VZCZCXRO4037
RR RUEHLMC
DE RUEHSN #0476/01 0721551
ZNR UUUUU ZZH
R 131551Z MAR 07
FM AMEMBASSY SAN SALVADOR
TO RUEHC/SECSTATE WASHDC 5494
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
RUEHRC/USDA FAS WASHDC

UNCLAS SECTION 01 OF 02 SAN SALVADOR 000476 
 
SIPDIS 
 
STATE PASS USAID/LAC 
STATE ALSO PASS USTR 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
3134/ITA/USFCS/OIO/WH/PKESHISHIAN/BARTHUR 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EINV EAGR EAID ES
SUBJECT: A/S Sullivan and MCC Bent Visit on CAFTA Anniversary 
 
 
Summary 
------- 
¶1.  Assistant Secretary of State for EEB Daniel Sullivan and 
Millennium Challenge Corporation Deputy CEO Rodney Bent visited El 
Salvador February 28 and March 1 to commemorate the one-year 
anniversary of CAFTA-DR's entry into force.  In meetings with GOES 
officials, the private sector, and the media, both officials 
highlighted the role of CAFTA-DR in stimulating economic growth as 
part of a broader agenda of total economic engagement.  A/S Sullivan 
and Ambassador Glazer discussed the GOES' refusal to allow U.S. 
table eggs into El Salvador with Vice President Ana Vilma de Escobar 
and other senior GOES officials.  Other meetings brought attention 
to domestic bio-fuel production, El Salvador's potential as a 
regional transportation and logistics hub, and violent crime as a 
deterrent to economic growth.  End summary. 
 
CAFTA-DR at One Year 
-------------------- 
¶2.  Ambassador Glazer and A/S Sullivan joined President Saca and 
other GOES officials at a formal ceremony marking CAFTA-DR's one 
year anniversary on March 1.  In a speech extensively covered by 
national media, A/S Sullivan congratulated the Salvadorans for their 
remarkable progress since 1992 in reducing poverty and rebuilding a 
war-torn society.  He recognized the role of the GOES in creating 
economic opportunity for its people through an aggressive reform 
agenda and taking a leading role in CAFTA-DR implementation. 
Highlighting U.S. - Salvadoran bilateral cooperation, he described 
CAFTA-DR as one part of our total economic engagement with El 
Salvador, which also includes programs run by the MCC, USAID, OPIC, 
TDA, and other USG agencies (see www.state.gov/e/eeb/ for the full 
text of the speech).  President Saca reinforced many of these themes 
and clearly stated his objective to ensure that economic growth has 
a direct role in alleviating poverty. 
 
¶3.  A/S Sullivan visited Arrocera San Francisco, a Salvadoran food 
processor and distributor that has taken advantage of CAFTA-DR 
opportunities to expand its product line for export to the United 
States and add 200 new employees in the last year.  The firm exports 
its own products and serves as a distributor for a number of smaller 
food processors that otherwise would find it difficult to reach U.S. 
markets.  Arrocera San Francisco has already established a 
distribution center in the United States and plans to establish five 
more, creating more jobs in the United States.  In press events and 
meetings with GOES and other officials, A/S Sullivan drew attention 
to the company as an example of how CAFTA-DR benefits both nations 
by directly employing more Salvadorans and more Americans as a 
result of increased trade. 
 
¶4.  Beginning with his first event with Minister of Agriculture 
Mario Salaverria, A/S Sullivan pressed the GOES to allow U.S. table 
eggs and other poultry products into El Salvador.  He also raised 
the same USG concerns with Vice President Ana Vilma de Escobar and 
Minister of Economy Yolanda de Gavidia the following day.  He 
stressed that such trade irritants must be resolved so our two 
governments could focus attention on broader areas of interest and 
cooperation.  Still claiming that it was a technical issue, 
Salaverria said he was willing to meet again with USDA and USTR 
officials to try to resolve the matter.  The Ambassador has since 
raised this issue with Technical Secretary Eduardo Zablah, President 
Saca's chief of staff and principal economic advisor. 
 
¶5.  Conversations with Vice President de Escobar, Technical 
Secretary Eduardo Zablah, Minister of Economy de Gavidia, and other 
 
SIPDIS 
GOES officials also focused on El Salvador's potential to become a 
regional logistics and transportation hub for the region.  The Vice 
President mentioned the development of seaport infrastructure and a 
road network to complement the country's large, modern airport. 
Minister de Gavidia, meanwhile, noted efforts to simplify government 
regulation in an effort to lower transportation costs. 
 
Bio-fuels 
--------- 
¶6.  During his visit, A/S Sullivan highlighted USG interest in El 
Salvador's fledgling bio-fuels industry in conversations with Vice 
President de Escobar, Minister of Agriculture Salaverria, and 
Minister of Economy de Gavidia.  He also visited the La Cabana sugar 
mill and refinery, one of two bio-fuel plants in El Salvador, but 
the only one using Salvadoran inputs.  The plant is currently 
producing about 70,000 liters of ethanol daily, and plans are to 
increase production to about 140,000 liters.  The other bio-fuel 
facility de-hydrates Brazilian ethanol and exported $134 million to 
the United States in 2006. 
 
¶7.  A/S Sullivan congratulated the Salvadorans for their initiative 
in developing bio-fuels, both to take advantage of CAFTA-DR trading 
 
SAN SALVAD 00000476  002.2 OF 002 
 
 
opportunities and for domestic consumption.  He underscored that 
diversifying types of fuels was critical for both U.S. and 
Salvadoran energy security.  Minister de Gavidia noted that the 
country imported $715 million in petroleum products in 2006, making 
bio-fuel development an important priority.  Vice President de 
Escobar mentioned that the government is finalizing legislation on 
bio-fuels that would spur its use and provide incentives to increase 
production. 
 
Total Economic Engagement 
------------------------ 
¶8.  Throughout the visit, A/S Sullivan highlighted the importance of 
total economic engagement--that is, an effort to integrate USG 
trade, investment, and foreign assistance.  With local businessmen 
in the northern farming town of Nueva Concepcion and a visit to a 
nearby papaya farm, A/S Sullivan and MCC Deputy CEO Bent emphasized 
the opportunities for economic growth created by CAFTA-DR, the 
assistance already provided by USAID to take advantage of those 
opportunities, and the assistance that will be provided by MCC over 
the next several years. 
 
¶9.  A papaya farm the delegation visited epitomized the total 
economic engagement approach.  In early 2006, farm owner Manuel 
Quijada planted 2,700 papaya trees on 5 acres of land previously 
used for rice cultivation.  USAID technical assistance focused on 
teaching Quijada how to grow papayas, including the installation of 
a drip irrigation system.  IDB assistance has focused on marketing 
and sales.  Currently, the papayas are sold locally, competing with 
Guatemalan imports.  To date he has harvested about 30,000 pounds of 
fruit, earning about $4,000, nearly three times more than he would 
earn growing rice.  With additional technical assistance on 
post-harvest processing, Quijada is positioned to take advantage of 
the road network to be built by the MCC to expand his market, and in 
association with other papaya growers, eventually export under 
CAFTA-DR. 
 
¶10.  In a meeting with Vice President de Escobar and Minister of 
Economy de Gavidia, A/S Sullivan raised the Alliance for Growth and 
Progress (AGP) proposal currently under discussion in Washington. 
The Vice President and Minister of Economy welcomed the idea of 
expanding upon and deepening the connections between the countries 
with free trade agreements and other like-minded countries in the 
hemisphere.  Minister de Gavidia mentioned a recent APEC meeting in 
Colombia where similar issues were discussed, and both GOES 
officials said they would be interested to hear more about AGP.  A/S 
Sullivan also raised with the Vice President and Minister de Gavidia 
the issue of crime and security and how increases in these troubling 
trends could undermine economic growth and poverty reduction 
efforts. 
 
Comment 
------- 
¶11.  Much attention has been paid (and rightfully so) to the 
one-year anniversary of CAFTA-DR implementation in El Salvador. 
This visit to El Salvador of two high-ranking State Department and 
MCC officials brought added attention to the benefits of free trade 
agreements in creating jobs and business opportunities in both 
countries.  In addition, the visit highlighted the fact that the 
U.S. commitment to El Salvador extends beyond trade agreements to 
total economic engagement for the benefit of both nations. 
Throughout the visit, however, Salvadoran interlocutors noted that 
unabated violent crime remains a significant obstacle to taking 
advantage of these opportunities for growth.  End comment. 
 
¶12.  A/S Sullivan cleared this message. 
 
Glazer