VZCZCXYZ0000
PP RUEHWEB
DE RUEHSN #1242/01 3042248
ZNY CCCCC ZZH
P 302248Z OCT 08 ZDK
FM AMEMBASSY SAN SALVADOR
TO RUEHC/SECSTATE WASHDC PRIORITY 0257
INFO RUEHCV/AMEMBASSY CARACAS PRIORITY 0352
RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
C O N F I D E N T I A L SAN SALVADOR 001242
SIPDIS
E.O. 12958: DECL: 10/30/2018
TAGS: PGOV PREL ECON EFIN EAID ENRG MARR MASS SNAR
ES
SUBJECT: WHA/CEN DIRECTOR WEBSTER'S VISIT TO EL SALVADOR
REF: A. 07 SAN SALVADOR 2300
B. SAN SALVADOR 1140
C. SAN SALVADOR 1195
Classified By: The Ambassador, for reasons 1.4 (b) and (d)
1. (C) Summary: During his October 19-22 visit, WHA/CEN Director Christopher Webster met with key figures on the
Salvadoran political and economic landscape. He spoke with members of both (center-right, pro-U.S.) ARENA and the
(left-wing) FMLN about their respective campaigns and party platforms. Webster met with representatives of the
Salvadoran government and U.S. companies regarding the country's current economic concerns. He discussed prospects for
extending the agreement for the Comalapa Cooperative Security Location (CSL) with government officials, and spoke about
the potential of the Merida Initiative. End Summary.
----------------------------------
Political Landscape: The FMLN Take
----------------------------------
2. (C) WHA/CEN Director Christopher Webster met October 20 with FMLN Deputy Hugo Martinez and Alexander Segovia,
Economic Advisor to the Mauricio Funes Presidential campaign. Martinez said that the Salvadoran voter base consists of
one-third strong ARENA supporters, one-third strong FMLN supporters, and one-third undecided voters. Martinez said that
the Funes campaign has specifically targeted those undecided voters and was confident about attracting their support. In
contrast, according to Martinez, ARENA candidate Rodrigo Avila has concentrated on consolidating the party's existing
voter base. He said ARENA is desperate, and has turned to fear tactics in its advertisements, claiming that "if the FMLN
wins, it will stop remittances." Segovia expressed concern about ARENA's "dirty" campaign, saying he is worried about
fraud and intimidation because ARENA will do anything to keep Funes from winning. He expressed the need for domestic and
international election observers to be deployed as quickly as possible.
3. (C) Segovia and Martinez both blamed President Saca for the current tension between the FMLN and ARENA. He added that
several FMLN members have been the victims of intimidation, and implicated Saca as the source. Segovia claimed that Saca
would rather leave a disorganized government for Avila than an organized one for Funes.
4. (C) When asked about the differences between Funes and the FMLN, and how those would affect an FMLN government,
Segovia said that an effective government would rely on three pillars: a strong party, the support of the people, and
the international community. He said that the problem is not between Funes and the FMLN; rather, the question would be
whether Salvadoran society and the business sector will support the FMLN's programs. Martinez said that the difference
between hardline FMLN views of the past and today's party is Funes' candidacy. He cited the FMLN platform to demonstrate
the evolving attitudes of the party. Segovia dismissed the notion of FMLN ties to Venezuela as ARENA propaganda, adding
that an FMLN government would not join ALBA if it did not serve the national interest. Martinez added that Funes would
not be pressured by other governments because he respected the decisions of the Salvadoran people. Martinez acknowledged
the deep relationship between El Salvador and the U.S., and said that it would be very important to keep open the lines
of communication between the two governments, regardless of the results of the upcoming elections. Asked specifically
about the FMLN,s stance on the CSL agreement, Martinez said that the party would support in Parliament an agreement with
the current set of missions.
-------------------------------------
Political Landscape: ARENA's Position
-------------------------------------
5. (C) Webster met October 20 with ARENA Foreign Policy Advisor Oscar Santamaria, Economic Advisor Rafael Lemus, and
Jorge Guirola, CFO of the 2009 ARENA Presidential Campaign, at ARENA's campaign headquarters. The ARENA representatives
were reluctant to give insights on the campaign, and used the meeting as an opportunity to present their platform.
Guirola said that ARENA performed a survey to determine the issues that were most important to the voters. The four main
voter concerns were: cost of living, employment, medicine, and personal security. ARENA used this data to develop its
platform, which focuses on five topics: social, economic, institutional, security, and environmental. From these five
topics, ARENA identified fifty themes, and plans to assign 10 roundtables to each of these themes, each of which would
consist of 10 members, from all sides of the political spectrum. The end result would be five thousand people working on
the 50 themes. Guirola admitted that while the platform had been released, it had not been fully communicated to the
people.
--------------------------------------------- ---
Political Landscape: A Commentator's Perspective
--------------------------------------------- ---
6. (C) Webster met October 22 with Joaquin Samayoa, a former FMLN member and current political commentator, who outlined
the problems of both parties vying for the presidency. Samayoa said that ARENA could be a very effective government, but
suffers from an abundance of corruption, particularly in President Saca's administration. He said that Avila is a bad
candidate, and was anointed by Saca, in an attempt to continue to exert power once he is out of office. He said that
Avila is very good at connecting with ordinary folk, particularly in the countryside, but he is not attracting the
middle class, and his understanding of El Salvador's problems is limited.
7. (C) Samayoa commented that ARENA has had many opportunities to consolidate its support, but that its current actions
may be too little, too late. He believes the selection of Arturo Zablah as its candidate for Vice President will help
ARENA, as he will attract some independents, undecided voters, and the middle class. Samayoa thinks that many voters are
still deliberating, and that ARENA still has an opportunity to improve its standing.
8. (C) Samayoa said that the FMLN has not allowed for internal ideological evolution, and does not permit serious
internal debate. He noted that the FMLN would face inevitable alienation from the Salvadoran people if it gained power,
due to the influence of Venezuela's Hugo Chavez. He claimed that Chavez had spent millions of dollars in support of the
FMLN, and that an FMLN-led government would not be independent; rather, Chavez could completely manipulate it. However,
Samayoa mentioned that the saving grace might be the number of Salvadorans in the U.S., and the resulting ties between
El Salvador and the U.S. He added that the Legislative Assembly elections in January 2009 will be immensely important to
the political environment; there is a large difference between one party controlling the Presidency and one party
controlling both the Presidency and the Legislative Assembly.
9. (C) Samayoa believes that Mauricio Funes is a person with exceptional analytical ability, and is more pragmatic than
ideological. That said, Samayoa said that Funes would have no chance of running an independent government, and that he
would be at odds with the FMLN from the outset. He cited the recent selection of Legislative Assembly candidates as
evidence of this perspective: the FMLN said Funes would select his own deputies, but in the end, he did not.
-----------------------------------
UN Voting and the Merida Initiative
-----------------------------------
10. (C) Webster met October 20 with Vice Minister of Foreign Affairs Eduardo Calix. When questioned on El Salvador's
recent UN voting record, Calix said that El Salvador is not trying to hurt its relationship with the U.S., but likewise
does not want to alienate other parts of the world. He said that El Salvador has good relations with other countries
that must be considered. He added that multilateral culture is very different now than it has been in the past.
11. (C) Vice Minister Calix reprised the points he raised with DAS Madison (ref C), citing the Central American action
plan agreed upon by six countries of the region, which calls for $953 million for improved law enforcement. He
contrasted this figure with the $60 million which was announced for Merida, which he estimated broke down to roughly $6
million per Central American country. He said that this is problematic; $6 million is a good start, but not nearly
enough to sufficiently combat the problem. Webster responded by pointing out that the initial outlay for Merida was just
the beginning, and that future years would bring increased funding. Webster also mentioned that the Central American
plan was very general, and that the U.S. would like to see more details. Calix said that he feels the same way about
Merida, and suggested that Congressional visits to El Salvador to view the progress might help demonstrate the value of
further funding activities.
--------------------------------------------
Comalapa Cooperative Security Location (CSL)
--------------------------------------------
12. (C) Vice Minister Calix told Webster that the CSL proposal was being reviewed at the highest levels. He said the MFA
had circulated the proposal within the GOES, and was awaiting a response from the Ministry of Finance. He said that he
should have an answer "within days." In response to Webster,s statement that the USG favors a simple extension of the
current agreement, Calix reiterated his prior comments about the proposal (ref C), saying the second U.S. proposal
calling for a simple extension of the agreement is much more viable than the first, which had recommended a significant
expansion of the CSL,s range of activities. He agreed with Webster's assessment that the CSL is important to maintain
effective cooperation between the U.S. and El Salvador.
13. (C) Webster also discussed the extension of the CSL agreement with Ministry of Defense (MOD) Chief of Defense Policy
Colonel Alvarado. Consistent with previous conversations, Alvarado said that he believes the CSL agreement could be
expanded rather than simply extended, and that such an agreement could be approved by the Legislative Assembly with some
effort. Alvarado said that although it posed a risk, the MOD was taking the long view and believes that an extension of
10-15 years would better serve both countries. Webster reiterated that the U.S. believes it would be better to avoid the
risks of taking the extension to the Assembly in light of the upcoming Salvadoran elections and would prefer a simple
extension of the current agreement.
14.(C) Just before his departure, Webster visited the CSL facility and received a briefing from its personnel on the
activities carried out under the current agreement. If the CSL,s mission were to be expanded, desired activities would
include launching unmanned aircraft vehicles and deploying a higher number of more modern aircraft than those currently
used.
---------------
Economic Crises
---------------
15. (C) On the economic front, FMLN Economic Advisor Segovia
said that El Salvador,s financial difficulties must be
handled immediately; El Salvador cannot wait until the next
Legislative Assembly takes office in 2009. He said that the
FMLN is ready to act on the short-term debt problems, but not
without addressing long-term strategy as well. Segovia
pointed to basic political disagreements as the main
roadblock to economic decision-making in the Legislative
Assembly. He said the FMLN is ready to accept the proposed
$950 million in loans from the Inter-American Development
Bank (IDB) and World Bank, but before that happens, the FMLN
and ARENA must determine how to manage those loans for the
long-term benefit of the country. Segovia said that a Funes
administration would adopt macroeconomic policies to address
these long-term concerns.
16. (C) ARENA Economic Advisor Rafael Lemus outlined three
strategies to address El Salvador's economic problems that
would aim to increase the country's GDP by a total of three
percent. A close evaluation of subsidies would yield a 1.25
percent increase, tax reforms would account for 1.0 ) 1.5
percent, and 0.5 percent would come from the formalization of
the small business sector and new taxes. Webster asked Lemus
about short-term financing, citing a plan presented by the
FMLN that addressed both short-term and long-term concerns.
Criticizing the FMLN plan, Lemus said the FMLN did not
understand the structure of financing, the IDB, and the World
Bank. He said the ARENA strategy would focus on investment,
budgeting, and future debt. ARENA Foreign Policy Advisor and
former Minister of Foreign Affairs (1994-1995) Oscar
Santamaria stressed the importance of fiscal reform, and said
that it would not be possible without the support of all
political players.
-----------------
The Energy Sector
-----------------
17. (C) Webster met October 20 with AES Country Manager
Fernando Pujals, and asked if AES had made progress towards
resolving recent liquidity problems caused by unpaid power
subsidies (ref B). Mr. Pujals explained that AES was forced
to increase its rates after the GOES was unable to resolve
the issue by the October 12 deadline, when the "tariff reset"
process sets rates for the next six months. The GOES issued
a decree to postpone the deadline until October 27, but AES
lawyers advised that the decree is not legally valid since it
was not published until October 14, after the tariff reset.
Pujals noted that AES is in an "uncomfortable position," as
it is required by law to start applying unsubsidized rates
even as the GOES continues to state publicly that subsidies
will be maintained and electricity rates will not rise. He
emphasized that AES is willing to negotiate an agreement to
restore subsidized rates if the GOES sets a schedule to pay
$94 million it owes for subsidies accumulated from
April-October 2008.
18. (C) Webster met October 20 with Esso Country Manager Jose
Alfaro, who described how oil companies have faced persistent
criticism and pressure due to high oil prices. Despite
studies showing that El Salvador has one of the most
competitive fuel markets in the region, Alfaro commented the
GOES had "painted itself into a corner" by repeatedly
complaining of "abuses" by oil companies, and implied the
GOES could act to end these abuses and lower prices. The
competition authority announced a controversial decision in
September 2007 to fine Esso and Shell for alleged
anticompetitive behavior, arguing that their joint-ownership
of a refinery gave them a dominant market position (ref A).
As Esso contests the case in court, Alfaro complained that
the GOES has failed to intervene against blatant dumping by
Albapetroleo, a joint venture between PDVSA and a consortium
of FMLN mayors. Albapetroleo is importing diesel fuel from
Nicaragua and distributing the fuel below cost to quickly
gain market share and raise campaign funds. Alfaro warned
that Esso may leave El Salvador if the problem of unfair
competition from Albapetroleo is not resolved.
----------------------
MCC Compact Site Visit
----------------------
19 (U) Webster also visited one of the sites of activities
to be funded by El Salvador,s $461 million Compact with the
Millennium Challenge Corporation (MCC). A group of Mayors
representing the towns through and next to which the
Compact-funded road would run in El Salvador,s Northern Zone
highlighted the investment, employment, and other economic
benefits the road would bring to their communities. Webster
also attended a briefing by MCC,s in country personnel and
staff of the GOES-counterpart organization, FOMILENIO, to a
group of farmers highlighting the assistance to be provided
under the Compact to encourage them and other farmers in the
area to diversify their crops to increase their income. Not
surprisingly, the farmers expressed concern about the cost
and viability of making these adjustments. The MCC and
FOMILINEO staff responded constructively to these concerns
and promised further consultations. Webster was impressed by
the dedication of the FOMILENIO staff present to making the
MCC vision a reality.
-------
Comment
-------
20. (C) Webster,s visit clarified further the opinions of
ARENA and the FMLN regarding their campaigns, platforms, and
strategies, as well as prospects for finding common ground on
issues of national importance. The visit also provided an
opportunity to obtain additional information about the cloudy
outlook for the Salvadoran economy. Since the visit,
ARENA,s support has increased in the public opinion polls,
and fuel prices have fallen by over a dollar per gallon.
21. (U) This cable has been cleared by WHA/CEN Director
Christopher Webster.
BLAU