EARLY IMPRESSIONS OF FUNES GOVERNMENT

S E C R E T SAN SALVADOR 000708 NOFORN SIPDIS E.O. 12958: DECL: 07/21/2019 TAGS: PGOV PREL ES SUBJECT: EARLY IMPRESSIONS OF FUNES GOVERNMENT REF: SAN SALVADOR 653 Classified By: Charge d'Affaires, for reasons 1.4 (b) and (d) ¶1. (C) Summary: Some eight weeks into the Funes Administration, we are beginning to see more clearly the trends and factions inside the GOES. President Mauricio Funes' non-FMLN campaign support group, the Friends of Mauricio, is largely in control of the economic apparatus of El Salvador. Similarly, Defense is in the hands of a formerly-retired, recently-promoted military officer and Friend of Mauricio, Brigadier General David Munguia Payes. FMLN hard-liners are at the helm of the security and intelligence apparatus. Foreign policy is in the hands of a loyal FMLN member, but has thus far been characterized by pragmatism and outreach to the U.S. Assistance programs broadly mirror the rest of the relationship, with most programs moving forward successfully but some police and security programs under review. The Funes GOES has made poverty eradication its highest priority. End Summary. -------------- The Good -------------- ¶2. (C) The Funes Administration inherited two serious economic problems. First, the Salvadoran economy likely entered recession in late 2008, driven by falling remittances and declining exports because of the U.S. recession. Second, the government was effectively broke ) and in many cases behind on its bills ) because of declining tax revenues and the Saca Administration’s lavish, election-year subsidies. So far, the government has chosen to seek new funding from the World Bank, Inter-American Development Bank, and International Monetary Fund, rather than from sources like Venezuela. The government's "Anti-Crisis Plan" likewise appears to consist primarily of increased funding for existing social programs. These programs, however, will likely do little to boost the economy, where recovery ultimately depends on the recovery in the U.S. ¶3. (C) Since June 1, Salvadoran foreign policy has also been characterized by pragmatism. Foreign Minister Hugo Martinez stepped into the chair at the OAS General Assembly in San Pedro Sula just hours after assuming his new role; he impressed both the U.S. delegation and Salvadoran observers with his performance. Since then, the main foreign policy issue faced by the GOES has been Honduras. In the hours after President Zelaya's expulsion to Costa Rica, both Martinez and Funes reached out to the Embassy and to Washington to coordinate what has been a reasonable, responsible approach to the crisis on their northern border. On Funes' first day in office he recognized Cuba, but balanced this by meeting Secretary Clinton and the USDEL to his inauguration. FMLN hardliners, particularly Vice President Sanchez Ceren, would prefer an ALBA-esque foreign policy and carry out a parallel FMLN agenda, but they are not permitted to wreck relations with traditional partners. Ambassadorial appointments are being made in a deliberate, unhurried fashion, and have not raised concerns; indeed, keeping former FM Francisco Lainez in place at the OAS sent an early signal of continuity. ¶4. (C) On foreign assistance, USAID reports good cooperation across the board, save for some difficulties in public security. (More on that below.) The GOES has voiced strong support for continuing USAID programs and has indicated it is in agreement with USAID's strategic goals for El Salvador. The Funes Administration has elevated to Vice Minister the MFA position responsible for coordinating foreign assistance programs and has called for the formulation of a global cooperation strategy. The GOES is actively leveraging international donors to address its near-term anti-crisis plan. In charge of both economic policy and donor coordination is Alex Segovia, the President's Chief of Cabinet. Segovia, a kind of super-minister, is the most pragmatic and least ideological figure in the GOES. ¶5. (C) The GOES just reaffirmed its continued interest in USAID's programs for improved tax collection, health sector reform and a diagnostic of the education system. MCC's rate of implementation continues to gain speed, in large degree because of the efforts of local partner FOMILENIO's Director, Jose Angel Quiroz. We successfully pushed back against a move by Funes to replace Quiroz in the early days of his government, arguing that another disruption in FOMILENIO management would set back MCC's program by months, if not more. It was Segovia, in his role as FOMILENIO Board Chairman, who convinced Funes to leave Quiros in place. The new GOES has shown great interest in the MCC indicators; Segovia just wrote a warm letter to MCC CEO Rodney Bent recommitting the GOES to the indicators and all other MCC criteria. ¶6. (C) Military-to-military cooperation continues at a tempo similar to that before Funes took office. The USNS Comfort recently spent 11 days anchored offshore and saw more than 19,000 Salvadoran patients. We have three other Medical Readiness Training Exercises scheduled for 2009 and a full slate of DOD/SA-funded training for members of the Salvadoran Armed Forces (ESAF). Additionally, the MOD has requested USG support to conduct a National Security Strategy (NSS) workshop with the intent to get Cabinet level and Assembly personnel involved in the GOES process to develop their own NSS. Appointment of retired Colonel Munguia Payes as Minister of Defense, as well as mid-ranked active duty colonels to most key command positions, has created discomfort in ESAF ranks. However, the Minister of Defense is an institutionalist and is focused on maintaining the ESAF's apolitical professionalism. The Minister and the ESAF are loyal supporters of the president, and eager to continue longstanding mil-to-mil relationships with the U.S. -------------- The Bad -------------- ¶7. (S) Salvadorans across the spectrum link Manuel Melgar, now Minister of Public Security and Justice, to the 1985 Zona Rosa attack which killed four off-duty U.S. Embassy Marine Security Guards and other Americans and Salvadorans. Melgar's nomination appears to have been based less on his public security credentials than on the hard-line FMLN's insistence that they control public security. This was their "pound of flesh" in exchange for "Friends of Mauricio" controlling the economy. Melgar's presence as Minister has resulted in a distancing from the USG, a far cry from the close relationship we enjoyed with his predecessor. Law enforcement cooperation has not been frozen, but full implementation of the Merida Initiative is now contingent upon guidance from Washington regarding how best to work around Melgar. Just as disappointing is the cynical message it sends to a high-crime society like El Salvador when the President names as Minister of Public Security an individual with blood on his hands. -------------- And the Ugly -------------- ¶8. (C) Traditional feuds between the Salvadoran right and left and modern feuds between Funes and the FMLN are playing out in other contexts. Over two weeks after the legal deadline (June 30) to appoint five new magistrates to the Supreme Court, the Salvadoran Legislative Assembly remained deadlocked as the governing FMLN and ARENA-led opposition coalition could not reach agreement on a list of names. (Note: Supreme Court appointments require a 2/3 supermajority, thus demanding ARENA and the FMLN support any nominee. End note.) Naming a new Attorney General (which also requires a 2/3 Assembly vote) became linked to the Supreme Court selections and the entire process ground to a halt. The Supreme Court was made whole July 16 when a deal was struck between Funes, the FMLN, and opposition on a slate of nominees. Public and private negotiations continue over the new Attorney General. ¶9. (S/NF) El Salvador's intelligence service (OIE) in the hands of orthodox FMLN member Eduardo Linares could become ugly, depending upon how much leeway Funes allows him to accept advice, training, money, and personnel from Cuba or Venezuela. To date Linares has behaved cautiously, first seeking to get his arms around his own organization, which, to be fair, had previously considered the FMLN as its primary target. -------------- Pursuing U.S. Interests Going Forward -------------- ¶10. (C) Eight weeks on, we are roughly where we expected to be. We have enjoyed excellent cooperation in most areas with the GOES, but lost some ground in other areas, especially law enforcement. Given the inconsistent performance of Salvadoran law enforcement in good times, it has been hard to discern a difference in performance, or crime statistics, since June 1. Our assistance priorities, and continued trade relationship, seems closely aligned with the Funes Administration's own goals. Foreign policy priorities will sometimes diverge, although our problems are likely to be less with the official GOES policies than with the FMLN's own parallel policies. The Embassy's approach with the Funes Administration will continue to be engagement across the board, even with Public Security, up to and including the Deputy Minister. Our objective is to strengthen the institutions of Salvadoran democracy, regardless of who is in power. Civil society, media, and the business sector take a parallel and complementary approach. ARENA did not disappear June 1 and its reorganization and regrouping is proceeding. It promises to remain a significant opposition during the entire five years of the Funes Administration. BLAU