A/S SHANNON DISCUSSES TRANSITION WITH FUNES AND

C O N F I D E N T I A L SAN SALVADOR 000322

SIPDIS

E.O. 12958: DECL: 04/07/2029
TAGS: PREL PGOV ECON ETRD OVIP SHANNON ES
SUBJECT: A/S SHANNON DISCUSSES TRANSITION WITH FUNES AND
AVILA

Classified By: CHARGE D'AFFAIRES ROBERT I. BLAU, REASONS 1.4(B,D)


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


1. (C) WHA Assistant Secretary Thomas Shannon held separate
meetings March 18 with President Saca, Foreign Minister
Marisol Argueta, President-elect Mauricio Funes and ARENA
Presidential candidate Rodrigo Avila. He also attended
several press conferences and a reception with private
business sector representatives. This second cable on the
visit focuses on his meetings with President-elect Mauricio
Funes, ARENA Presidential-candidate Rodrigo Avila and the
private business sector. The first cable reported on A/S
Shannon's meeting with President Saca and the Foreign
Minister.


2. (C) Both major parties have approached the transition in a
mature fashion, stating they wanted to work with one another.
Funes was pleased with Saca's offer to cooperate in the
transition and invitation to attend the Summit of the America
(SOA). Funes was also eager to work with the USG and said he
would attend the March 30 meeting with Vice President Biden.
He was especially pleased about his phone call from President
Obama. Funes' most immediate priorities are addressing the
unemployment problems exacerbated by the current economic
crisis and resolving crime and security issues. Avila said
ARENA would be a vigilant, but constructive opposition party.
End Summary.

Meeting Attendees
--------------


3. (U) Legislative Deputy Hugo Martinez (also rumored to be
in the running as Funes' Foreign Minister or possibly
Ambassador to Washington) and Mauricio Funes' wife Vanda
Pignato attended Assistant Secretary Shannon's meeting with
President-elect Funes. Rodrigo Avila's campaign manager
Cesar Funes (no relation to Mauricio) attended the meeting
with Rodrigo Avila. Charge Robert Blau and the Political and
Economic Counselors attended all of the meetings with
Assistant Secretary Shannon. A/DCM joined the meeting with
Avila.

Funes Reiterates Desire to Work with USG
--------------


4. (C) The phone call from President Obama to President-elect
Mauricio Funes made a huge and positive impression. It was
the first thing that Funes mentioned to A/S Shannon. (Note:
Funes also mentioned it extensively to the press before and
after his meeting with A/S Shannon. End note.) He was
particularly pleased that the President asked for his views.
A/S Shannon and Funes discussed their shared interest in
maintaining close relations between the USG and the Funes
administration. Funes said that he would be delighted to
attend the March 30 meeting in Costa Rica with Vice President
Biden, and he also looked forward to attending the SOA with
President Saca. (Weekend media reported on the Secretary's
call to Funes, during the latter's trip to Brazil.)


5. (C) In the meeting with A/S Shannon, Funes complimented
Saca on how he and ARENA handled their presidential-election
defeat. He was particularly pleased with Saca's willingness
to open the government's books and work with them on the
transition, as well as Saca's invitations to attend the SICA
(Central American Integration Secretariat) meeting and the
SOA. He was also surprised by the change in the attitude of
the press. During the campaign, he said the press had been
more antagonistic, but since he became President-elect they
had treated him with much more deference and respect, which
was a welcome surprise.


6. (C) Funes said he inherited a polarized country and that
he needed to reach broader understandings and agreements in
order to move the country forward. A/S Shannon replied that
the peaceful and transparent elections demonstrated a
confidence and maturity in the country's democratic process
and institutions. The Funes campaign, he noted, had taken a
more positive tone than his opponents' and the vote for him
was a vote against polarization. In response, Funes noted
that the division within the legislature (the FMLN has 35 of
84 seats) means that the parties will have to work together.
Acknowledging that there will be "discrepancies" between the
parties "as there are in the United States," the recent
approval by both parties of Inter-American Development Bank
loans showed that the FMLN and ARENA could work together. To

underline the point he noted Saca's public statement that if
the Funes administration proposes a law that is in the best
interests of the country ARENA should support it.


7. (C) The first priority of the Funes administration will be
addressing the impact of the economic crisis. Funes said
that remittances and exports had dropped, which could create
balance of payments problems. He hastened to add that he was
not saying anything about dollarization. (Comment. In the
past, some FMLN representatives, as well as others including
the ARENA Vice Presidential candidate, had criticized
dollarization. Throughout the campaign, Funes has said that
he has no intention of getting rid of dollarization. End
comment.) Funes wants to have a "national dialogue" on the
situation and reach agreements on how to recover the "25,000
jobs" the country has already lost and create new jobs. He
hopes that projects under the Millennium Challenge
Corporation compact could be accelerated and noted that his
administration might take advantage of the Standby Agreement
with the International Monetary Fund or other financing to
stimulate the economy.


8. (C) Funes' other major priority was crime and public
security. He said public security was not much of a campaign
issue, because ARENA's candidate was the former chief of
police and given the serious crime problems in the country it
was not in ARENA's interest to focus on the issue. However,
he said it was a serious problem that affected the quality of
everyone's life in the country. While more police would
help, Funes said they have to be adequately trained in
investigative techniques, because without those capabilities
you cannot get criminal convictions. For those reasons he
supported the U.S.-funded International Law Enforcement
Academy (ILEA) in El Salvador and the Cooperative Security
Location's (CLS) anti-narco-trafficking activities.


9. (C) A/S Shannon said he had just spoken with President
Saca about extending the agreement for the CSL for an
additional five years. He also said that we would like to
review with Funes the Merida Initiative. Funes acknowledged
both, stating we share a "common enemy" in that regard. The
Charge added that we have several groups within the Embassy
that work on security and economic development issues that
stand ready to begin work with the Funes administration.
Funes appeared surprise$iL%?]NF|Ew
= even before
he took office, but said he was very encouraged by the offer.
His wife Vanda Pignato, who also attended the meeting,
wanted to talk with USAID about women's and family issues.
Everyone agreed to follow up on those discussions. A/S
Shannon stressed that he came in good faith to continue the
excellent relations we had with El Salvador, not only on a
government basis, but based on the large numbers of
Salvadorans in the United States and our strong cultural and
demographic ties.


10. (C) In terms of international relations, Funes emphasized
that he has not visited Hugo Chavez, but has visited his
neighbors. The following day, he was leaving for a week in
Brazil where he would meet with President Lula again and he
would not be stopping in Venezuela. He joked that ARENA
campaign propaganda pictures of him with Hugo Chavez were
from a photo taken of him and Chavez when he had interviewed
Chavez on a television program years earlier. A/S Shannon
said he was asked similar questions by the press at the
Foreign Ministry regarding what the USG thought of them FMLN
having closer relations with Venezuela and Cuba. Assistant
Secretary Shannon said he told the press that the USG's
relations with the government of El Salvador would not be
conditioned upon El Salvador's sovereign decisions about its
foreign relations. He added that the USG and El Salvador had
many common interests.

Avila Taking Defeat Gracefully
--------------


11. (C) A/S Shannon complimented Avila on his campaign and
the maturity he demonstrated in accepting defeat. Avila said
he meant it when he said that ARENA should work with the
Funes government, but that they would be a "vigilant and
constructive" opposition party and not be obstructionists.
Avila was concerned about the state of the economy and about
narco-trafficking in the region. On the former, he said the
country needed to create more employment as alternatives to
migration and gangs. He said his prior police experience
made him well-qualified to talk about the problems of
narco-trafficking in the region. He was very worried, noting
that the "Mexican drug lords already control Guatemala" and
that if the problem was not urgently addressed they will get

even stronger. A/S Shannon said those concerns were part of
the rationale behind the Merida Initiative. Avila said he
would continue fighting these battles and that ARENA would
continue to be the closest ally for the United States.

Business Sector in Shock but Willing to Engage
-------------- -


12. (C) In a reception of twenty plus business leaders and
economists from the both major parties and independents,
those from the losing side said they were still processing
ARENA's loss at the polls. Former Minister of Economy Miguel
Lacayo said that some business owners had been holding off on
layoffs to help ARENA win the election. Now that ARENA lost,
he thought companies would start layoffs soon. The Fruit of
the Loom representative told Charge that they would lay off
3,000 employees that week. Most of the group was from the
right and they all acknowledged the need to work with the new
Funes administration. Miguel Menendez, part of the "Friends
of Mauricio" group, arrived late, stating he had watched the
news reports of A/S Shannon's visit and how grateful he was
for the strong support the USG has shown for Funes, both in
the phone call from President Obama and in A/S Shannon's
visit just three days after the election. "Friend of
Mauricio" Carlos Caceres echoed these remarks, adding that it
did not go unobserved that Charge was the first to
congratulate Funes on election night.

U.S. Engagement Greatly Appreciated
--------------


13. (U) In his press conferences with President Saca, Foreign
Minister Argueta and at the Embassy, A/S Shannon emphasized
the long and extensive relationship between the United States
and El Salvador. He also congratulated the Salvadorans for
the peaceful and mature expression of the democratic process
in the recent elections. Those comments made front-page and
television news headlines, as did A/S Shannon's meeting with
Funes and the President's telephone call to Funes.
Salvadorans also said they appreciated the positive and
visible expression of high-level USG support for the country,
especially so soon after the election which shifted power to
the opposition party.


14. (U) Assistant Secretary Shannon has cleared this cable.
BLAU