SCENESETTER: VISIT OF CODEL COSTELLO

UNCLAS SAN SALVADOR 000247 SIPDIS STATE FOR WHA/CEN, H DRICH SIPDIS E.O. 12958: N/A TAGS: ECON EAIR MARR PREL ES SUBJECT: SCENESETTER: VISIT OF CODEL COSTELLO ¶1. Embassy San Salvador welcomes you and your delegation to El Salvador. El Salvador is one of our strongest allies in the Western Hemisphere, and is a bedrock of economic and political stability in the region. Your visits to the Aeroman aircraft maintenance facility will highlight an expanding high-technology company now majority-owned by U.S. investors. You arrive as El Salvador is already focused on preparing for 2009 legislative and presidential elections. The ruling ARENA party has accelerated the process of selecting its presidential candidate after the main opposition FMLN party chose a popular television JOURNALIST in November 2007. El Salvador's economy achieved strong GDP growth rate over 4 percent during the past two years as the government has continued to implement positive, free market-based economic reforms. Improving public security is the highest priority for the U.S. Mission as crime is an important political issue and economic constraint. The Merida Initiative and Cooperative Security Location are important elements of our cooperation on security and antinarcotics. POLITICAL SNAPSHOT -------------- ¶2. As one of our closest allies, El Salvador is the only country in the Western Hemisphere with forces currently deployed in Iraq. The ruling ARENA party has held the Presidency since 1988 and leads a coalition with a narrow majority in the Legislative Assembly. El Salvador will hold legislative and municipal elections in January 2009 and Presidential elections in March 2009. ¶3. Similar to the United States, El Salvador's election campaign season has been accelerated and is already underway. The opposition FMLN nominated telegenic JOURNALIST Mauricio Funes (formerly not associated with any party) as its presidential candidate, with old guard FMLN stalwart Salvador Sanchez Ceren as his running mate. While many question which part of the FMLN (the new face or the old guard) will actually control policies should the FMLN win the election, few doubt that the FMLN will be a formidable opponent in the 2009 elections. The FMLN's selection of Funes has forced ARENA to accelerate its own candidate selection with the naming of pre-candidates in January of 2008 and selection of a final candidate by mid-March. On February 26, ARENA announced three finalists: current Vice President Ana Vilma de Escobar, former Presidential Legal Advisor Luis Mario Rodriguez and former National Police Chief Rodrigo Avila. PUBLIC SECURITY AND THE MERIDA INITIATIVE -------------- ¶4. Rising levels of violent crime are an important economic constraint and may have a major impact on the 2009 elections. Violent street gangs are a serious problem and random, violent crime is endemic throughout the country. The U.S. is working closely with the Salvadoran government to develop the capacity of public security services and advise the government on police, legal and criminal procedure reforms. ¶5. The Merida Initiative can play an important role in reinforce security cooperation and reduce the threat of transnational crime. The Initiative aims to strengthen state institutions in the region, as well as break the power and impunity of criminal organizations in the region that aggressively intimidate these institutions, threaten governments' abilities to maintain public security and expand the rule of law, and pose a hazard to the safety and security of the United States. Funds are divided among three "pillars" of activities: Counternarcotics, Counterterrorism, and Border Security; Public Security and Law Enforcement; and Institution Building and Rule of Law. The Central America portion of the Initiative seeks to directly respond to needs identified by the Central American governments. ECONOMIC OVERVIEW -------------- ¶6. El Salvador's stable economy, the result of a broad reform agenda implemented by successive ARENA governments, has earned El Salvador an investment-grade debt rating from Moody's, and provides a measure of economic predictability. The Salvadoran economy grew by over 4 percent for the past two years after growing only 2 percent from 1999-2005. The United States is El Salvador's largest trading partner: we import $2,006 million worth of Salvadoran goods (57.1 percent of their total exports) and export $3,086 million of goods to El Salvador (40.5 percent of their total imports). El Salvador was the first Central American country to ratify and implement CAFTA-DR and has led the region in promoting regional integration. Remittances, primarily from the U.S., have grown to account for about 17% of GDP in 2007 (about $3.5 billion). US ASSISTANCE -------------- ¶7. The United States provides assistance through USAID and the Millenium Challenge Corporation (MCC) to promote sustainable economic growth and reduce poverty. USAID manages bilateral and regional programs to promote economic growth, strengthen democratic institutions, improve social services and support the enforcement of environmental and labor standards under CAFTA-DR. A Millennium Challenge Corporation (MCC) compact approved in 2006 and in force since September 2007 is investing $461 million over five years that seeks to stimulate economic growth and reduce poverty in the country's northern region through strategic investments in education, public services, enterprise development, and transportation infrastructure. AEROMAN MAINTENANCE FACILITY -------------- ¶8. The Aeroman maintenance facility employs over 1,200 engineers, technicians and support staff to provide airframe heavy maintenance services on Airbus and Boeing aircraft for TACA, Jet Blue and US Airways. The company is negotiating with Southwest Airways and has begun an expansion project to double its maintenance capacity from 4 to 8 maintenance lines by 2010. Aeroman became a majority U.S.-owned firm in 2007 after two U.S.-based private equity firms, Sageview capital and KKR, acquired a 70% stake in Aeroman's main parent company, ACTS. ACTS purchased an 80% stake in Aeroman in 2006 while the original owner, TACA, retained a 20% stake. COOPERATIVE SECURITY LOCATION -------------- ¶9. The Cooperative Security Location (CSL, formerly Forward Operating Location - FOL) provides aerial counter-narcotic support from the Salvadoran air base at the International Airport of Comalapa, El Salvador. The CSL maintains 21 permanent US Navy staff and 32 civilian contractors to support 110-140 temporarily deployed USN and USCG personnel operating 3-6 maritime patrol aircraft (MPA) for aerial counter-narcotics activities. CSL also hosts a rotating monthly detachment of one Canadian CP-140 MPA with 20-22 personnel. Information gathered during monitoring flights is shared with regional allies who then decide whether their own law enforcement officials should intercept suspect vessels and airplanes. Glazer