SCENESETTER FOR A/S SHANNON'S MARCH 19-21 VISIT TO

UNCLAS GUATEMALA 000254

SENSITIVE
SIPDIS

SAN SALVADOR PLS PASS TO A/S SHANNON
TEGUCIGALPA PLS PASS TO A/S SHANNON

E.O. 12958: N/A
TAGS: PGOV ECON PINR ASEC SNAR EAID GT
SUBJECT: SCENESETTER FOR A/S SHANNON'S MARCH 19-21 VISIT TO
GUATEMALA

Summary
--------------

1. (SBU) President Colom's tenure has been characterized by
a number of successes in the social field, and growing
challenges in others, especially security. Controversial
First Lady Sandra de Colom leads the government's efforts to
fulfill campaign promises of poverty alleviation and social
inclusion of indigenous people. Guatemala's economy, which
is closely tied to that of the U.S., is being buffeted by the
global financial crisis. The country continues to suffer at
the hands of Mexican and Guatemalan drug traffickers as well
as gang members, and the security situation continues to
deteriorate. The GOG is advancing its legislative agenda,
which includes an important package of security related
reforms, with the help of center-right congressional allies.
Guatemalan foreign policy is aimed at maintaining good
relations with the USG while burnishing center-left
credentials with other regional governments. The GOG
observed the Salvadoran election with interest, and hopes
that the Obama Administration will change USG policy toward
Cuba.


2. (SBU) Among the topics President Colom and FonMin Rodas
will want to discuss with you are the Vice President's
upcoming visit to Costa Rica (Colom plans to attend),the
Summit of the Americas, immigration, and the Merida
Initiative. You may also wish to raise Pathways to
Prosperity, congratulate President Colom on his government's
growing efforts to alleviate poverty, and encourage thorough
reform of rule of law institutions in the face of the growing
threat from narcotraffickers. Given Guatemala's close ties
with El Salvador, you might also discuss USG expectations for
the new FMLN government. End Summary.

Advances in Poverty Alleviation
--------------

3. (SBU) President Colom was elected on the strength of
support from rural voters to carry out a poverty alleviation
and rural development agenda. The GOG's flagship poverty
alleviation program, "My Family Progresses," is a Conditional
Cash Transfer (CCT) program modeled on CCTs in Brazil and
Mexico, and run by First Lady Sandra de Colom. Via "My
Family Progresses," according to government statistics,
approximately 28,000 mostly rural and indigenous families
received a small monthly stipend in exchange for keeping
their children in school and keeping up on their vaccinations
during 2008. Business elites and other opinion leaders in
Guatemala City have derided the program as fomenting
dependency on the state, lacking in transparency, and as a
vehicle for political patronage and corruption. Despite the
criticisms, the program is popular with the rural poor. The
Ambassador has praised the GOG's effort to use its CCT, while
privately urging the GOG to improve the program's
transparency.


4. (U) The GOG established other popular programs for poor
families, such as providing children with vitamin supplements
and opening primary schools on Saturdays so that children can
play in a safe place where they are protected from gangs.
For the first time, families did not have to pay to register
their children for public school in 2009. The GOG's success
in conveying an image of social activism is all the more
noteworthy because the state remains chronically
under-funded. Tax receipts were just 11.3% of GDP in 2008,
the lowest in the hemisphere, according to U.S. Treasury
officials. Per latest estimates, even if fully implemented,
the GOG's tax reform package would increase the tax take by
only about 1% of GDP.

Respect for Market Economics
--------------

5. (SBU) A pragmatist, President Colom has been careful to
preserve the free market mechanisms that are slowly helping
rural people to slip the bonds of extreme poverty. He has
embraced CAFTA as a boon to small farmers, who have increased
non-traditional agricultural exports to the United States.
Colom has also resisted the temptation to tax remittances
from Guatemalans in the U.S., which at more than $4 billion
annually (but now declining) have done far more to transform
the countryside than any government program, or even trade.
At one point during 2008, year-on-year inflation exceeded
14%, the basic basket of consumer goods was up 22%, and
gasoline spiked to $4.50 per gallon, but inflation has since
fallen in line with global trends. Spurred by soaring fuel
prices, Colom rushed to sign a PetroCaribe deal with
Venezuela in 2008. Now that oil prices are lower, the GOG
appears to have lost interest in finalizing the terms of the
agreement. Driven by external factors, GDP growth fell in
2008 to about 3.5% as the main drivers of the economy --
tourism, remittances, and exports -- slowed sharply.

Legislative Alliances Delivering Key Votes
--------------

6. (SBU) The governing UNE party has only 37 of Congress's
158 seats. Nonetheless, the GOG continues to advance its
legislative agenda thanks to President Colom's ability to
forge and maintain alliances with center-right and other
parties. Prospects look favorable for an omnibus security
bill now before Congress. Drafted with assistance from the
International Commission Against Impunity in Guatemala
(CICIG),the bill would reform and modernize the Penal Code,
Code for Penal Procedures, Femicide Law, Extraditions Law,
and the Organized Crime Law. The Embassy has been vocal in
its support of the legislation. By threatening to make
public documents implicating General Otto Perez Molina,
leader of the opposition Patriot Party, in the congressional
embezzlement scandal, the UNE muted a main source of
opposition. Little real opposition is left in Congress. The
role of opposition is now mostly played by the press and
private sector.

Security Dire and Getting Worse
--------------

7. (SBU) The GOG continues to lose significant control of
entire swaths of the national territory -- concentrated in
border regions -- to narcotraffickers. With a homicide rate
of 48.4 per 100,000, and with over 6,200 murders in 2008,
Guatemala is among the most dangerous countries in Latin
America. The current government inherited a police force
that for the last nine years at least has been understaffed,
usually poorly led, underpaid, and corrupt. The military,
which was capped at approximately 33,000 members by the 1996
Peace Accords, was reduced to approximately 14,500 under the
Berger Government. It is under-staffed and under-resourced
for the security functions it has; it does enjoy increased
public confidence. Gravitating toward Guatemala's weak rule
of law, Mexican Zetas (the armed wing of the Gulf Cartel)
displaced Guatemalan traffickers in bloody shoot-outs, and
established a permanent presence in several border and
interior regions. The removal of several key traffickers
from the scene in eastern Guatemala brought on a bloody
battle to fill the resulting vacuum. (Comment: The GOG
believes the Mexicans are being pushed out of Mexico by more
aggressive GOM actions; we believe, however, that Mexican
cartels are attracted to Guatemala by the relative power
vacuum in the drug transit areas.) Encouraged by a homicide
impunity rate of at least 93% (and even higher for other
kinds of crime),gang members increased their extortion
business in Guatemala City and other urban areas. Among
their victims in 2008 were 163 murdered bus drivers, most of
whom failed to make extortion payments demanded by the gangs.



8. (SBU) CICIG Commissioner Carlos Castresana publicly
characterized Guatemala's rule of law institutions as being
in a state of "collapse." Vulnerable judges, prosecutors,
and police in rural areas are unprepared to confront
narcotraffickers' increasing challenge to state authority.
While Vice President Espada publicly named the judiciary as
the country's most corrupt rule of law institution, the
competition is stiff. Approximately 900 police officers were
removed for cause (though in most cases not prosecuted)
during 2008, including the National Civilian Police's (PNC)
top leadership. At Castresana's urging, Colom undertook a
major house-cleaning at the Attorney General's Office. While
the AG's Office is much improved, much remains to be done. A
new Supreme Court should be elected not later than September;
the Embassy, CICIG, the GOG and other donor countries have
begun working for a new court that is better. Authorities
seized just three of the approximately 200 to 300 metric tons
of cocaine estimated to have passed through Guatemalan air,
sea, and land space during 2008. Under rising public
pressure to improve the security situation, in January Colom
replaced Minister of Government Francisco Jimenez with
Salvador Gandara, who has increased the PNC's operational
tempo. Colom has also replaced three senior military
officers that we believe have ties to drug traffickers.

State Efforts on Security
--------------

9. (SBU) In the face of the formidable narcotrafficking
threat, the state is making some efforts. The Organized
Crime Unit, Counternarcotics Unit, and CICIG-supervised
Vetted Unit of the Attorney General's Office are working well
under new leadership and in close coordination with CICIG and
the Embassy. The Ministry of Government's budget was
increased, 4,800 new police will be hired in 2009, and
Minister Gandara has pushed the PNC to undertake bolder
counternarcotics operations. With Embassy and CICIG
assistance, the Attorney General's Office and Ministry of
Government are progressing toward full implementation of the
Organized Crime Law. Human rights groups have expressed
concerns about Minister Gandara, but have yet to produce any
evidence of wrongdoing. The Ambassador hosted a meeting for
Minister Gandara and leading human rights activist Helen
Mack, during which the two made progress toward overcoming
their differences.

The Kitchen Cabinet
--------------

10. (SBU) There was a marked strengthening of the Kitchen
Cabinet during Colom's first year in office. First Lady
Sandra de Colom regularly attends cabinet meetings, and
guides social policy via her Social Cohesion Council. She is
the most effective manager in the GOG. After Mrs. Colom, UNE
campaign financiers brothers Gustavo and Roberto Alejos are
probably closest to the President. Colom is rarely seen
without Gustavo, his private secretary, and Roberto Alejos is
pushing forward Colom's legislative agenda from his new
position as President of Congress. Finance Minister Alberto
Fuentes Knight and Foreign Minister Haroldo Rodas help set
the center-leftideological tone for the GOG.

Foreign Policy: Lft, Half-Rudder
--------------

11. (SBU) The mantra of the GOG's foreign policy is
maintenance of good relations with all countries in the
hemisphere. Advancing regional integration is also high on
the agenda. As demonstrated by their April 2008 visit to the
White House, President Colom and FonMin Rodas appreciate that
their most important bilateral relationship by far is that
with the U.S. The MFA's activism on USG immigration policy
is largely intended for domestic consumption. The Colom
Government has occasionally used foreign policy to burnish
its center-left credentials with other Latin American
governments, at times by indulging in short bursts of
anti-capitalist (though not anti-American) rhetoric. The MFA
has refrained from taking any principled stands on Cubans'
human rights, Nicaragua's flawed November 2008 elections,
Chavez's support for the FARC and anti-democratic
shenanigans, and similar issues. It hopes that the Obama
Administration will change USG policy toward Cuba. The GOG
has been publicly neutral toward the FMLN victory in El
Salvador, but many in the GOG harbor private sympathy for the
FMLN. There is some speculation that the FMLN victory will
encourage the GOG to turn further left to keep pace with
regional developments, but there is no evidence so far to
support such a view.

Conclusion
--------------

12. (SBU) Your visit to Guatemala comes at an excellent time
as the GOG seeks to expand its ties to the USG. The first of
the Merida Initiative money is coming on-line, and the
Embassy may soon receive other substantial resources.
President Colom and the other senior GOG representatives you
will meet will be eager to discuss the Obama Administration's
agenda generally, with specific focus on immigration, the
Merida Initiative, CICIG, Pathways to Prosperity, Vice
President Biden's visit, and the Summit of the Americas. USG
policy toward Cuba may also be raised. You may wish to use
your visit to congratulate President Colom on his appropriate
focus on poverty alleviation. Guatemala has closer cultural,
business, and family ties with El Salvador than with any
other Central American country. Discussion of our
expectations for the new FMLN government would be of interest
to most interlocutors. We suggest that you encourage GOG
leaders to undertake thorough institutional reform as an
integral part of the GOG's effort to combat narcotraffickers,
who so far have proven much more nimble than the state in the
ongoing contest for control.
McFarland