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Viewing cable 07SANSALVADOR2411, A/S SULLIVAN & A/S LOWERY MEET WITH SALVADORAN VP ON

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Reference ID Created Released Classification Origin
07SANSALVADOR2411 2007-12-17 14:20 2011-08-26 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy San Salvador
VZCZCXRO3615
PP RUEHLMC
DE RUEHSN #2411/01 3511420
ZNR UUUUU ZZH
P 171420Z DEC 07
FM AMEMBASSY SAN SALVADOR
TO RUEHC/SECSTATE WASHDC PRIORITY 8736
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
RUEHRC/USDA FAS WASHDC
RUEHSG/AMEMBASSY SANTIAGO 0205
RUEHME/AMEMBASSY MEXICO 6666
RUEHBR/AMEMBASSY BRASILIA 0146
UNCLAS SECTION 01 OF 02 SAN SALVADOR 002411 
 
SIPDIS 
 
STATE PASS USAID/LAC 
STATE ALSO PASS USTR 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ETRD PREL EINV ES
SUBJECT: A/S SULLIVAN & A/S LOWERY MEET WITH SALVADORAN VP ON 
EXTENDING THE BENEFITS OF TRADE LIBERALIZATION 
 
 
1. (SBU) SUMMARY.  A joint State/ Treasury delegation led by EEB 
Assistant Secretary Sullivan and Treasury Assistant Secretary Lowery 
discussed regional integration, including a like-minded association 
of free trade partners, and extending the benefits of CAFTA-DR to 
all parts of society with El Salvador Vice President Ana Vilma de 
Escobar on November 29.  Escobar stated that the proposed 
association was "music to her ears."  Escobar also updated the 
delegation on efforts to bring foreign direct investment to El 
Salvador.  END SUMMARY. 
 
2. (U) Participants: 
 
U.S. 
A/S Dan Sullivan, Economic, Energy, and Business Affairs 
A/S Clay Lowery, International Affairs, Treasury 
PDAS Craig Kelly, Western Hemisphere Affairs 
Charge d'Affairs, A.I. Butler 
DAS Brian O'Neill, Western Hemisphere Affairs, Treasury 
Greg Delawie, Director, Bilateral Trade Issues, EEB 
Luyen Tran, Director, Western Hemisphere Affairs, Treasury 
Econ Counselor Donn-Allan Titus 
Econoff Christensen (notetaker) 
 
El Salvador 
Vice President Ana Vilma de Escobar 
GOES Notetaker 
 
3. (SBU) Sullivan opened by noting the USG planned to continue its 
total economic engagement (use of all USG tools such as Free Trade 
Agreements, MCC, USAID programs, OPIC, air service agreements, etc.) 
in the Western Hemisphere and hoped to build on existing free trade 
agreements to continue the momentum. 
 
6.  (SBU)  Sullivan stressed that the immediate priority in the 
Hemisphere for the USG was the passage of FTAs with Peru, Columbia, 
and Panama, and noted the positive House of Representatives vote on 
Peru.  He said the USG wanted to consolidate and maintain the 
momentum of the historic achievements with regard to free trade in 
the hemisphere.  He suggested the establishment of an association of 
free trade partners in the hemisphere, committed to democracy, the 
rule of law, and open market policies, the primary purpose of which 
would be to work together to promote competitiveness and ensure the 
benefits of trade liberalization were spread as broadly as possible 
in all our societies, especially to small business, farmers, and 
others who had not yet directly benefited from free trade. 
 
7.  (SBU)  Such an association could have strong links to the 
private sector and could include initiatives, such as the US 
Treasury's program to enhance access to financing for small and 
medium enterprises (SMEs), to help citizens take better advantage of 
FTAs in the region.  An important longer term goal of such an 
association would be to work on "knitting together" the different 
hemispheric trade agreements - possibly harmonizing issues like 
customs procedures, rules of origin, intellectual property rights, 
etc., and working on cumulation issues. 
 
8 (SBU)  This association of free trade partners potentially could 
include an administrative headquarters to serve as a coordinating 
body and driving force for continued progress on reducing poverty, 
increasing competitiveness and social cohesion in the Western 
Hemisphere.  It could complement the work of other institutions in 
the region, such as the OAS and IDB. 
 
9. (SBU) Sullivan emphasized that the delegation was seeking input 
from the three leaders on trade in Latin America - Chile, El 
Salvador, and Mexico - as well as Canada - before moving forward 
with this idea.  He noted the delegation would return to Washington 
to work with other agencies in the USG to consolidate the ideas of 
the Latin leaders and refine the proposal for final approval by the 
USG interagency economic team. 
 
10.  (SBU)  Kelly added that the USG was not interested in creating 
competing "blocs," but rather enhancing cooperation among those who 
had common values to reinforce the positive elements of free trade 
agreements.  Escobar replied that the proposal was "like music to 
her ears," and that bringing together like-minded countries would be 
important to spreading the benefits of trade.  She said creating 
jobs through trade is the best social policy a government can 
 
SAN SALVAD 00002411  002 OF 002 
 
 
deliver.  Sullivan noted the positive response from GOES Ministers 
and said that they would continue to work together to develop this 
proposal. 
 
11. (SBU) Lowery discussed the need for both governments to expand 
the benefits of CAFTA by increased education, better access to 
finance for micro, small, and medium enterprises, and better 
knowledge of sanitary and phytosanitary (SPS) regulations to help 
the agriculture sector, especially the small farmer.  Discussing 
education, Escobar emphasized the need for more English speakers, 
especially among young people, and additional technical and 
engineering training. 
 
12. (SBU) Escobar noted that, almost two years after CAFTA-DR, which 
made it possible to advance important economic changes, the people 
were looking to the Government to deliver on issues like job 
creation.  The opposition FMLN, she added, had its first credible 
Presidential candidate, and if the Government did not deliver on 
economic issues, the people would look for an alternative in the 
2009 elections. 
 
13. (SBU) Escobar described efforts to attract more Foreign Direct 
Investment (FDI) to El Salvador, noting the Government needed a 
greater sense of urgency and that the country needed to become more 
agile if it is to expand its investor base.  She pointed to its 
success in attracting an aircraft maintenance operation that 
services TACA and Air Canada jets.  However, El Salvador needed to 
work to improve its international indicators, including the 
Millennium Challenge Corporation eligibility indicators, to 
distinguish itself from other countries.  She also emphasized the 
importance of Central American integration and the region acting as 
a bloc for expanding trade opportunities; together, the region was 
the third-largest market in the hemisphere.  To achieve this, she 
added, finishing a Central American customs union is essential.  El 
Salvador is also interested in strengthening its ports and customs, 
including joining the U.S. Container Security Initiative.  Sullivan 
noted many businesspeople the delegation had met, both American 
companies and Salvadoran SMEs, had highlighted customs delays as a 
major issue undermining Salvadoran competitiveness. 
 
14. (SBU) Escobar highlighted two issues El Salvador faces in 
continuing to attract FDI.  First, many foreign companies currently 
operate in Free Zones, which the WTO has said may not continue past 
2015.  It was not yet clear to the GOES how to restructure the free 
zone incentives to keep existing investors from moving elsewhere. 
(Note. Earlier this year the WTO granted El Salvador an extension 
from 2009 to 2015 to end its non-compliant free trade zone regime. 
End note.) Second, El Salvador has significant needs for new energy 
generation.  The GOES has made some progress on diversification, 
working on a new liquefied natural gas (LNG) law and participating 
in the U.S.-Brazil biofuels initiative, but more still needs to be 
done.  (Comment.  The LNG company has yet to secure financing for 
the project.  Another U.S. company, AES, plans to build a coal-fired 
generation plant in the same area, but has not received its 
environmental approval.  Both companies have expressed their concern 
over recent GOES attempts that allegedly try to hold down 
electricity prices at their expense.  End comment.) 
 
15. (SBU) Noting perception did not always match reality, Escobar 
described the security situation as another impediment to 
investment.  Kelly highlighted the Merida Initiative as part of USG 
efforts to help Mexico and Central America address security issues. 
He emphasized that security and economic prosperity go hand-in-hand, 
and one is not possible without addressing the other. 
 
16. (U) A/S Sullivan has cleared this message. 
 
Glazer