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Cablegate: Scenesetter for President's Trip to Mexico, March

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FM AMEMBASSY MEXICO
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UNCLAS SECTION 01 OF 03 MEXICO 001102

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV PREL PINR ECON OVIP MX
SUBJECT: SCENESETTER FOR PRESIDENT'S TRIP TO MEXICO, MARCH
12-14, 2007

1. (SBU) Mission Mexico warmly welcomes you to Merida.
President Calderon recognizes the broad-ranging challenges
his country faces and appears to have the vision and
political will to address them strategically. Having
completed three months in office, he has demonstrated resolve
in tackling his key policy objectives, which he believes will
fundamentally transform Mexico: improving security and the
rule of law, attacking poverty, and creating jobs. The U.S.
and Mexico have developed a solid set of institutional
relationships that allow us to work productively on most of
our priorities, including fundamental issues of North
American security and prosperity, and those links are set to
expand. Your visit is an unmistakable sign of our support
for the Calderon government -- one of our most important
allies in the hemisphere -- and our dedication to this
complex, interdependent relationship.

2. (SBU) Mexico's democratic institutions weathered a
contentious presidential election, and Calderon has been
quick to emerge as an activist president with a strong and
respected cabinet, particularly in the security and economic
areas. His security efforts are designed to reassure foreign
investors and Mexicans worried about drug-related crime and
lawlessness that organized criminals will no longer act with
impunity. He knows that attracting investment, particularly
from the U.S., is pivotal to curbing migration and narrowing
the social and economic inequalities that undercut Mexican
society and result in bitter political divisions. Calderon
also recognizes that his vision of Mexico becoming a more
prosperous country and a regional leader depends on security
and the rule of law.

SECURITY AT THE FOREFRONT

3. (SBU) The new administration has moved forcefully to
improve public security by significantly increasing the
security budget; launching surge operations against drug
traffickers in eight of the most conflictive states; working
to overhaul Mexico's national police organization; advancing
justice reform; and authorizing the extradition to the United
States of 15 wanted criminals, including 4 drug king-pins.
The president's initial actions reflect his commitment to
intensify security-related cooperation with the U.S, and his
willingness to incur political risk in doing so. Throughout
your discussions, it will be important to convey that we
understand and appreciate that Mexico is engaging in security
cooperation both for its own national interests and as a
responsible neighbor.

4. (SBU) The president fully understands the depth of our
concerns about international terrorism and the
transformational effect of the 9/11 attacks on USG policy,
and he has signaled his strong commitment to work with us to
preempt terrorist activity or entry through our shared
border. While a solid foundation for joint counter-terrorism
cooperation has been established, and the GOM's efforts
should be recognized, we also need to press for further
progress on information sharing. With respect to WMD, the
GOM -- on its own initiative -- has requested our assistance
in strengthening its detection capabilities.

5. (SBU) Mexico is a central partner in USG efforts to combat
drug trafficking and other trans-border threats. While
taking aggressive measures to tackle organized crime at home,
Calderon has also publicly urged the U.S. to boost its own
efforts to drive down demand for narcotics and improve
controls on arms, cash, and precursor chemicals smuggled into
Mexico. He acknowledges that Mexico cannot effectively
confront narco-trafficking without our cooperation and is
eager for expanded assistance, including help with combating
money laundering. During his recent trip to Mexico,
Secretary Chertoff heard from Mexican Attorney General Medina

SIPDIS
Mora that Mexico's most critical law enforcement challenges
are: improving the institutional strength of local, state,
and federal police forces (including by unifying several
autonomous police forces); dismantling the sophisticated
business operations run by the drug cartels; and crafting a
regional strategy encompassing the U.S., Mexico, and Central
America.

6. (SBU) Mexico's southern border remains extremely
vulnerable to illegal immigration, trafficking in persons,
and the smuggling of contraband. It is an issue of
considerable concern to the GOM, which attributes its lack of
success in securing the border to its rugged and porous
nature, limited enforcement infrastructure and the poor law
enforcement capabilities of its southern neighbors, Guatemala
and Belize. Nevertheless, progress in securing Mexico's
southern border is of vital importance to our own security.

MEXICO 00001102 002 OF 003


As Mexico hopes for immigration reform in the U.S., Calderon
is addressing Mexico's own immigration challenge. He has
just announced plans for a Safe Southern Border Program,
designed to strengthen Mexico's law enforcement efforts in
the south, improve treatment of illegal migrants, and create
guest worker program for Central Americans. You may wish to
express support for this multilayered effort and offer U.S.
law enforcement assistance.

BILATERAL RELATIONS ON A MATURE FOOTING, BUT IMMIGRATION
REMAINS DIVISIVE

7. (SBU) Calderon has demonstrated pragmatism in his posture
toward the United States and appears poised to build on an
already modern and mature U.S.-Mexico relationship. The
president's message is that Mexico will seek what it needs
from us on the basis of equality, respect, and the close
cooperation expected of neighbors that share wide-ranging
interests and challenges. Far more than his predecessor,
President Calderon recognizes that immigration reform is a
U.S. domestic matter that is dependent upon U.S.
congressional action. He will seek progress in a low-key
effort that avoids making migration the dominant bilateral
issue. Nevertheless, domestic political considerations
require that he raise the issue with USG officials and that
he publicly criticize measures -- such as the border fence --
that most Mexicans find offensive. The Mexican public draws
little distinction between documented and undocumented
migrants, seeing both as hard-working countrymen driven to
the U.S. by domestic economic adversity and U.S. economic
demands. Calderon will appreciate your recognition of the
contributions Mexicans make to our economy and your
commitment to immigration reform.

A PRESIDENT WITH INCREASING POLITICAL CAPITAL

9. (SBU) The change in atmospherics between the Fox and
Calderon administrations has been evident from Calderon's
first day in office, and he has restored to the presidency an
aura of authority that many believe was eroded by President
Fox's more informal and disengaged manner. Although Calderon
won election with a bare 36% plurality in a three-way race,
the latest opinion polls show that 58% of Mexicans approve of
his performance to date. Nevertheless, the political climate
remains conflictive, with a congress closely divided between
the president's right-of-center Political Action Party (PAN),
the leftist Democratic Revolutionary Party (PRD), and the
left-of-center Institutional Revolutionary Party (PRI).
Although support for defeated PRD presidential candidate
Andres Manuel Lopez Obrador (AMLO) has waned and his party is
split, Mexico's left can still mount noisy opposition to
Calderon and energize opposition legislators to stall key
reforms here.

A PROMISING ECONOMY IN NEED OF REFORM

10. (SBU) Our major economic interests stem from four areas:
Over USD one billion a day in bilateral trade in goods and
services, much of which passes through overtaxed facilities
along our common border; our need to improve competitiveness
in North America; Mexico's position as our second largest oil
supplier; and Calderon's stated goal of economic development
to stem migration from the poorest parts of Mexico. We seek
to quietly encourage Mexico to reduce barriers to the flow of
legitimate trade across our common border, promote
competition, reform its energy sector, professionalize its
bureaucracy, strengthen education, fight poverty, and create
jobs. Mexican leaders understand what needs to be done but
are often blocked by vested interests, such as labor unions
and business oligopolies. We will be most effective by
sharing best practices, helping set the Mexican policy stage
for needed actions, and providing technical assistance.

11. (SBU) Mexico grew by 4.8% in 2006 following 3% growth in
2005. Analysts expect inflation to remain under control in
the current 3-4% range. We agree with Finance Minister
Carstens that Mexico needs broad reform to improve tax
collection, reduce reliance on oil income, confront growing
pension liabilities and payments on government borrowing
outside the federal budget, and provide needed spending on
poverty alleviation, education, health, and infrastructure to
develop the poorest parts of Mexico. Carstens, who will pick
his battles carefully and is unlikely to take on some of the
entrenched monopolies in the near term, has asked for U.S.
technical assistance. President Calderon has also called for
-- and is likely to raise with you -- expanding the mandate
of the North American Development Bank in order to channel
infrastructure investment to the areas of Mexican
out-migration.

MEXICO 00001102 003 OF 003

BORDER - KEY TO COMPETITIVENESS

12. (SBU) The private sector North American Competitiveness
Council had it right when they told the February 2007
Security and Prosperity (SPP) Ministerial that their top
priority was "improving the secure flow of goods and people
within North America." Facilities along the U.S.-Mexico
border must be improved significantly to securely accommodate
current trade levels and expected future growth. We can and
must accomplish this without compromising security by, inter
alia: extending and/or synchronizing operating hours at U.S.
and Mexican border crossing points; sharing best practices;
cutting back on redundant inspections; employing new
technologies to track and speed the secure movement of cargo;
identifying critical infrastructure investments needed on
both sides of the border; and involving the private sector to
make the North American supply chain more secure and
efficient.

ENERGY - REFORM NEEDED TO AVERT DECLINE

13. (SBU) After Canada, Mexico is the largest source of U.S.
oil imports. We therefore have a strong strategic interest
in continued stable supplies of Mexican oil. Within Mexico,
energy is an extremely sensitive topic tied to national
sovereignty, but the energy sector requires difficult reforms
urgently. Because the Constitution prohibits private
investment in many areas of the energy sector, the government
must provide the tens of billions of investment dollars that
the state oil monopoly Pemex needs. The current system will
not withstand an expected steep drop in Mexican oil
production, or a fall in oil prices. President Calderon, a
former Energy Secretary, is looking at how to head off the
expected drop in oil production.

CLOSING

14. (SBU) Your visit early in the Calderon presidency will
demonstrate our support for a serious leader whom we expect
will be among our closest hemispheric allies, reaffirm our
security-related priorities and our continued commitment to
the SPP framework, and ensure that our relationship with
Calderon's government enjoys early momentum. Your presence
here will also lay the groundwork for smooth communication
with a sometimes sensitive neighbor, sending a broad signal
that we are committed to working together to advance the
shared interests and address the common problems of our
increasingly linked countries.


Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity
GARZA

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