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Cablegate: Presidential Advisors Discuss Calderonqs Social

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PP RUEHCD RUEHGD RUEHHM RUEHHO RUEHJO RUEHMC RUEHNG RUEHNL RUEHPOD
RUEHRD RUEHRS RUEHTM
DE RUEHME #1031/01 0991822
ZNR UUUUU ZZH
P 081822Z APR 08
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 1291
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
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RUEHTG/AMEMBASSY TEGUCIGALPA 1751

UNCLAS SECTION 01 OF 07 MEXICO 001031

SIPDIS

SENSITIVE
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STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OMA, AND DRL/AWH
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E.O. 12958: N/A
TAGS: ECON SENV ELAB EFIN PINR PGOV MX
SUBJECT: Presidential Advisors Discuss CalderonQs Social
Development Efforts, including Education

REF: (A) Mexico 944
(B) Mexico 13

-------
Summary
-------

1. (SBU) On April 6, President Calderon once again
publicly explained how fighting poverty is the top
economic goal of his Administration. In Ref A, Post
explains President CalderonQs overall strategy for
alleviating poverty, which includes macroeconomic
stability, increased trade and foreign investment,
improved competitiveness and infrastructure, structural
reform and social development programs. On April 4,
Econoffs met with members of CalderonQs Qsocial cabinet
to discuss social development efforts. Dr. Liliana Meza,
Technical Secretary for the Social Cabinet, described the
effort as Qinvesting in peopleQ in order to make the poor
economically productive members of the labor force, while
providing all Mexicans a minimum floor of assured
welfare. Since this effort requires education reform,
Meza said the President and had met with the leader of
the politically powerful teachersQ union (SNTE) Elba
Esther Gordillo, and Education Minister Josefina Vasquez
Mota to discuss an agreement on education reforms. A key
goal of social development, Meza said, was to eliminate
Qfood-based povertyQ by 2030. (Comment: Currently 14.4
million Mexicans, 13.8% of the population, do not earn
enough to meet basic nutritional needs. End Comment)
Meza also described how reforestation programs promote
rural development, and made a pitch for the United States
to join European countries in seeking carbon emission
offsets by supporting reforestation in Mexico. End
Summary

-------------------------------------------
Calderon Again Pledges to Alleviate Poverty
-------------------------------------------

2. (U) In an April 6 speech in San Juan Chamula, Chiapas,
one of MexicoQs most representative indigenous
communities, President Calderon again discussed the
priority he places on alleviating poverty. He said
Qsocial developmentQ was the centerpiece of his
Administration, with the ultimate goal being that all
Mexicans, regardless of their ethnic origin or native
language, should be assured that there will not be a lack
of food on their table, that their children will be able
to attend school, and they will have access to medicine,
hospitals and doctors. Calderon stressed his commitment
of providing MexicoQs most vulnerable with education,
housing, health, water, infrastructure, job
opportunities, and a better income. His speech also
stressed the importance of protecting the environment and
the countryQs forests and jungles.

-------------------------------------------
CalderonQs Social Cabinet Lays out the Plan
-------------------------------------------

3. (U) On April 4, Econoffs met with CalderonQs social
cabinet, led by Dr. Liliana Meza, the Social Cabinet
Technical Secretary. Also attending were Dolores Nieto,

MEXICO 00001031 002 OF 007


Director for Agricultural and Livestock Policy; Luis
Villanueva, Coordinator for Social Policy; and Enrique
Mezo, Head of the Department for Agricultural Policy.
Meza explained that social development has been a
priority for Calderon since his Presidential campaign,
and now Qsocial policyQ and Qequal opportunityQ were main
pillars of the National Development Plan for 2007-2012
(Ref A). Overall, she said the goal was to invest in
people so that all Mexicans have equal opportunity to
obtain adequate nutrition, housing, health care and
economic security for their families. A key specific goal
was to eliminate Qfood-based povertyQ by 2030.

----------------------------------------
Escaping Poverty Starts with Health Care
----------------------------------------

4. (U) Part of the effort to achieve equality of
opportunity, Meza noted, was the pledge Calderon made in
his inaugural address that every child born during his
Administration would have health insurance. To do this,
Calderon expanded former President FoxQs QPopular Health
InsuranceQ program (Seguro Popular)(Ref A) to create the
QHealth Insurance for a New Generation.Q She said the
ultimate goal was for all Mexicans to have health
insurance by the end of the Calderon Administration in
2012.

5. (U) Responding to criticism from the Central Bank
Governor (Ref A), and some industrial sectors that
government health programs motivate people to remain in
the informal sector of the economy where they do not pay
social security or other taxes, Dr. MezaQs colleagues
said it was easier for poor people to overcome poverty if
they had health coverage. Meza explained that these
health programs are critical to supporting other social
development efforts, such as the QOportunidadesQ program,
which directly tackle poverty (Ref A). She said the
Administration was aware that even for families receiving
support from existing social development programs, a
catastrophic illness can wipe out a familyQs savings,
forcing them to pull children out of school, and pushing
the family into poverty. Health insurance programs also
improve educational opportunities for children, she said.
If families have health coverage, they do not need to
spend the little money they earn on health, but in
sending their children to school.

--------------------------------------------- ---------
Goal of Universal Pensions Requires Energy and Tax Reform
--------------------------------------------- ---------

6. (SBU) Meza said CalderonQs pledge to provide Qequal
opportunityQ for all Mexicans extended to providing them
financial security. This in turn, she explained posed the
Qgreatest challenge,Q providing all Mexicans retirement
pensions regardless of where they worked. She noted that
reform of state oil monopoly PEMEX and further fiscal
reform would be needed to generate sufficient revenue,
and that so far there is no political consensus on how to
handle even indirect taxes, such as the value-added tax.
She explained that the Administration was making some
progress on financial security for all by expanding
government health insurance for the elderly.

MEXICO 00001031 003 OF 007

---------------------------------
Day Care Needed to Escape Poverty
---------------------------------

7. (U) Another measure cited by Meza to alleviate poverty
was the establishment of over 6000 day care centers.
Previously, she explained government-provided day care
was only available to workers in privileged sectors of
society, such as workers for the state oil monopoly
PEMEX, and workers of the social security institute for
government workers (ISSSSTE). The Calderon
Administration realized that poverty levels decline when
both spouses work, and therefore has expanded government
day cares to help women enter the labor market. Overall,
she said, from 1994 through 2008, womenQs participation
in the labor market grew from 30 to 50%.

-----------------------------------------
Building Human Capacity the Critical Step
-----------------------------------------

----------------------------
Education Reform on the Way?
----------------------------

8. (U) Dr. Meza explained that the ultimate goal is to
develop the capacity of MexicoQs poorest people so they
can move beyond government social development programs
into decently paying jobs. To do that, she said the
Administration is trying to tie social and education
programs in rural and urban areas to the needs of the
labor market. She said that reforming basic education
alone was not enough to increase the capacity of MexicoQs
labor force. Instead, the government was working to
improve technical training, use of the internet and
reform middle-school and high school/university education
to link it to the needs of the labor market. With the
support of business chambers and universities, the
government is working to link education programs to the
countryQs the most-demanded jobs. The government has also
begun to foster development of those technical careers
that are currently in more demand and could help young
Mexicans to insert more easily to the global labor
market. Meza said current government efforts include
facilitating the issuance of education scholarships, in
particular for high school and university education.

9. (SBU) Meza claimed the politically powerful teacherQs
union, The National Union of Education Workers (SNTE),
was Qwell disposed to cooperateQ in this effort. She said
on April 2, Calderon and his Education Minister Vazquez
Mota met with SNTE President Gordillo to discuss
education reforms. Meza claimed Gordilla had had no
problems with the measures being discussed. Meza opined
that she hoped Mexico had Qturned the corner on this
binding constraintQ of the teacherQs union blocking
education reform. She noted that if Mexico failed to
prepare its people to be part of the world economy,
MexicoQs polarization would deepen, bringing economic and
social problems. (Comment: The communique issued by
CalderonQs office about the meeting seemed carefully
worded. It said Calderon had called Gordillo and Vasquez
Mota to meet him in order to Qdialog and construct an

MEXICO 00001031 004 OF 007


agreement to promote education,Q and to design a Qshared
strategy between the government, society and teachers to
allow a significant increase in the quality of
education.Q The communique said this agreement would be
the basis for a fundamental transformation of the
education sector, and that Calderon told Gordillo and
Vasquez Mota he would be waiting for them to present
specific initiatives to improve the quality of education.
While it was a significant accomplishment for Calderon to
get Gordilla to the same table with him and Vasquez Mota
to discuss education reform, Post has not yet seen
indications that Gordilla is willing to support education
reform. End Comment)

-------------------------------
Financial Services for the Poor
-------------------------------

10. (U) Meza said another means to bring the poor into
the productive economy was through expanding their access
to credit and other financial services. Since the
government lacked resources to directly develop savings
and lending for the poor and micro-businesses, Meza said
it used programs like the QCompartamosQ (LetQs Share) to
facilitate development of non-government organizations
and the private credit market (Ref A). (Comment:
Compartamos was a non-profit organization that became a
for-profit bank focused on micro-lending. In order to
ensure a sustainable means for expanding financial
services for the poor, the Mexican Secretariat of Economy
has used loan capital and capacity-building to support
non-government, private and cooperative groups that
provide financial services to micro- and small-scale
busineses and rural households. End Comment) Meza said
such programs help small- and micro-businesses and rural
households invest and grow economically by helping them
establish a credit history. She explained that
QSolidarity Guarantees,Q in which members of a group
cross-guarantee each othersQ loans in place of
traditional collateral, ensure the loans are repaid.
(Comment: Many of MexicoQs most successful micro-finance
institutions, such as Compartamos, Fincomun, Finca and
AlSol, are also partners in USAIDQs ongoing micro-finance
project, in which USAID partners with the public and
private sector to expand access to financial services for
the more than one million Mexicans who had previously
been excluded from the traditional financial sector. End
Comment)

11. (U) Noting the importance of promoting savings for
the poor, Meza said the main reason Mexicans immigrate is
lack of credit and social services. She said people
migrated to obtain the capital needed to provide
financial security for their families.

----------------------------------------
Rural Development Through Re-forestation
-----------------------------------------

12. (U) Meza noted that each Cabinet Secretary was given
a goal in promoting rural development, and each was
tasked to identify their specialty regarding rural
development, and to improve the efficiency and impact of
their programs. She said government programs to stimulate

MEXICO 00001031 005 OF 007


development in rural and impoverished areas included
Procampo (the rural development program described in Ref
A) and QYoung Entrepreneurs,Q and reforestation.

13. (U) Meza said QProArbolQ was among the most important
environmental programs that Calderon has implemented.
ProArbol seeks to reforest vast areas, and maintain
existing forest cover. Through this program, she said the
government pays peasants the cost of its land and an
additional amount to motivate them to re-plant trees.
(Comment: ProArbol supports peasants to maintain forest
coverage by paying for environmental services, such as
water, carbon and biodiversity; promoting sustainable
productive forest management, soil restoration, fire
prevention; as well as motivating local communities to
replant trees. In the first year of the ProArbol program,
Calderon promised to plant 250 million trees, fully one-
quarter of the worldwide total the United Nations called
for in 2007. The government claims to have reached this
goal. End Comment) Meza also discussed the program,
Cuenca Forestal de Golfo,Q under which Mexico contributes
to reducing carbon emissions thus becoming a Qlung for
North America.Q She said European countries were already
exchanging carbon credits by funding restoration of humid
and temperate forests in Mexico. She opined that it would
be natural for the United States to use Mexico to offset
its carbon emissions, thus supporting CalderonQs efforts
to protect the environment of North America as a region.

--------------------------------------------- -
Support to Marginalized Areas Meant to Compete with
Central America
--------------------------------------------- -

14. (U) Meza provided some insight into CalderonQs
recently announced support programs for marginalized
areas of Mexico, described in Ref A. Meza said Mexican
firms were about to leave for Central America seeking
lower labor costs. The Administration responded by
asking these firms to work with the government to develop
incentives to invest in marginalized areas of Mexico that
had ample supplies of the low skilled labor offered in
Central America. The measures were meant to help head off
MexicoQs slipping competitiveness to Central America.

--------------------------------------------- -
Minimum Wage Not A Tool for Social Development
--------------------------------------------- -

15. (SBU) Econoff asked Meza about the debate each
December/January over how much to increase MexicoQs
minimum wage. While the government and many business
representatives favor keeping the minimum wage low in
order to control inflation, unions call for increasing
the wage (Ref B) claiming that the low minimum wage
perpetuates poverty and immigration out of Mexico. Meza
acknowledged that 18-20 percent of workers in Mexico earn
less than two minimum salaries (roughly USD 10 a day),
but said the minimum wage was a Qreference price,Q rather
than a real price for labor. If wage levels were too low,
she explained, market forces push wage levels upward
regardless of the minimum wage. As for those who saw
increasing the minimum wage as a panacea to poverty, Meza
said it would be QfoolishnessQ to increase the minimum

MEXICO 00001031 006 OF 007


wage enough for a family of four or five to join the
middle class. She explained that the minimum wage was
established to stabilize the economy in the 1980Qs by
resolving the crisis caused by rampant inflation and
soaring foreign debt. Meza said that wages were low in
Mexico because of market forces responding to the excess
supply of unqualified labor. It was therefore important
for the government to raise the productivity of the labor
force. Raising labor costs without increased
productivity would only increase inflationary pressures,
and continued macroeconomic stability was essential to
reducing poverty in Mexico.

------------------------------------
Importance of Macroeconomic Stability
------------------------------------

16. (SBU) In echoing public statements by President
Calderon and Finance Minister Carstens that macroeconomic
stability is the pillar for development and poverty
alleviation (Ref A), Meza noted that Mexico is barely
recovering from the financial crises of 1995. The
government must remain cautious in keeping government
spending in line with revenues because of the devastating
cost a financial crisis has in pushing more people into
poverty. Thus, although the government recognizes the
utility of further expanding the successful poverty
alleviation program Oportunidades into urban areas,
current revenues do not allow such expansion. Instead,
Calderon is trying to coordinate and realign efforts to
spend public resources more efficiently and improve the
impact of the existing social programs while maintaining
economic stability despite the threat of a possible U.S.
recession.

-----------------------------
Importance of Public Security
-----------------------------

17. (U) In a television interview following the
PresidentQs April 6 speech, Secretary of Social
Development, Ernesto Cordero explained that CalderonQs
announcement that social development was the center piece
of his Administration did not mean he would disregard the
fight against drug trafficking. Cordero said the
Administration understands that Mexico requires
integrated and coordinated actions for law enforcement
and social development. CalderonQs social development
team highlighted this connection during the April 4
meeting with Econoffs. Villanueva noted that at the start
of his Administration Calderon launched QLimpiemos
MexicoQ (QLetQs Clean Up MexicoQ), to combine efforts to
combat insecurity and foster social development. The plan
consists of rescuing public spaces from criminals, and
making them secure. Such efforts included sending the
military into areas where local law enforcement has been
unable to combat drug traffickers, combined crime
prevention and social development efforts focused on
cities with high crime rates.

-------
Comment
-------


MEXICO 00001031 007 OF 007


18. (SBU) While there are critics who accuse Calderon of
using the social policy as a governmentQs flag for
electoral purposes, in particular for the upcoming 2009
mid-term elections, there is no doubt that social
programs, such as Oportunidades, have helped reduce
poverty. However, it is also true that these sometimes
scattered efforts must be better coordinated to improve
their impact and effectiveness, not only to alleviate
poverty and provide more opportunities to the population,
but also to reduce the incentive to migrate to the U.S.
by giving Mexicans the access to education they need to
find a decent job.

19. (SBU) As noted in Ref A, bringing the poor into the
productive labor force also requires structural economic
reforms to obtain the resources the government seeks to
Qinvest in people,Q to create an education system that
produces productive workers, and to transform Mexico into
a competitive economy able to provide sufficient jobs for
its people. End Comment.


GARZA

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