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Cablegate: C O R R E C T E D C O P Y Presidential Advisors Discuss

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PP RUEHCD RUEHGD RUEHHM RUEHHO RUEHJO RUEHMC RUEHNG RUEHNL RUEHPOD
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DE RUEHME #1049/01 0992218
ZNR UUUUU ZZH
P 082218Z APR 08
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC PRIORITY 1308
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
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RHMFIUU/CDR USSOUTHCOM MIAMI FL
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RUEHGT/AMEMBASSY GUATEMALA 3682
RUEHZP/AMEMBASSY PANAMA 2301
RUEHBE/AMEMBASSY BELIZE 0036
RUEHTG/AMEMBASSY TEGUCIGALPA 1758

UNCLAS SECTION 01 OF 06 MEXICO 001049

SIPDIS

SENSITIVE
SIPDIS

STATE FOR A/S SHANNON
STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OMA, AND DRL/AWH
STATE FOR EB/ESC MCMANUS AND IZZO
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GERI WORD
TREASURY FOR IA (ANNA JEWEL, LUYEN TRAN)
NSC FOR RICHARD MILES, DAN FISK
STATE PASS TO USTR (EISSENSTAT/MELLE)
STATE PASS TO FEDERAL RESERVE (ANDREA RAFFO)
DOE FOR INTERNATIONAL AFFAIRS KDEUTSCH AND ALOCKWOOD
DOT WASHDC FOR DAVID DECARME

E.O. 12958: N/A
TAGS: ECON SENV ELAB EFIN PINR PGOV MX
SUBJECT: C O R R E C T E D C O P Y Presidential Advisors Discuss
Calderon's 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 Calderon's 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
Calderon's "social cabinet" to discuss social development efforts.
Dr. Liliana Meza, Technical Secretary for the Social Cabinet,
described the effort as "investing in people" 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 teachers' 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 "food-based poverty"
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
Mexico's most representative indigenous communities, President
Calderon again discussed the priority he places on alleviating
poverty. He said "social development" 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 Mexico's 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 country's forests and jungles.

-------------------------------------------
Calderon's Social Cabinet Lays out the Plan
-------------------------------------------

3. (U) On April 4, Econoffs met with Calderon's social cabinet, led
by Dr. Liliana Meza, the Social Cabinet Technical Secretary. Also
attending were Dolores Nieto, 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 "social policy"
and "equal opportunity" 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

MEXICO 00001049 002 OF 006


to obtain adequate nutrition, housing, health care and economic
security for their families. A key specific goal was to eliminate
"food-based poverty" 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 Fox's
"Popular Health Insurance" program (Seguro Popular)(Ref A) to create
the "Health Insurance for a New Generation." 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. Meza's
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 "Oportunidades" 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 family's 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 Calderon's pledge to provide "equal opportunity"
for all Mexicans extended to providing them financial security. This
in turn, she explained posed the "greatest challenge," 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.

---------------------------------
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, women's
participation in the labor market grew from 30 to 50%.

MEXICO 00001049 003 OF 006

-----------------------------------------
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 Mexico's 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 Mexico's 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 country's 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 teacher's union, The
National Union of Education Workers (SNTE), was "well disposed to
cooperate" 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 Gordillo had had no problems
with the measures being discussed. Meza opined that she hoped Mexico
had "turned the corner on this binding constraint" of the teacher's
union blocking education reform. She noted that if Mexico failed to
prepare its people to be part of the world economy, Mexico's
polarization would deepen, bringing economic and social problems.
(Comment: The communique issued by Calderon's office about the
meeting seemed carefully worded. It said Calderon had called
Gordillo and Vasquez Mota to meet him in order to "dialog and
construct an agreement to promote education," and to design a
"shared strategy between the government, society and teachers to
allow a significant increase in the quality of education." 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 Gordillo to the
same table with him and Vasquez Mota to discuss education reform,
Post has not yet seen indications that Gordillo 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 "Compartamos"
(Let's Share) to facilitate development of non-government

MEXICO 00001049 004 OF 006


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

SIPDIS
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 "Solidarity Guarantees," in which members of a group
cross-guarantee each others' loans in place of traditional
collateral, ensure the loans are repaid. (Comment: Many of Mexico's
most successful micro-finance institutions, such as Compartamos,
Fincomun, Finca and AlSol, are also partners in USAID's 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 development in rural and impoverished areas included
Procampo (the rural development program described in Ref A) and
"Young Entrepreneurs," and reforestation.

13. (U) Meza said "ProArbol" 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," under
which Mexico contributes to reducing carbon emissions thus becoming
a "lung for North America." 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 Calderon's efforts to protect the environment of North
America as a region.

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

MEXICO 00001049 005 OF 006

14. (U) Meza provided some insight into Calderon's 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 Mexico's 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 Mexico's 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
"reference price," 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 "foolishness" to increase the minimum 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
1980's 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 President's April 6

MEXICO 00001049 006 OF 006


speech, Secretary of Social Development, Ernesto Cordero explained
that Calderon's 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. Calderon's social
development team highlighted this connection during the April 4
meeting with Econoffs. Villanueva noted that at the start of his
Administration Calderon launched "Limpiemos Mexico" ("Let's Clean Up
Mexico"), 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
-------

18. (SBU) While there are critics who accuse Calderon of using the
social policy as a government's 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 "invest in people," 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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