SCENESETTER FOR THE VISIT TO MEXICO BY CODEL ENGEL

C O N F I D E N T I A L SECTION 01 OF 04 MEXICO 000348 SIPDIS FROM CHARGE STATE FOR EB, P, WHA, H E.O. 12958: DECL: 02/06/2019 TAGS: PREL PGOV PHUM SNAR KCRM MX SUBJECT: SCENESETTER FOR THE VISIT TO MEXICO BY CODEL ENGEL -- FEBRUARY 16-18, 2009 Classified By: Political Minister Counselor Charles V. Barclay. Reasons 1.4 (b) and (d). ¶1. (SBU) On behalf of Mission Mexico, I warmly welcome you to Mexico City. Your visit is an opportunity to underscore the broad, deep relationship between the U.S. and Mexico and, in particular, our appreciation for President Calderon's demonstrated leadership in the area of security. Committed to an ambitious security and development economic agenda, Calderon seeks to maintain the upper hand in the battle against narcotics trafficking as his highest priority in early 2009. In the face of a global economic downturn, he has worked to minimize its impact in Mexico while maintaining Mexico's economic competitiveness. ¶2. (SBU) The U.S. financial crisis, and its impact in Mexico, has generated considerable concern in recent months. You will also note widespread public concern over crime and violence. As drug-related violence spirals, a perception is growing that Mexico's already troubled security situation has deteriorated steadily and disturbingly. Mexico's opposition political parties, positioning themselves in the run up to this year's legislative, gubernatorial and local elections, have ramped up criticism of Calderon's approach to both security and the economy. Mexico's Economy ¶3. (U) The Calderon administration has registered some impressive accomplishments since 2006 -- maintaining macroeconomic stability, keeping inflation for the most part at a reasonable 4 percent, and lowering barriers to trade. The President secured quick congressional approval of the 2007 and 2008 budgets, and won passage of an unpopular but necessary government workers' social security reform. In the last year, Congress also approved a tax reform that will boost government revenues and a modest package of modernizing reforms to Mexico's state-run energy company, PEMEX. ¶4. (SBU) Much remains to be done, however, to arrest Mexico's slipping global competitiveness. The GOM's challenge is to implement structural reforms required for growth sufficient to raise 40% of Mexicans out of poverty. In recent months, inflation has remained at over 5 percent fueled by rising international food and energy prices. The Mexican peso slipped over 32% against the U.S. dollar in the last six months as a result of the lower price of oil, reduction in exports, and a decline in remittances from the U.S. Real GDP growth is also expected to be zero or slightly negative this year, down from an estimated 2.6 percent in 2008 and 3.3 percent in 2007, primarily due to the U.S. economic slowdown. ¶5. (C) In response to the steep global downturn and falling oil prices and production, President Calderon has announced plans to increase public spending on housing and infrastructure projects, programs to support small and medium businesses and introduced tariff cuts to improve Mexico's competitiveness. In the near term, these measures must genuinely help mitigate the negative impact of stalled growth in Mexico if President Calderon is to sustain his public support -- and that of his party. Over the longer term, the president must advance reforms that make a lasting impact on the lives of Mexico's poor and struggling middle class. Political Landscape ¶6. (SBU) In addition to growing concerns over the economy, crime and violence, the president and his party face a hardening political environment here in advance of legislative and key gubernatorial elections later this year. All three of the main political parties in the legislature have their eyes on the bellwether 2009 elections, and the Institutional Revolutionary Party (PRI),in particular, is expected to make gains. The window of opportunity to effectively cooperate with a divided congress on major reform initiatives is rapidly closing. Security Strategy ¶7. (SBU) Drug-related violence in Mexico continues unabated. 2008 set a new record for organized crime-related homicides with more than 6000 killings, including 525 military and law enforcement officers. The upsurge last year is partly a result of President Calderon's aggressive push against Mexico's cartels, and partly a result of their vicious battle for control of trafficking routes to the U.S. MEXICO 00000348 002 OF 004 ¶8. (C) Despite these challenges, President Calderon remains committed to combating organized crime and improving the country,s security situation through aggressive law enforcement and military deployments, as well as reforming the country,s police and judicial institutions. President Calderon is running joint military-law enforcement anti-narcotic operations in ten states, and some 27,000 troops are specifically involved in counter-drug activities. He has raised pay for the military and replaced a number of high-ranking law enforcement officials in an anti-corruption campaign. He has increased the budget of the security forces each year since he took office, including a dramatic increase in the current budget. The President, in coordination with other political parties, also ushered through Congress four important security and justice reform packages that, if appropriately implemented, will help to modernize and restructure the country,s justice system, as well as improve and better coordinate Mexico,s disparate police forces. ¶9. (U) Calderon's efforts have produced results. In 2007 over 28,000 persons involved in drug-related crimes were arrested; approximately 27,000 were incarcerated in 2008. In 2008, over 19 metric tons of cocaine have been seized, as well as 1,650 metric tons of marijuana and 341 kilos of methamphetamine. This is on the heels of record seizures in 2007: 48 metric tons of cocaine, 2,194 metric tons of marijuana, and 932 kilos of methamphetamine. Arms seizures are up from 4,220 weapons seized in 2006 to 9,550 seized in 2007 and 20,235 from January to October 2008. The U.S. - Mexico Relationship ¶10. (U) Calderon has demonstrated pragmatism in his posture toward the United States and bilateral cooperation across a wide range of issues, particularly on law enforcement, has never been stronger. The President has significantly expanded the number of criminal extraditions to the U.S., instructed key members of his security team to engage their USG counterparts fully and worked closely with us to develop a joint approach to counter-narcotics through such efforts as the Merida Initiative. The Letter of Agreement for Merida was signed with the Government of Mexico on December 3. The Mission currently is staffing up to administer Merida and early initiatives are already beginning to bear fruit. Some Merida projects should be underway by the summer, although many are long term in nature and will not yield early results. Merida Initiative Rollout ¶11. (U) Inter-agency coordination meetings are ongoing within the Law Enforcement Community to prepare for Merida roll out. The $400 million Merida Initiative includes a mix of funding: INCLE administered by our Narcotics Affairs Section; Economic Support Funds administered by USAID; and Foreign Military Financing administered by the Office of Defense Cooperation. The package includes funding for: -- Non-intrusive inspection equipment, ion scanners and canine units for Mexico to interdict trafficked drugs, arms, cash, and persons. -- Technologies to improve and secure communications systems that collect criminal information, including biometric data, as well as continued support to expand Platforma Mexico, a program that facilitates information and intelligence exchanges among the country's law enforcement agencies. -- Technical advice and training to strengthen the institutions of justice -- vetting for the new police force, case management software to track investigations through the system, new offices of citizen complaints and professional responsibility, and witness protection programs. -- Helicopters and surveillance aircraft to support interdiction activities, and rapid response of law enforcement agencies and supporting military forces. Key Issues ¶12. (C-Entire Paragraph) Specific issues that are likely to be raised during your visit include: -- Merida Initiative: Senior GOM officials, including President Calderon, have expressed concern about the length of time it has taken to begin implementation. We will continue to work closely with our counterparts here to pick up the pace and to ensure the program has the greatest MEXICO 00000348 003 OF 004 possible impact. We appreciate Calderon's political courage to partner with the U.S. and Central America on this initiative. GOM officials will also be interested in discussing future funding for Merida. The program was initially discussed as a $1.4 billion program over three years and both public and official expectations are leaning in that direction, even if it takes longer than three years to reach. -- Security Legislation: Several pieces of legislation to advance reforms in the area of security were passed last fall, including: the creation of a National Council for Public Security, penal code reforms, a cell phone registry law, and anti-kidnapping reform. The latter will require a change to the constitution that will have to be approved by the states. The most notable law still pending is police reorganization. -- Arms Trafficking: The Department of Homeland Security's Immigration and Customs Enforcement (DHS/ICE) works closely with its counterparts in the Government of Mexico to pass information on arms trafficking in support of enforcement activity in Mexico, as well as to gather information in order to further ICE investigative efforts in the U.S. This includes a web-based portal, "Armas Cruzadas" in order to share arms trafficking intelligence. In January 2008, ICE launched a surge operation to combat arms trafficking along the U.S.-Mexico border and currently is working with its Mexican government counterparts in order to establish an arms trafficking vetted unit. The Bureau of Alcohol, Tobacco and Firearms (ATF) is sharing its database and E-trace program with Mexican law enforcement to support efforts to more effectively trace firearms that are seized in Mexico. The GOM continues to press for more integrated and coordinated actions. A proposed March conference should provide an opportunity to improve bilateral cooperation in trafficking cases. -- UN Cooperation: As Mexico assumed its seat on the UN Security Council in January 2009, it will become even more important that we coordinate closely with Mexico on issues in both the GA and on the council. -- Mexico-Cuba Relations: Relations have warmed during President Calderon's administration with high level visits between the two countries. A Memorandum of Understanding on migration issues was signed last fall. Mexico seeks to step up repatriations of Cubans entering Mexico illegally (mostly en route to the U.S.). The program led to two repatriations in December 2008. In establishing better ties with Cuba, we hope Mexico takes the opportunity to urge the Cuban Government to address human rights concerns. We also hope that, as Mexico restarts the program to repatriate greater numbers of Cubans, it works with the UNHCR to guard against returning any individuals with legitimate concerns about facing political persecution. -- NAFTA: Many commentators have contrasted the approach of President Obama and President Calderon on the question of NAFTA. In their first meeting on January 12 in Washington, whereas Calderon expressed a desire to build on NAFTA, some perceived Obama as wanting to revisit the current treaty to strengthen labor and environmental standards. Mexican Congressional opinion on the subject of renegotiation is mixed. While some would like to find out more details as they believe renegotiation could hurt Mexico, others suggest that renegotiation of the treaty on labor and environmental issues is doable. -- Intellectual Property Rights: Mexico continues to be a challenge for U.S. intellectual property rights holders, both pharmaceutical and audiovisual. However, with USG support, the government is making progress. -- Bradley Will: Bradley Will was shot and killed in the city of Oaxaca in October 2006 while reporting on violence between anti-government protesters and local police. After a lengthy investigation by Mexico's Attorney General's office, an individual tied to one of the protest groups was charged with the killing. Human rights organizations, however, believe the evidence points to plainclothes state policemen. A federal judge found irregularities in the case and his finding is being reviewed. Meanwhile, the suspect remains in custody. We continue to encourage the government to mount a thorough investigation and prosecution that will bring the true perpetrators of this crime to justice. MEXICO 00000348 004 OF 004 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