VZCZCXRO5643
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #0815/01 0791554
ZNR UUUUU ZZH
R 201554Z MAR 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 5691
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/CDR USSOUTHCOM MIAMI FL
RHMFIUU/HQ USNORTHCOM
RUEAHLA/DEPT OF HOMELAND SECURITY
RUEABND/DEA HQS WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC

UNCLAS SECTION 01 OF 03 MEXICO 000815 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL PINR MX
SUBJECT: SCENESETTER FOR THE VISIT OF CODEL REYES, SKELTON, 
AND BERMAN TO MEXICO, MARCH 26-27, 2009 
 
¶1. (SBU) Mission Mexico welcomes you to Mexico City.  Mexico 
is key to USG success in combating the trafficking of drugs, 
persons, arms and precursors, terrorism, and other 
transnational threats.  Your visit is an opportunity to 
underscore the broad, deep relationship between the U.S. and 
Mexico and, in particular, our appreciation for President 
Calderon's demonstrated leadership in the area of security. 
Committed to an ambitious security and development economic 
agenda, Calderon seeks to maintain the upper hand in the 
battle against narcotics trafficking as his highest priority 
in early 2009. 
 
MEETING SECURITY CHALLENGES 
--------------------------- 
 
¶2. (SBU) Drug-related violence in Mexico continues unabated. 
2008 set a new record for organized crime-related homicides 
with more than 6000 killings, including 525 military and law 
enforcement officers.  The upsurge last year was partly a 
result of increased pressure on Mexico's cartels from 
President Calderon's aggressive push against them, and partly 
a result of their vicious battle for control of trafficking 
routes to the U.S. 
 
¶3. (SBU) Despite these challenges, President Calderon remains 
committed to combating organized crime and improving the 
country's security situation through aggressive law 
enforcement and military deployments, as well as reforming 
the country's police and judicial institutions.  President 
Calderon is running joint military-law enforcement 
anti-narcotic operations in ten states, and upwards of 40,000 
troops are specifically involved in counter-drug activities. 
He has raised pay for the military and replaced a number of 
high-ranking law enforcement officials in an anti-corruption 
campaign.  He has increased the budget of the security forces 
each year since he took office, including a dramatic increase 
in the current budget.  The President, in coordination with 
other political parties, also ushered through Congress four 
important security and justice reform packages that, if 
appropriately implemented, will help to modernize and 
restructure the country's justice system, as well as improve 
and better coordinate Mexico's disparate police forces. 
 
¶4. (SBU) Calderon's efforts have produced results.  In 2008, 
over 19 metric tons of cocaine have been seized, as well as 
1,650 metric tons of marijuana and 341 kilos of 
methamphetamine.  This is on the heels of record seizures in 
2007:  48 metric tons of cocaine, 2,194 metric tons of 
marijuana, and 932 kilos of methamphetamine.  Arms seizures 
are up from 4,220 weapons seized in 2006 to 9,550 seized in 
2007 and 20,235 from January to October 2008. 
 
HIGH STAKES FOR SECURITY OFFICIALS 
---------------------------------- 
 
¶5. (SBU) The human price Mexico has paid has been high: in 
2008, over 520 police and military officials were killed. 
Mexican political leaders are not shy about reminding us that 
U.S. demand for drugs, money laundering, and illegal arms 
flows from our side of the border help fuel Mexico's drug 
war, and have been vocal in criticizing comments from the 
United States suggesting that Mexico is close to a "failed 
state." 
 
MEXICO'S ECONOMY IN THE GLOBAL CRISIS 
------------------------------------- 
 
¶6.  (SBU) Mexico's macroeconomic policy is well-managed; 
however, the global crisis has pushed Mexico into recession. 
Exports, industrial output, remittances from abroad and 
foreign direct investment all are decreasing, while 
unemployment and inflation are on the rise.  The peso has 
depreciated 50 percent against the dollar in the past year, 
and oil production - a major source of revenue for the GOM - 
is declining steadily.  Calderon's stimulus package is not 
protectionist; it includes tax incentives for businesses, 
subsidies to shore up and boost employment, and a 
multi-billion-dollar infrastructure development plan. 
However, these initiatives may not be enough to pull out of 
recession.  As 82 percent of Mexico's exports are destined 
for the United States and we are Mexico's largest foreign 
 
MEXICO 00000815  002 OF 003 
 
 
direct investor, the future of Mexico's economy depends 
heavily on the future of our own. 
 
¶7. (U) The Calderon administration has registered some 
impressive accomplishments since 2006, however.  The 
President secured quick congressional approval of the 2007, 
2008, and 2009 budgets and won passage of an unpopular but 
necessary government workers' social security reform.  In the 
last year, Congress also approved a tax reform that will 
boost government revenues and a modest package of modernizing 
reforms to Mexico's state-run energy company, PEMEX. 
 
POLITICAL LANDSCAPE 
------------------- 
 
¶8. (SBU) In addition to growing concerns over the economy, 
crime and violence, the president and his party face a 
hardening political environment here in advance of 
legislative and key gubernatorial elections later this year. 
All three of the main political parties in the legislature 
have their eyes on the bellwether 2009 elections, and the 
Institutional Revolutionary Party (PRI), in particular, is 
expected to make gains.  The window of opportunity to 
effectively cooperate with a divided congress on major reform 
initiatives is rapidly closing. 
 
THE U.S. -- MEXICO RELATIONSHIP 
------------------------------ 
 
¶9. (U) Calderon has demonstrated pragmatism in his posture 
toward the United States and bilateral cooperation across a 
wide range of issues, particularly on law enforcement, has 
never been stronger.  The President has significantly 
expanded the number of criminal extraditions to the U.S., 
instructed key members of his security team to engage their 
USG counterparts fully and worked closely with us to develop 
a joint approach to counter-narcotics, which includes efforts 
to combat arms trafficking, bulk cash smuggling, and 
corruption, through such measures as the Merida Initiative. 
 
¶10. (SBU) The Merida Initiative represents an historic 
opportunity for the U.S. and Mexico to jointly face the 
challenges posed by organized crime across our border.  The 
U.S. is assisting Mexico this year with $400 million in 
assistance programs, which includes a mix of funding: INCLE 
administered by our Narcotics Affairs Section; Economic 
Support Funds administered by USAID; and Foreign Military 
Financing administered by the Office of Defense Cooperation. 
The package includes funding for: 
 
-- Non-intrusive inspection equipment, ion scanners and 
canine units for Mexico to interdict trafficked drugs, arms, 
cash, and persons. 
 
-- Technologies to improve and secure communications systems 
that collect criminal information, including biometric data, 
as well as continued support to expand Plataforma Mexico, a 
program that facilitates information and intelligence 
exchanges among the country's law enforcement agencies. 
 
-- Technical advice and training to strengthen the 
institutions of justice -- vetting for the new police force, 
case management software to track investigations through the 
system, new offices of citizen complaints and professional 
responsibility, and witness protection programs. 
 
-- Helicopters and surveillance aircraft to support 
interdiction activities, and rapid response of law 
enforcement agencies and supporting military forces. 
 
Key Issues 
---------- 
 
¶11. (SBU) President Calderon may speak to a number of areas, 
including where he would like the U.S. to do more: 
 
--Senior GOM officials, including President Calderon, have 
expressed concern about the length of time it has taken to 
begin implementation.  We will continue to work closely with 
our counterparts here to pick up the pace and to ensure the 
program has the greatest possible impact.  We appreciate 
 
MEXICO 00000815  003 OF 003 
 
 
Calderon's political courage to partner with the U.S. and 
Central America on this initiative.  GOM officials will also 
be interested in discussing future funding for Merida. 
 
-- Arms trafficking:  The Department of Homeland Security's 
Immigration and Customs Enforcement (DHS/ICE) works closely 
with its counterparts in the Government of Mexico, but the 
GOM continues to press for more integrated and coordinated 
actions.  With violence rising to unprecedented levels and 
reports indicating that over 90 percent of cartel weaponry 
coming from the U.S., President Calderon will surely raise 
his concern about the flow of arms south. 
 
-- Money laundering/smuggling: The illicit drug trade is the 
main source of funds laundered through the Mexican financial 
system, though other major sources include corruption, 
kidnapping and trafficking in firearms.  President Calderon 
is committed to improving interdiction of bulk cash 
smuggling, by further empowering Customs agents, for example. 
 The GOM may look for expanded controls on our side of the 
border in addition to the interagency training and support 
assistance we are providing. 
 
-- Drug demand:  Calderon has recently spoken publicly to how 
the U.S. appetite for drugs drives Mexico's present-day 
security challenges.  He is looking for the U.S. to 
rededicate itself to combating drug demand at home. 
 
-- NAFTA: Many commentators have contrasted the approach of 
President Obama and President Calderon on the question of 
NAFTA.  In their first meeting on January 12 in Washington, 
whereas Calderon expressed a desire to build on NAFTA, some 
perceived Obama as wanting to revisit the current treaty to 
strengthen labor and environmental standards.  Mexican 
Congressional opinion on the subject of renegotiation is 
mixed.  While some would like to find out more details as 
they believe renegotiation could hurt Mexico, others suggest 
that renegotiation of the treaty on labor and environmental 
issues is doable. 
 
--Other trade irritants: Since the congressional vote to end 
the cross-border trucking demonstration project, Mexican 
carriers operating in the U.S. have ceased operations, while 
Mexico will allow currently-authorized U.S. carriers to 
continue to operate in Mexico.  Consistent with a 2001 NAFTA 
arbitration panel ruling, Mexico announced 17 March that it 
would retaliate against $2.4 billion in U.S. goods.  The list 
of targeted products, which went into effect 19 March, 
notably steers clear of several major exports, including 
beef, pork, and corn syrup.  The 89 affected products range 
from potatoes and onions to wine and deodorant.  The GOM has 
left the door open to modify the list to apply or reduce 
pressure as warranted.  President Calderon has warned in 
recent speeches against a turn to protectionism, but has not 
commented publicly on trucking or retaliation.  Mexico may be 
receptive to a U.S. overture to establish a replacement 
trucking program, but will be looking for a firm 
implementation timeline and a new program that is broader 
than the canceled pilot. 
 
 
 
Visit Mexico City's Classified Web Site at 
http://www.state.sgov.gov/p/wha/mexicocity and the North American 
Partnership Blog at http://www.intelink.gov/communities/state/nap / 
BASSETT