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. 
 
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Political Landscape: The FMLN Take 
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¶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. 
 
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Political Landscape: ARENA's Position 
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¶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. 
 
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Political Landscape: A Commentator's Perspective 
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¶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. 
 
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UN Voting and the Merida Initiative 
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¶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. 
 
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Comalapa Cooperative Security Location (CSL) 
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¶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. 
 
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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. 
 
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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. 
 
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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. 
 
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Comment 
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¶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