SCENESETTER FOR PRESIDENT OBAMA'S VISIT TO

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2009-07-31 20:55:00
09MEXICO2264
Embassy Mexico
CONFIDENTIAL
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FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 7694
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RHMFISS/DEPT OF JUSTICE WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/CDR USSOUTHCOM MIAMI FL
RHMFISS/HQ USNORTHCOM
RUEAHLA/DEPT OF HOMELAND SECURITY
RUEABND/DEA HQS WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 05 MEXICO 002264

NOFORN
SENSITIVE
SIPDIS

FOR THE PRESIDENT FROM CHARGE D'AFFAIRES JOHN FEELEY.
NSC FOR DAN RESTREPO.
WHA FOR ROBERTA JACOBSON, E.A. LEE.

E.O. 12958: DECL: 12/21/2017
TAGS: PGOV PREL PHUS PINR KCRM SNAR MX
SUBJECT: SCENESETTER FOR PRESIDENT OBAMA'S VISIT TO
GUADALAJARA, AUGUST 9-10,2009

Classified By: CHARGE D'AFFAIRES JOHN FEELEY.
REASON 1.4 (b),(d).


1. (C) Key Points

--President Calderon remains committed to forging a legacy
based on the rule of law, where Mexico's criminal
organizations are severely diminished, and the benefits of
Mexico's wealth and trade are more widely shared among its
citizens. At the same time, he faces record levels of
violence, continued financial distress, problems within his
political party, and diminished power in Congress following
his PAN party's loss in recent midterm elections. Inequality
and poverty are on the rise, and the Mexican public
increasingly questions whether the war against drug
trafficking and organized crime is winnable. Despite these
challenges, President Calderon remains resolute. He fully
understands and appreciates that our commercial and law
enforcement interdependence is complete and necessary. He
looks to build stronger strategic alliances with us to
advance common goals in the areas of North American
competitiveness, energy and the environment, and citizen
security.

--President Calderon will want to engage you on an impossibly
wide range of issues, but he will focus most intently on the
domestic security challenges Mexico faces from criminal
violence. He will convey appreciation for U.S. cooperation
to date, but press hard for an explicit commitment to outyear
funding beyond the original three years of the Merida
Initiative. He will also push for greater efforts to stem
the flow of illegal arms and drug money into Mexico. You
should ask that the GOM provide a more transparent account
for how it handles accusations of human rights violations,
especially in the military court system, access by ATF to
seized weapons caches, and the extradition of high profile
cartel members, not just low-ranking lieutenants.

--The United States and Mexico have a broad and growing
relationship on energy that encompasses oil, gas, clean
energy, and new collaboration on renewables, climate change,
and carbon reduction. Mexico is emerging as a leader among
developing countries on clean energy and climate change and
is a willing partner in expanding cooperation on such
endeavors. In fact, President Calderon would like to see
greater U.S. engagement on environmental issues, recognizing
it as an area of mutual interest.

--While Mexico has taken significant steps to achieve
macroeconomic stability and is the second largest economy in
Latin America, GDP growth rates averaged only 2 percent over
the past ten years, and reforms have been slow in coming.
Despite the urgency of fighting the recession, structural
tax, energy, and fiscal reforms and increased competitiveness
are essential elements of a long-term, sustained recovery.
We can join with Canada in urging the GOM to pursue a
competitiveness agenda in the education, labor, trade and
finance sectors, as well as encourage modern, efficient use
of Mexico's petroleum and other energy sources.

--Eighty-two percent of Mexico,s exports go to the United
States, and we remain by far the country's largest source of
foreign investment. Mexico is the first or second largest
trading partner for 22 U.S. states. Mexico's long-term
prospects for growth and prosperity are tied to ours, and
President Calderon is particularly mindful of the positive
impact NAFTA has had on both our economies. Trade irritants
still persist, such as the delay in reformulating a pilot,
cross-border trucking program and our revised
country-of-origin labeling (COOL) provisions for beef and
pork products. Nevertheless, the GOM wants to resolve these
and other concerns without reopening the agreement.

--Mexico and Canada seek to deepen diplomatic cooperation, as
Canada has identified stronger ties with the Americas as a
foreign policy priority. Canada is increasingly concerned

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about Mexico's security situation, and is looking for avenues
to support President Calderon's efforts to reform the police,
corrections, and judicial sectors. Although Canada remains
at times concerned that trilateralism comes at the expense of
its bilateral relationship with the United States, Canada
values the trilateral summit process and will seek to sharpen
focus on the leaders' engagement on climate, energy and the
environment.

Citizen Security
--------------


2. (U) President Calderon continues to confront Mexico's
difficult security environment with unprecedented commitment.
Polling indicates that most Mexicans still approve of his
efforts, which include deploying some 45,000 troops dedicated
to counter-drug activities, yearly increases to the security
budget, and the passage of important security and justice
reforms to modernize and restructure the country's judicial
system. Mexicans also recognize the need to improve and
better coordinate the country's disparate police forces.
While polling indicates that the Mexican public believes that
the cartels are winning, over half of the population supports
President Calderon's security strategy and upwards of 80
percent agree with the military's domestic deployment in the
counter-drug fight.


3. (SBU) Nevertheless, the President faces significant
challenges despite his myriad efforts to improve the
country's security situation. Levels of violence show no
signs of decreasing, with organized crime-related homicides
and casualties suffered by security forces in the counterdrug
fight likely to surpass 2008's record figures. Allegations
of human rights abuses by soldiers deployed on counterdrug
missions threaten to undermine continued public support.
While there is general consensus on President Calderon's
frontal assault strategy, the new political environment
following the July 5 midterm elections, in which his rivals
made significant gains, could embolden his opponents and make
the passage and implementation of important legislation more
complicated.


4. (C) In light of these complications, President Calderon
needs our unalloyed support. The Merida Initiative provides
important material support to President Calderon's strategic
goals. As important, it demonstrates our shared
responsibility and resolve in facing up to the challenges
posed by transborder organized crime. While this initiative
was originally conceived of as a three-year plan, it is now
clear that we and the Mexican government must continue our
cooperation and assistance. We now need to focus on the
state and local level institution building, given Mexico's
strong federal system and the need to address security issues
locally. U.S. assistance is modest compared to what Mexico
is doing on its own, but it is critical to keeping the
country moving in the right direction. You should make the
following points:

-- We can expect that President Calderon will press the
United States to take stronger measures to fight arms
trafficking. Reinforce with him that we have stepped up our
deployment of resources under the Southwest Border Initiative
to combat arms flows. You should also note that success
relies in large measure on tracing the weapons Mexico has
seized from criminals. We are making progress on developing
protocols with Mexican law enforcement agencies to expand our
access to seized weapons, but it would be helpful if you
requested Calderon push the process along.

-- You should also be prepared to speak to the status of
Merida Initiative funds, including how reports of rising
human rights abuses stand to impact their delivery and
overarching support in Congress. We have prepared a report
to Congress on Mexico's human rights efforts to secure the
release of the 15 percent of funding, as required by law.
While the GOM, and particularly the military, must do more,

MEXICO 00002264 003 OF 005


we see their efforts beginning to take shape. On July 24,
the Mexican military (SEDENA) issued a press release stating
it had convicted 12 soldiers for human rights abuses since

2006. This kind of announcement is positive for the case
SEDENA makes in response to charges of impunity, and it also
flies in the face SEDENA's historical aversion to addressing
such issues in public. But more military transparency with
us and the NGO community on human rights issues is needed.

-- Mexico has extradited record numbers of criminals over the
last two years and has sent back 63 wanted criminals already
this year. However, only one of these is a major cartel
figure -- Miguel Caro Quintero. While commending Calderon on
extradition in general, push for the extradition of
high-level figures, such as Benjamin Arrellano Felix and
Sandra Avila Beltran.

-- The Mexicans are hyper-sensitive to any notion of
deploying National Guardsmen to our shared border. You may
consider briefing Calderon on this plan, its purpose and what
it entails before it becomes public.

--You should thank Calderon for Mexico's outstanding
participation in the recently concluded National Level
Exercise focusing on terrorism prevention. Mexico's
contribution to the program highlights its increased trust
and willingness to work with us on important security issues.

Energy, Health, and the Environment
--------------


5. (C) We have a broad and growing relationship on energy
that encompasses oil, gas, clean energy, and the beginnings
of cooperation on renewables, climate change, and carbon
reduction. As our fourth largest supplier of oil, Mexico's
production and exports are falling rapidly. In late 2008,
the Mexican Congress approved a modest energy reform package,
breaking a taboo prohibiting past administrations from
addressing the highly sensitive topic. The reform does not,
however, address the most pressing issues facing Mexico's
state-owned oil company (PEMEX). Since oil accounts for over
one third of Mexican budget revenues, the Calderon government
must find ways to offset declining oil revenues in order to
keep the fiscal deficit under control. Successful bilateral
talks on Transboundary Reservoirs in the Gulf of Mexico might
help lead over the long-term to more efficient exploitation
of oil and help Mexico treat a pending fiscal crunch.


6. (C) Mexico is emerging as a leader among developing
countries on clean energy and climate change and is a willing
partner in expanding cooperation on such endeavors.
President Calderon would like to see greater U.S. engagement
on environmental issues, recognizing it as an area of mutual
interest. We are working to reach agreement on strategies
for the December 2009 Copenhagen Conference of Parties on
climate change. The U.S. -- Mexico Framework on Clean Energy
and Climate Change has established a formal mechanism for
collaboration, information exchange, and facilitating common
efforts to achieve clean energy economies. Mexico is working
at home to promote energy efficiency, the use of clean energy
sources, and the reduction of its reliance on hydrocarbons.
Mexico also recently announced a national energy transition
and sustainable energy strategy that will funnel $1.5 billion
to implement more than 50 projects in order to foster the use
of new technologies to generate renewable energy, create
standards for energy efficiency, and diversify energy
sources.


7. (U) The outbreak in April of the H1N1 virus highlighted
the value of and continued need for international
collaboration on health issues. Mexico's rapid response to
the outbreak and transparency in communicating with
international partners helped slow the spread of the virus
and mitigated the loss of life. Swift and efficient
cooperation between the United States, Mexico and Canada
during the outbreak demonstrated the value of trilateral

MEXICO 00002264 004 OF 005


preparations to address cross-border health threats, and
Mexico was grateful to the United States for our balanced
response and decision not to halt or slow cross-border
activities. Nevertheless, the Calderon government's swift
response came also with high economic costs, particularly for
tourism, small businesses and pork producers. Mexico,s
finance minister predicted that the economic impact of the
crisis could be between 0.3 and 0.5 percent of Mexico,s GDP,
which was US $1.14 trillion in 2008. Following HHS Secretary
Sebelius' successful visit to Cancun on July 2 at the
W.H.O.'s H1N1 conference, your public affirmation of the
GOM's strong performance will help keep the government
focused for the expected return of H1N1 this fall.

Competitiveness
--------------


8. (SBU) Mexico has taken significant steps to achieve
macroeconomic stability. It is the second largest economy in
Latin America and the region's top destination for U.S.
foreign direct investment. Mexico has long leveraged its
cultural and geographic proximity to the United States market
to its economic advantage. Despite this, Mexico,s GDP has
grown just 2 percent annually over the past 10 years, totally
insufficient to achieve the 7-8 percent growth rate necessary
to address social inequities, make inroads against the
40-plus percent poverty level, and modernize the economy.


9. (SBU) Structural reforms have been slow in coming due to
political stalemates and powerful entrenched interests.
Education levels, tax collection, and transparency remain low
by both OECD and regional standards. In 2009, the World
Economic Forum ranked Mexico 60 among 134 countries in its
Global Competitiveness Index. Mexico fell far short in labor
market efficiency (110),institutions (97),innovation (90)
and higher education and training (74). Calderon knows this
and wants desperately to improve Mexico's competitiveness,
achieve dynamic growth, and increase prosperity.

10. (C) However, structural reforms and increasing
competitiveness are essential elements of a long-term,
sustained recovery regardless of the current recession or
hoped-for 2010 recovery in the United States. We and Canada
can urge the GOM to pursue a competitiveness agenda in
education, labor, trade and finance, as well as encourage the
efficient use of Mexico,s petroleum and other energy sources
to make them more competitive. Cross-Border Trade
Facilitation is another area for improvement. It is in our
mutual interest for Mexico to increase trade with its
neighbors and commercial partners. The GOM must increase
customs revenue and reduce customs revenue leakage caused by
rampant corruption. With Canada, we can continue work to
enhance Mexico,s capacity in customs and trade facilitation,
which will improve the environment for international trade
and transit. Mexico also suffers from monopolies and
oligarchies that should be addressed through strengthened
competition authorities. At the same time, Mexico must
tackle head-on the politically difficult issue of education
reform, or the next generation of Mexicans will not be
prepared to respond to the needs of a changing,
knowledge-based economy.

Beyond the Bilateral Relationship
--------------


11. (C) President Calderon highly values the unique
U.S.-Mexico relationship and has taken steps during his
presidency to strengthen it. He also seeks a larger role
internationally for his country. Mexico is using its two
year tenure (2008-2010) on the UN Security Council to expand
its growing engagement in the hemisphere and on the global
stage. So far, Mexico's tenure has been positive. We work
closely and constructively with its UN team both in Mexico
City and New York, and Calderon will be receptive to
suggestions where the GOM can be helpful on UNSC issues.

12. (C) Regionally, Mexico views itself as a leader, and
Calderon has capitalized on Mexico,s large commercial and

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cultural footprint. While deeply suspicious of
leftist-populism, he has avoided the bitter feuding his
predecessor waged with Cuba and Venezuela and sought to
normalize relations with both. He is deeply concerned with
lawlessness in Central America and seeks our cooperation,
through the Merida Initiative and other programs, to bolster
the security and stability of his southern border neighbors.
At the same time, he is perhaps less proactively engaged in
the region at the moment, focusing on security and economic
woes at home.


13. (C) Canada is becoming increasingly concerned about the
security situation in Mexico and is actively looking for ways
to support President Calderon's efforts to reform the police,
corrections, and judicial sectors. Its bilateral security
working group focuses on increasing cooperation and
information exchange on migration, emergency management,
marine security, and law enforcement, which Canada has
characterized as "practical" and "results oriented." Canada
also seeks to coordinate closely with us to assist the
Calderon government on security reform. Although Canada is
concerned that trilateralism comes at the expense of its
bilateral relationship with the United States, it does value
the trilateral summit process and will seek to place greater
focus at NALS on climate, energy and the environment.
Mexican-Canadian relations are currently strained in the wake
of Canada's re-imposition of visa requirements for Mexicans
to combat what Canada perceives as abuses of its liberal
refugee process by Mexican applicants. Both governments have
pledged to work through this problem, and it is unlikely to
have a lasting impact on their overall cooperation on other
issues.

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 /

FEELEY