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PP RUEHCD RUEHGD RUEHHM RUEHHO RUEHJO RUEHMC RUEHNG RUEHNL RUEHPOD
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DE RUEHME #1049/01 0992218
ZNR UUUUU ZZH
P 082218Z APR 08
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 1308
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RHMFIUU/CDR USNORTHCOM
RHMFIUU/CDR USSOUTHCOM MIAMI FL
RHEHNSC/NSC WASHINGTON DC
RUEHXI/LABOR COLLECTIVE
RUEHSN/AMEMBASSY SAN SALVADOR 2570
RUEHGT/AMEMBASSY GUATEMALA 3682
RUEHZP/AMEMBASSY PANAMA 2301
RUEHBE/AMEMBASSY BELIZE 0036
RUEHTG/AMEMBASSY TEGUCIGALPA 1758

UNCLAS SECTION 01 OF 06 MEXICO 001049 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR A/S SHANNON 
STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OMA, AND DRL/AWH 
STATE FOR EB/ESC MCMANUS AND IZZO 
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GERI WORD 
TREASURY FOR IA (ANNA JEWEL, LUYEN TRAN) 
NSC FOR RICHARD MILES, DAN FISK 
STATE PASS TO USTR (EISSENSTAT/MELLE) 
STATE PASS TO FEDERAL RESERVE (ANDREA RAFFO) 
DOE FOR INTERNATIONAL AFFAIRS KDEUTSCH AND ALOCKWOOD 
DOT WASHDC FOR DAVID DECARME 
 
E.O. 12958: N/A 
TAGS: ECON SENV ELAB EFIN PINR PGOV MX
SUBJECT: C O R R E C T E D  C O P Y  Presidential Advisors Discuss 
Calderon's Social 
Development Efforts, including Education 
 
REF: (A) Mexico 944 
     (B) Mexico 13 
 
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Summary 
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¶1. (SBU) On April 6, President Calderon once again publicly 
explained how fighting poverty is the top economic goal of his 
Administration. In Ref A, Post explains President Calderon's overall 
strategy for alleviating poverty, which includes macroeconomic 
stability, increased trade and foreign investment, improved 
competitiveness and infrastructure, structural reform and social 
development programs. On April 4, Econoffs met with members of 
Calderon's "social cabinet" to discuss social development efforts. 
Dr. Liliana Meza, Technical Secretary for the Social Cabinet, 
described the effort as "investing in people" in order to make the 
poor economically productive members of the labor force, while 
providing all Mexicans a minimum floor of assured welfare. Since 
this effort requires education reform, Meza said the President and 
had met with the leader of the politically powerful teachers' union 
(SNTE) Elba Esther Gordillo, and Education Minister Josefina Vasquez 
Mota to discuss an agreement on education reforms. A key goal of 
social development, Meza said, was to eliminate "food-based poverty" 
by 2030.  (Comment:  Currently 14.4 million Mexicans, 13.8% of the 
population, do not earn enough to meet basic nutritional needs. End 
Comment)  Meza also described how reforestation programs promote 
rural development, and made a pitch for the United States to join 
European countries in seeking carbon emission offsets by supporting 
reforestation in Mexico.  End Summary 
 
------------------------------------------- 
Calderon Again Pledges to Alleviate Poverty 
------------------------------------------- 
 
¶2. (U) In an April 6 speech in San Juan Chamula, Chiapas, one of 
Mexico's most representative indigenous communities, President 
Calderon again discussed the priority he places on alleviating 
poverty. He said "social development" was the centerpiece of his 
Administration, with the ultimate goal being that all Mexicans, 
regardless of their ethnic origin or native language, should be 
assured that there will not be a lack of food on their table, that 
their children will be able to attend school, and they will have 
access to medicine, hospitals and doctors. Calderon stressed his 
commitment of providing Mexico's most vulnerable with education, 
housing, health, water, infrastructure, job opportunities, and a 
better income. His speech also stressed the importance of protecting 
the environment and the country's forests and jungles. 
 
------------------------------------------- 
Calderon's Social Cabinet Lays out the Plan 
------------------------------------------- 
 
¶3. (U) On April 4, Econoffs met with Calderon's social cabinet, led 
by Dr. Liliana Meza, the Social Cabinet Technical Secretary.  Also 
attending were Dolores Nieto, Director for Agricultural and 
Livestock Policy; Luis Villanueva, Coordinator for Social Policy; 
and Enrique Mezo, Head of the Department for Agricultural Policy. 
Meza explained that social development has been a priority for 
Calderon since his Presidential campaign, and now "social policy" 
and "equal opportunity" were main pillars of the National 
Development Plan for 2007-2012 (Ref A). Overall, she said the goal 
was to invest in people so that all Mexicans have equal opportunity 
 
MEXICO 00001049  002 OF 006 
 
 
to obtain adequate nutrition, housing, health care and economic 
security for their families. A key specific goal was to eliminate 
"food-based poverty" by 2030. 
 
---------------------------------------- 
Escaping Poverty Starts with Health Care 
---------------------------------------- 
 
¶4.  (U) Part of the effort to achieve equality of opportunity, Meza 
noted, was the pledge Calderon made in his inaugural address that 
every child born during his Administration would have health 
insurance. To do this, Calderon expanded former President Fox's 
"Popular Health Insurance" program (Seguro Popular)(Ref A) to create 
the "Health Insurance for a New Generation." She said the ultimate 
goal was for all Mexicans to have health insurance by the end of the 
Calderon Administration in 2012. 
 
¶5. (U) Responding to criticism from the Central Bank Governor (Ref 
A), and some industrial sectors that government health programs 
motivate people to remain in the informal sector of the economy 
where they do not pay social security or other taxes, Dr. Meza's 
colleagues said it was easier for poor people to overcome poverty if 
they had health coverage. Meza explained that these health programs 
are critical to supporting other social development efforts, such as 
the "Oportunidades" program, which directly tackle poverty (Ref A). 
She said the Administration was aware that even for families 
receiving support from existing social development programs, a 
catastrophic illness can wipe out a family's savings, forcing them 
to pull children out of school, and pushing the family into poverty. 
Health insurance programs also improve educational opportunities for 
children, she said.  If families have health coverage, they do not 
need to spend the little money they earn on health, but in sending 
their children to school. 
 
--------------------------------------------- --------- 
Goal of Universal Pensions Requires Energy and Tax Reform 
--------------------------------------------- --------- 
 
¶6.  (SBU) Meza said Calderon's pledge to provide "equal opportunity" 
for all Mexicans extended to providing them financial security. This 
in turn, she explained posed the "greatest challenge," providing all 
Mexicans retirement pensions regardless of where they worked. She 
noted that reform of state oil monopoly PEMEX and further fiscal 
reform would be needed to generate sufficient revenue, and that so 
far there is no political consensus on how to handle even indirect 
taxes, such as the value-added tax. She explained that the 
Administration was making some progress on financial security for 
all by expanding government health insurance for the elderly. 
 
--------------------------------- 
Day Care Needed to Escape Poverty 
--------------------------------- 
 
¶7. (U) Another measure cited by Meza to alleviate poverty was the 
establishment of over 6000 day care centers.  Previously, she 
explained government-provided day care was only available to workers 
in privileged sectors of society, such as workers for the state oil 
monopoly PEMEX, and workers of the social security institute for 
government workers (ISSSSTE).  The Calderon Administration realized 
that poverty levels decline when both spouses work, and therefore 
has expanded government day cares to help women enter the labor 
market. Overall, she said, from 1994 through 2008, women's 
participation in the labor market grew from 30 to 50%. 
 
MEXICO 00001049  003 OF 006 
 
 
 
----------------------------------------- 
Building Human Capacity the Critical Step 
----------------------------------------- 
 
---------------------------- 
Education Reform on the Way? 
---------------------------- 
 
¶8.  (U) Dr. Meza explained that the ultimate goal is to develop the 
capacity of Mexico's poorest people so they can move beyond 
government social development programs into decently paying jobs. To 
do that, she said the Administration is trying to tie social and 
education programs in rural and urban areas to the needs of the 
labor market.  She said that reforming basic education alone was not 
enough to increase the capacity of Mexico's labor force. Instead, 
the government was working to improve technical training, use of the 
internet and reform middle-school and high school/university 
education to link it to the needs of the labor market. With the 
support of business chambers and universities, the government is 
working to link education programs to the country's the 
most-demanded jobs. The government has also begun to foster 
development of those technical careers that are currently in more 
demand and could help young Mexicans to insert more easily to the 
global labor market.  Meza said current government efforts include 
facilitating the issuance of education scholarships, in particular 
for high school and university education. 
 
¶9. (SBU) Meza claimed the politically powerful teacher's union, The 
National Union of Education Workers (SNTE), was "well disposed to 
cooperate" in this effort. She said on April 2, Calderon and his 
Education Minister Vazquez Mota met with SNTE President Gordillo to 
discuss education reforms. Meza claimed Gordillo had had no problems 
with the measures being discussed. Meza opined that she hoped Mexico 
had "turned the corner on this binding constraint" of the teacher's 
union blocking education reform. She noted that if Mexico failed to 
prepare its people to be part of the world economy, Mexico's 
polarization would deepen, bringing economic and social problems. 
(Comment:  The communique issued by Calderon's office about the 
meeting seemed carefully worded. It said Calderon had called 
Gordillo and Vasquez Mota to meet him in order to "dialog and 
construct an agreement to promote education," and to design a 
"shared strategy between the government, society and teachers to 
allow a significant increase in the quality of education." The 
communique said this agreement would be the basis for a fundamental 
transformation of the education sector, and that Calderon told 
Gordillo and Vasquez Mota he would be waiting for them to present 
specific initiatives to improve the quality of education.  While it 
was a significant accomplishment for Calderon to get Gordillo to the 
same table with him and Vasquez Mota to discuss education reform, 
Post has not yet seen indications that Gordillo is willing to 
support education reform. End Comment) 
 
------------------------------- 
Financial Services for the Poor 
------------------------------- 
 
¶10. (U) Meza said another means to bring the poor into the 
productive economy was through expanding their access to credit and 
other financial services. Since the government lacked resources to 
directly develop savings and lending for the poor and 
micro-businesses, Meza said it used programs like the "Compartamos" 
(Let's Share) to facilitate development of non-government 
 
MEXICO 00001049  004 OF 006 
 
 
organizations and the private credit market (Ref A). (Comment: 
Compartamos was a non-profit organization that became a for-profit 
bank focused on micro-lending.  In order to ensure a sustainable 
means for expanding financial services for the poor, the Mexican 
Secretariat of Economy has used loan capital and capacity-building 
 
SIPDIS 
to support non-government, private and cooperative groups that 
provide financial services to micro- and small-scale busineses and 
rural households. End Comment) Meza said such programs help small- 
and micro-businesses and rural households invest and grow 
economically by helping them establish a credit history. She 
explained that "Solidarity Guarantees," in which members of a group 
cross-guarantee each others' loans in place of traditional 
collateral, ensure the loans are repaid. (Comment: Many of Mexico's 
most successful micro-finance institutions, such as Compartamos, 
Fincomun, Finca and AlSol, are also partners in USAID's ongoing 
micro-finance project, in which USAID partners with the public and 
private sector to expand access to financial services for the more 
than one million Mexicans who had previously been excluded from the 
traditional financial sector.  End Comment) 
 
¶11. (U) Noting the importance of promoting savings for the poor, 
Meza said the main reason Mexicans immigrate is lack of credit and 
social services. She said people migrated to obtain the capital 
needed to provide financial security for their families. 
 
---------------------------------------- 
Rural Development Through Re-forestation 
----------------------------------------- 
 
¶12. (U) Meza noted that each Cabinet Secretary was given a goal in 
promoting rural development, and each was tasked to identify their 
specialty regarding rural development, and to improve the efficiency 
and impact of their programs. She said government programs to 
stimulate development in rural and impoverished areas included 
Procampo (the rural development program described in Ref A) and 
"Young Entrepreneurs," and reforestation. 
 
¶13. (U) Meza said "ProArbol" was among the most important 
environmental programs that Calderon has implemented. ProArbol seeks 
to reforest vast areas, and maintain existing forest cover. Through 
this program, she said the government pays peasants the cost of its 
land and an additional amount to motivate them to re-plant trees. 
(Comment: ProArbol supports peasants to maintain forest coverage by 
paying for environmental services, such as water, carbon and 
biodiversity; promoting sustainable productive forest management, 
soil restoration, fire prevention; as well as motivating local 
communities to replant trees. In the first year of the ProArbol 
program, Calderon promised to plant 250 million trees, fully 
one-quarter of the worldwide total the United Nations called for in 
¶2007.  The government claims to have reached this goal. End Comment) 
Meza also discussed the program, Cuenca Forestal de Golfo," under 
which Mexico contributes to reducing carbon emissions thus becoming 
a "lung for North America." She said European countries were already 
exchanging carbon credits by funding restoration of humid and 
temperate forests in Mexico. She opined that it would be natural for 
the United States to use Mexico to offset its carbon emissions, thus 
supporting Calderon's efforts to protect the environment of North 
America as a region. 
 
--------------------------------------------- - 
Support to Marginalized Areas Meant to Compete with 
Central America 
--------------------------------------------- - 
 
MEXICO 00001049  005 OF 006 
 
 
 
¶14. (U) Meza provided some insight into Calderon's recently 
announced support programs for marginalized areas of Mexico, 
described in Ref A. Meza said Mexican firms were about to leave for 
Central America seeking lower labor costs.  The Administration 
responded by asking these firms to work with the government to 
develop incentives to invest in marginalized areas of Mexico that 
had ample supplies of the low skilled labor offered in Central 
America. The measures were meant to help head off Mexico's slipping 
competitiveness to Central America. 
 
--------------------------------------------- - 
Minimum Wage Not A Tool for Social Development 
--------------------------------------------- - 
 
¶15. (SBU) Econoff asked Meza about the debate each December/January 
over how much to increase Mexico's minimum wage.  While the 
government and many business representatives favor keeping the 
minimum wage low in order to control inflation, unions call for 
increasing the wage (Ref B) claiming that the low minimum wage 
perpetuates poverty and immigration out of Mexico. Meza acknowledged 
that 18-20 percent of workers in Mexico earn less than two minimum 
salaries (roughly USD 10 a day), but said the minimum wage was a 
"reference price," rather than a real price for labor. If wage 
levels were too low, she explained, market forces push wage levels 
upward regardless of the minimum wage. As for those who saw 
increasing the minimum wage as a panacea to poverty, Meza said it 
would be "foolishness" to increase the minimum wage enough for a 
family of four or five to join the middle class. She explained that 
the minimum wage was established to stabilize the economy in the 
1980's by resolving the crisis caused by rampant inflation and 
soaring foreign debt. Meza said that wages were low in Mexico 
because of market forces responding to the excess supply of 
unqualified labor. It was therefore important for the government to 
raise the productivity of the labor force.  Raising labor costs 
without increased productivity would only increase inflationary 
pressures, and continued macroeconomic stability was essential to 
reducing poverty in Mexico. 
 
------------------------------------ 
Importance of Macroeconomic Stability 
------------------------------------ 
 
¶16. (SBU) In echoing public statements by President Calderon and 
Finance Minister Carstens that macroeconomic stability is the pillar 
for development and poverty alleviation (Ref A), Meza noted that 
Mexico is barely recovering from the financial crises of 1995. The 
government must remain cautious in keeping government spending in 
line with revenues because of the devastating cost a financial 
crisis has in pushing more people into poverty. Thus, although the 
government recognizes the utility of further expanding the 
successful poverty alleviation program Oportunidades into urban 
areas, current revenues do not allow such expansion. Instead, 
Calderon is trying to coordinate and realign efforts to spend public 
resources more efficiently and improve the impact of the existing 
social programs while maintaining economic stability despite the 
threat of a possible U.S. recession. 
 
----------------------------- 
Importance of Public Security 
----------------------------- 
 
¶17. (U) In a television interview following the President's April 6 
 
MEXICO 00001049  006 OF 006 
 
 
speech, Secretary of Social Development, Ernesto Cordero explained 
that Calderon's announcement that social development was the center 
piece of his Administration did not mean he would disregard the 
fight against drug trafficking. Cordero said the Administration 
understands that Mexico requires integrated and coordinated actions 
for law enforcement and social development. Calderon's social 
development team highlighted this connection during the April 4 
meeting with Econoffs. Villanueva noted that at the start of his 
Administration Calderon launched "Limpiemos Mexico" ("Let's Clean Up 
Mexico"), to combine efforts to combat insecurity and foster social 
development. The plan consists of rescuing public spaces from 
criminals, and making them secure. Such efforts included sending the 
military into areas where local law enforcement has been unable to 
combat drug traffickers, combined crime prevention and social 
development efforts focused on cities with high crime rates. 
 
------- 
Comment 
------- 
 
¶18. (SBU) While there are critics who accuse Calderon of using the 
social policy as a government's flag for electoral purposes, in 
particular for the upcoming 2009 mid-term elections, there is no 
doubt that social programs, such as Oportunidades, have helped 
reduce poverty.  However, it is also true that these sometimes 
scattered efforts must be better coordinated to improve their impact 
and effectiveness, not only to alleviate poverty and provide more 
opportunities to the population, but also to reduce the incentive to 
migrate to the U.S. by giving Mexicans the access to education they 
need to find a decent job. 
 
¶19. (SBU) As noted in Ref A, bringing the poor into the productive 
labor force also requires structural economic reforms to obtain the 
resources the government seeks to "invest in people," to create an 
education system that produces productive workers, and to transform 
Mexico into a competitive economy able to provide sufficient jobs 
for its people. End Comment. 
 
GARZA