN INAUGURATION Introduction -------------- ¶1. Your January 13-14 attendance at the inauguration of President-Elect Alvaro Colom will be an opportunity to highlight our efforts to promote economic development, poverty alleviation, democracy, and rule of law, following the 1996 signing of the Peace Accords, which put an end to the 36-year armed internal conflict. During your bilateral meeting, Colom will likely raise with you his wish to meet President Bush at the White House soonest. He will also raise immigration, deportations, trade, and USG assistance to Guatemala, to include counter-narcotics assistance. Democratic Progress -------------- ¶2. The United States and Guatemala enjoy good relations. Your and President Bush's March 2007 visit here reinforced the already favorable impression that most Guatemalans have of the U.S. The United States is Guatemala's largest trade partner, foreign investor, and assistance donor. The United States is home to more than one million Guatemalans -- most of whom are there illegally -- who in 2007 sent back to Guatemala over $4 billion in remittances (equal to 12% of GDP). In 2007, DHS deported more than 20,000 illegal Guatemalan immigrants. U.S. immigration reform is a topic of major interest here. Guatemala is the second-largest source for babies adopted by American parents, after China. Americans adopted over 4,500 babies here in FY2007, and the number is increasing every year. The Guatemalan Congress recently passed legislation that will bring Guatemala into compliance with the Hague Convention on International Adoptions. Securing passage had been a principal USG objective. ¶3. Trade and investment ties strengthened when CAFTA came into force one-and-a-half years ago. Two-way trade has increased 8.4%, and foreign direct investment has tripled. GDP growth for 2007 was 5.6%, and year-on-year inflation is 7.7%, due mostly to increasing oil and food prices. Guatemala's conservative fiscal policy, with deficits averaging only 1.5% of GDP, has resulted in public sector debt that is among the lowest in the region. Guatemala is working hard to qualify for a compact with the Millennium Challenge Corporation. ¶4. Guatemala returned to democracy in 1986, and ten years later signed the Peace Accords that ended 36 years of internal armed conflict. Tens of thousands of persons were killed (including U.S. Ambassador John Mein, assassinated by Marxist guerrillas in 1968). The chronically under-funded state is weak but trying to contend with enormous social problems. According to the World Bank, Guatemala has one of the most unequal income distributions in the hemisphere, and a poverty rate of 51%. ¶5. Alvaro Colom of the National Union for Hope (UNE) Party won a runoff presidential election on November 4 against retired General Otto Perez Molina, with 52.8% of the vote. Colom, who defines himself asa Social Democrat, is a successful businessman wose vocation for addressing Guatemala's pressing problems of pervasive poverty and the social exclusion of the large indigenous population led him to get into politics. Despite his upper-middle class background, he has extensive experience with indigenous communities and rural development. Vice President-Elect Rafael Estrada is a renowned heart surgeon who recently returned to Guatemala after 38 years of practicing medicine Qreturned to Guatemala after 38 years of practicing medicine in Houston, Texas. Improving public health, security and education will be top priorities of the new government. Colom seeks to continue Guatemala's good relations with the United States, and has made clear he will seek good relations with all governments in the hemisphere, to include those of Venezuela and Cuba. Colom's UNE will have more seats in Guatemala's fractured Congress than any other party, but nonetheless will be short of a majority. Striking alliances with opposition parties will therefore be key to advancing the government's agenda. ¶6. The Colom Government's health care agenda consists of (fill in). Berger Leaving a Promising Legacy -------------- ¶7. The Berger Government worked hard to ensure a successful government transition. The incoming and outgoing administrations are committed to ensuring that successful initiatives, such as tax reform, are not interrupted by the transition. Outgoing President Oscar Berger took office in January 2004, and was the candidate of a center-right coalition (GANA). The Berger Administration advanced a broad set of reforms that improved accountability, spurred economic growth, and increased investment in education and health. ¶8. Despite the Berger Administration's progress on many other fronts, the security situation remains critical. Gangs and narcotraffickers are responsible for much of the current crime wave, and Guatemala remains a major conduit for northbound cocaine and heroin. The National Police are widely viewed as corrupt and ineffective. In order to combat organized crime and official complicity and corruption, the Congress approved installation of the UN's International Commission Against Impunity in Guatemala (CICIG). CICIG's international prosecutors and investigators will buttress weak state security organizations. The Army, which most Guatemalans hold in relatively good regard, revamped its doctrine to emphasize respect for human rights, external threats and international peacekeeping. Guatemala has been a reliable partner in UN peacekeeping missions, maintaining troops in Haiti and Congo, and operating a school for Central American peacekeeping forces. U.S. security assistance to the Guatemalan military remains limited, however, since bans on most FMF and IMET imposed in 1990 remain in place. Derham