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Cablegate: Can Agriculture Secretary Weather Political

VZCZCXRO6564
PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #0146/01 0182041
ZNR UUUUU ZZH
P 182041Z JAN 08
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 0183
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUEHOT/AMEMBASSY OTTAWA PRIORITY 2355
RUEHC/DEPT OF LABOR WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 MEXICO 000146

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EAGR ETRD PGOV MX
SUBJECT: CAN AGRICULTURE SECRETARY WEATHER POLITICAL
TURBULENCE?

1. (U) This message is based on Embassy FAS reporting.

2. (SBU) Summary: Agriculture Secretary Cardenas has become
the favorite whipping boy of the entire ag community. There
was no surprise that the rhetorical heat from NAFTA opponents
has risen since the January 1 implementation of the final
opening of Mexico's corn, dried bean, milk powder and sugar
markets. They have been demanding re-negotiation of the
trade agreement's agricultural provisions for years. But the
clumsy handling of new rules governing Mexico's farm support
programs, which all farm sectors feel were rammed through
with little chance for input from affected sectors, seem to
have alienated even those farmers who have benefited from
NAFTA. On top of all this, price hikes for gasoline, other
inputs, and commodities in general have given critics of the
Calderon Administration further ammunition. There are
persistent rumors in the press and on the Internet that
Cardenas, who skipped out of a scheduled January 10
appearance at a high-level bilateral meeting on agricultural
trade issues, will be replaced sooner rather than later.
None of our GOM contacts report anything firm to either
support or refute such rumors, but as Calderon reorganizes
his Cabinet, Cardenas' near-total lack of support in the
agricultural community must weigh heavily. End summary.


Cardenas Rejects Demands to Re-Negotiate NAFTA
--------------------------------------------- -

3. (U) There are sectors of the Mexican agricultural
community that have taken great advantage of NAFTA, such as
fruit and vegetable exporters and livestock owners who
benefit from cheap imported feed. Opponents of the free
trade agreement, however, warn that the final lifting of
trade barriers could spark even more migration from Mexico's
devastated countryside and leave Mexico dependent on the U.S.
for corn and beans, both staples of the Mexican diet. In
fact, U.S. corn and bean exports to Mexico are not expected
to rise dramatically this year, since Mexico had already been
allowing more corn imports than required by NAFTA in the
years leading up to final liberalization. Also, Mexican corn
farmers primarily grow the white maize used to make tortillas
for human consumption, and thus are not in direct competition
with U.S. corn exports, which consist of yellow corn for
animal feed. With regard to beans, their consumption is
falling in Mexico as consumers turn increasingly toward meat
for their protein, a development facilitated by the
availability of U.S. yellow corn for feed. But even though
the economic facts on the ground do not lend support to the
anti-NAFTA arguments, they continue to resonate emotionally
for many Mexicans and provide a convenient rallying cry for
poor farmers who feel they have been ignored for decades.

4. (U) The main groups that have been protesting NAFTA are
the:

-- National Farmers Confederation (CNC - closely tied to the
Institutional Revolutionary Party (PRI) which ruled Mexico
for seventy years and is now one of the two main opposition
parties). The CNC represents mainly medium and small
growers. Several PRI lawmakers and governors are members of
this group. Cruz Lopez, CNC's president, has pointed out
that domestic corn farmers fear they will go out of business
due to their inability to compete with imports from the U.S.,
thus leaving Mexico dependent on the United States for its
basic food needs. "There is an abyss between the subsidies
we receive and those of the Canadian and U.S. farmers," Lopez
has stated. "For us, it is very important to guarantee to
the Mexican people that we can produce corn and beans."

-- Cardenista Peasants Central (CCC) and the National
Association of Trader Companies (ANEC). Both these
left-leaning groups have criticized the GOM for its lack of
attention to the repercussions of full NAFTA opening. Max
Correa, CCC's leader, has told Mexican media that "if this
refusal to protect national growers continues on the part of
the government...the countryside could take the path of
weapons and the guerrilla. It is not a catastrophic vision,
it's a reality." He also brandishes the statistic that since
NAFTA's entry into force, it has lost nearly 3 million farm
jobs and seen massive migration from the countryside to the
U.S. An estimated 80 percent of the 400,000 Mexicans who
annually migrate to the United States are from rural areas.


MEXICO 00000146 002 OF 003


-- Lawmakers in both chambers of the Mexican Congress have
also asked the GOM to re-negotiate NAFTA's agricultural
provisions. Members of the leftist Democratic Revolutionary
Party (PRD - currently the largest congressional opposition
party) have called on Calderon's administration to re-open
the trade agreement and remove corn and beans from the list
of unprotected goods. They have also suggested recourse to
the WTO. The center-left PRI (the third largest
congressional party behind the ruling center-right PAN and
the leftist PRD) has been somewhat more cautious, but there
have been recent rumblings that some PRI senators are leaning
toward their PRD colleagues. Although initial analysis
indicates there is no way these politicians could compel the
GOM to re-negotiate NAFTA, such a coalition could increase
political pressure on the Administration to address
agricultural concerns.

5. (U) There have been numerous protests against NAFTA in the
new year. Police had to break up one demonstration organized
by CNC, CCC, and other dissidents that took place outside the
venue where Secretary Cardenas was meeting with other farm
groups on January 10. Cardenas used the occasion to clarify
that there would be no re-negotiation of NAFTA, indicating
that both the U.S. and Canada had rejected the idea and
pointing out that Mexico had more to lose than to gain from
such a move, given its bilateral trade surpluses with both
its North American neighbors. President Calderon and Economy
Secretary Eduardo Sojo also have made strong public comments

SIPDIS
about the clear net benefits NAFTA has generated for Mexico.
Nonetheless, NAFTA continues to be a rallying point for
disaffected farm groups and a mega-march that will end in
Mexico City's central plaza (the Zocalo) is being planned for
January 31. CCC, CNC, and ANEC, among others, are planning
to participate.

New Rules of Operations
-----------------------

6. (SBU) NAFTA opposition has been a long-standing part of
Mexico's political landscape. Adding to the usual complaints
that the opening to corn and beans will devastate small
farmers, are concerns about the recently implemented increase
in the gasoline tax, and concerns about rising prices for
other inputs and commodity prices in general. Most
importantly, there is considerable anger about recent changes
in the Agricultural Ministry's (SAGARPA) rules of operation
in farm programs, which all farm sectors feel were rammed
through with little chance for input.

7. (SBU) Although the agricultural budget was increased 15%
for 2008 (to approximately USD 18.5 billion), on December 31,
2007 SAGARPA published new rules to streamline farm support
programs. Each group that has long benefited from having a
piece of agricultural support funds, fears that the changes
will reduce their share of the pie. The controversy is over
new operational rules for the "Concurrent Special Program for
Sustainable Rural Development. The Special Program aims to
improve rural livelihoods and agricultural productivity and
competitiveness. Among other things, the new rule changes
consolidate 46 programs into 8, and centralize control in the
federal government, cutting state-level groups out of
decisions on who gets support and money. In order to reduce
the procedures for farmers to seek benefits, the new rules
reduce the ability of groups representing farmers to be
involved in allocating support funding. Many of these
groups, especially those claiming to represent small farmers,
have long been accused of being more concerned about
delivering votes for political parties than benefiting
farmers. Because the new rules seek to benefit the poorest
farmers, commercial farmers, including those most supportive
of NAFTA, fear they will receive less money.

8. (SBU) During December, in a contentious and agitated
appearance before Mexico's Congress, Secretary Cardenas was
accused by opposition members of being inept, insensible,
arrogant and a liar, and was asked to consider resigning.
Cardenas explained that the new rules were designed to
eliminate red tape and corruption by making resources
available directly to agricultural workers. He remarked that
several "social leaders" were not comfortable with the
changes, noting that the changes represented an attempt to
eradicate "corruption and illicit enrichment" benefiting
leaders of groups representing agriculture.


MEXICO 00000146 003 OF 003


9. (SBU) While agricultural groups have known for some
months that SAGARPA was seeking to modify these operational
rules, the speed with which the new rules were published
seems to have surprised everyone. On the surface, the
changes sounded like much-needed reforms to eliminate many of
the numerous hurdles people faced when seeking benefits. The
surprise early release, however, seems to have united the
full range of agricultural groups in opposition. In addition
to complaints noted above, the CNC and CCC complain that the
rules were published unilaterally without taking into
consideration their proposals.

10. (SBU) While the CNC had been relatively quiet in the run
up to the final implementation of NAFTA, the announcement of
the new operational rules for support programs has made them
more animated and militant. At their annual meeting on
January 7 and 8, they called for President Calderon to honor
the 2003 National Accord for the Countryside, which calls for
renegotiation of NAFTA to eliminate corn and beans from the
agreement. After its annual meeting, the CNC reversed its
previously announced position and said it would participate
in the CCC and ANEC-announced mega-march on January 31 in
Mexico City, that will start in Chihuahua and pick up
protesters and tractors along the way.

Changes at the Ag Ministry?
---------------------------

11. (SBU) Industry and political sources are rife with
rumors about personnel changes to appease the sector's
disenchantment with Secretary Cardenas who has managed to
upset major agricultural producers, processors, state
agricultural leaders, small producers, and the Mexican
Congress. All have publicly expressed a lack of confidence
in Cardenas and the need for change. Even as recently as
this week the PRI faction in the lower house called Cardenas
stubborn and deaf to the needs of agriculture for his failure
to respond at all to their calls to reexamine the effects of
NAFTA on Mexican farmers. Calderon's recent sacking of both
his Secretary of Interior (Gobernacion) and Social
Development (SEDESOL) foreshadow additional changes. Some
suggest; however, that Agriculture Under Secretary Lopez
Tostado, directly responsible for the new rules that have
upset the industry, will take the fall. Finally, others
suggest that all of the SAGARPA leadership team should go.


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 /
GARZA

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