VZCZCXYZ0000
RR RUEHWEB

DE RUEHGT #1299/01 2911720
ZNR UUUUU ZZH
R 171720Z OCT 08
FM AMEMBASSY GUATEMALA
TO RUEAIIA/CIA WASHDC
RUEHC/SECSTATE WASHDC 6278
RUEABND/DEA HQS WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEFDIA/DIA WASHINGTON DC

UNCLAS GUATEMALA 001299 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON PGOV PREL GT
SUBJECT: PRIVATE SECTOR LEADERS POSITIVE ON RELATIONSHIP 
WITH COLOM 
 
¶1.  (U)  Summary:  On October 6, the CACIF (Coordinating 
Committee of Agricultural, Commercial, Industrial and 
Financial Associations) board of directors hosted Ambassador 
McFarland for lunch to describe its priorities and its 
relationship with the Colom Administration.  CACIF directors 
made clear that the private sector has a constructive working 
relationship with the Colom administration and that the 
administration is open to private sector input into policy 
decisions.  They delivered a presentation on a host of 
measures the government should take to enhance national 
competitiveness, and made clear they have engaged the GOG in 
dialogue about its controversial tax reform package.  End 
Summary. 
 
Tax reform and competitiveness 
------------------------------ 
 
¶2.  (U) CACIF President Jose Pivaral and CACIF's Board of 
Directors hosted the Ambassador, DCM, Pol/Econ Couns, and 
Econoff for lunch October 6.  CACIF leaders said they have 
actively engaged President Colom and his administration in 
policy discussions, particularly on a proposed overhaul of 
the tax system.  While the government and the private sector 
were unable to agree on all the elements of the tax reform 
proposal, CACIF representatives said that private sector 
concerns were taken seriously and some of their suggestions 
were incorporated into the draft legislation.  In addition, 
the most controversial portion of the legislation, income tax 
reform, was removed from the package to be discussed 
separately in January.  CACIF representatives said they were 
committed to negotiating with the government to ensure their 
concerns about pending legislation were addressed 
constructively, rather than oppose Colom administration 
initiatives outright which could result in legislative 
paralysis (as occurred during the Portillo administration). 
 
¶3. (U) Carlos Amador, Deputy Director of the Agricultural 
Products Exporters Association, discussed CACIF,s 
recommendations to the Colom Administration to enhance 
national competitiveness.  He noted that fiscal reform alone 
may improve distribution of wealth, but would not improve 
Guatemala's GDP growth or guarantee national development. 
Rather, the rapid generation of permanent employment was the 
only way to ensure Guatemala continues to develop and improve 
living standards for all Guatemalans.  CACIF,s goal was to 
convince the national government that the way to do this is 
through the rapid implementation of an integrated 
competitiveness program.  Amador mentioned several areas the 
government should emphasize as part of the competitiveness 
program including: 
 
-- improving country risk rating so as to lower interest 
rates available for sovereign debt; 
 
-- infrastructure development; 
 
-- shifting the electricity grid to renewable and other low 
cost fuels (e.g. coal); 
 
-- adoption of ILO 175; 
 
-- creation of new and strengthening of existing institutions 
related to "quality."  This is to help ensure products 
produced in Guatemala comply with export regulations and 
international quality measures such that markets will not 
close to Guatemalan exports. 
 
¶4. (SBU) None of the CACIF members present presented ideas on 
how the GOG would fund these programs. 
 
Security 
-------- 
 
¶5. (U) CACIF members discussed a recent meeting they had with 
president Colom on security issues.  During the meeting, 
participants noted their dismay over the increase in drug 
trafficking and organized crime in Guatemala and at rampant 
corruption in the national police.  They noted that national 
Qcorruption in the national police.  They noted that national 
police action against organized crime was all but ineffectual 
without the support of military units.  CACIF members 
supported President Colom's plans to increase the size of the 
army and police, but wanted a different way to pay for it 
than taking on additional debt, as international financial 
institutions had reportedly advised the GOG do.  Finally they 
discussed the need to enhance military intelligence 
capabilities to develop operational intelligence and the 
capacity to act quickly. 
 
Geopolitical developments 
------------------------- 
 
¶6. (SBU) Several CACIF directors noted their perception of 
the growing influence of Venezuela and leftist regimes in 
Latin America including Ecuador, Bolivia, Nicaragua, Honduras 
(with its entry into ALBA) and possibly El Salvador if the 
FMLN takes power.  They complained about the perceived 
inattention of the United States to this growing threat due 
to ongoing international conflicts.  Pivaral opined that the 
EU and NGOs were filling the vacuum that the USG was, in his 
view, ceding.  The Ambassador responded that the perception 
of USG neglect of Latin America was an area of frustration 
for the USG given the doubling of assistance to the region 
since 2000, the frequent trips by President Bush and other 
senior officials to the region, numerous free trade deals, 
success with Plan Colombia and our partnership with President 
Uribe, and finally, the Merida Initiative.  The Ambassador 
also observed signs of weakness in Venezuela's message, most 
notably Chavez's failed intervention in the Peruvian 
election.  He also stressed that good, effective governance 
is the best way for other countries to respond to populist 
challenges. 
 
¶7.  (SBU) Comment:  The CACIF presentation seemed designed to 
showcase the ability of Guatemala's conservative private 
sector to work constructively with the left-leaning Colom 
administration.  The fact that there is an organized 
government-private sector dialogue is a tribute to both 
sides.  CACIF leaders were cautiously optimistic that 
President Colom would continue to consult them on the design 
of any future fiscal reform that would impact their 
competitiveness.  They are clearly concerned that external 
factors, including the global financial turmoil and the 
elections in El Salvador, will inevitably have a negative 
impact on Guatemala's prospects for economic growth.  While 
worried about worsening security and growing narcotrafficker 
influence, they appear unconvinced by the government's 
proposal to increase the police and military's budget, 
probably because they are concerned that the government will 
seek to raise taxes in order to finance the increase. 
McFarland