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Cablegate: Realistic View of Challenges in State of Union

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OO RUEHCD RUEHGD RUEHHM RUEHHO RUEHJO RUEHMC RUEHNG RUEHNL RUEHPOD
RUEHRD RUEHRS RUEHTM
DE RUEHME #4816/01 2492232
ZNR UUUUU ZZH
O 062232Z SEP 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8768
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE IMMEDIATE
RUEHXI/LABOR COLLECTIVE IMMEDIATE
RUCPDOC/DEPT OF COMMERCE WASHDC IMMEDIATE
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RHMFIUU/CDR USSOUTHCOM MIAMI FL IMMEDIATE

UNCLAS SECTION 01 OF 04 MEXICO 004816

SIPDIS

SIPDIS

STATE FOR A/S SHANNON
STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OIA, AND DRL/AWH
USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GERI WORD
TREASURY FOR IA (ALICE FAIBISHENKO)
NSC FOR RICHARD MILES, DAN FISK
STATE PASS TO USTR (EISSENSTAT/MELLE)
STATE PASS TO FEDERAL RESERVE (CARLOS ARTETA)

E.O. 12958: N/A
TAGS: ECON EINV ELAB EFIN PINR MX
SUBJECT: REALISTIC VIEW OF CHALLENGES IN STATE OF UNION
ADDRESS


Summary
-------

1. (U) On September 2, President Calderon presented his 2007
State of the Union Address (Informe) at the Palacio National.
The Informe covered rule of law and security, competitive
economy and job creation, equal opportunity, sustainable
development, effective democracy and responsible foreign
policy. Calderon highlighted his administration's
accomplishments and emphasized the need for public support
for the changes necessary to build a better nation.

Introduction
------------

2. (U) Calderon presented the written version of his 2007
Informe to Congress on September 1 and spoke publicly the
following day at the Palacio National. He began his speech
with a call to change the format of the yearly address to a
debate as opposed to a presentation format. He also recalled
the five fundamental areas of his government's focus, which
also served as the main topics for his address: rule of law
and public security, competitive economy and job creation,
equal opportunities, sustainable development, effective
democracy and responsible foreign policy.

Rule of Law and Security
------------------------

3. (U) Calderon praised the efforts of the Secretariat of
Public Security (PGR) and the Army in combating
narcotrafficking. Thanks to their efforts, the government
has been able to gain ground against organized crime. Over
10,000 people linked to the drug trade have been captured,
including 20 of the biggest drug lords in the country.
Mexico has successfully extradited the most dangerous
kingpins to prevent them from controlling the trade from
jail.

4. (U) Calderon acknowledged that part of the problem with
drug trafficking is the impunity criminals enjoy. He drew
attention to the National Evaluation and Confidence Control
Center, created by the government to combat corruption in
police forces and spoke about the "Plataforma Mexico" program
which will create a single criminal information center
interconnected via a national network including voice, data,
and images. He also mentioned the proposal he sent to
Congress that would modernize security laws and institutions
by providing the police more tools to conduct their
investigations and expand the rights of victims in
proceedings. Calderon reminded the audience that the war
against organized crime will be long and hard but is
essential to decreasing the threat to Mexico's peace and
security.

Competitiveness and Job Creation
--------------------------------

5. (U) Calderon noted how his government has been able to
control inflation and maintain low interest rates and
macroeconomic stability. Despite the recent financial
volatility worldwide, Mexico has been stable, enjoying a low
country-risk premium -- the lowest level ever recorded was in
June 2007. He reported that international reserves currently
total USD 71 billion and that during the first half of the
year, FDI totaled USD 13.2 billion, a reflection of investor
confidence in Mexico. He boasted that the government created
618,000 formal jobs since January 1.

6. (U) Calderon acknowledged that neither economic stability
nor the current levels of economic growth are sufficient to
alleviate Mexico's poverty problem. He emphasized the
importance of public and private investment to achieve
sustainable growth and job creation. To improve the
country's competitiveness and productivity, the government
needs to channel the additional investment toward

MEXICO 00004816 002 OF 004


infrastructure projects that improve the country's logistics.
He highlighted the National Infrastructure Plan and his
administration's goal to provide Mexicans with better water
and electricity services, while improving transportation and
communication networks to stimulate the economy. He also
highlighted "Promexico," a government agency created to
promote exports and attract more investments. He mentioned
how the government has revamped its processes to channel
financing to small and medium enterprises (SME) through a
special SME fund and the national financing agency, NAFIN.
He also emphasized government efforts to increase the
competitiveness of Mexican farmers, including 176 billion MXP
(USD 16 billion) in special support programs to help farmers
handle the opening of the bean, milk, sugar, and corn sectors.

7. (U) Calderon described the approval of public sector
pension reform as an important success in making public
finances viable over the long term. Calderon praised
legislators, help in approving support for the elderly and
for the Seguro Popular, which provides health services to
those not covered by private or public sector social security
programs. He stressed the need for additional fiscal,
labor, education and telecommunication reforms. He warned
that public finances are threatened by the predicted decline
in oil revenues. Proven reserves will last for only nine
years, and daily production has declined by 200,000 barrels.
In light of this, he insisted on the approval of fiscal
reform. He said that he was convinced that consensus could
be achieved to pass the needed reforms.

Equality of Opportunity
-----------------------

8. (U) Calderon stressed his commitment to closing the gap
between rich and poor. Currently, 40% of Mexicans live in
poverty. More than 14 million Mexicans are living in extreme
poverty, and 10 million do not have access to potable water.
He praised government efforts that have helped to reduce the
number of Mexicans living in extreme poverty by 20 million
over the last 10 years and said that government programs will
have proven successful if the trend continues in the coming
years. The fiscal reform that he sent to Congress in June
would very much help to alleviate poverty. He promised to
analyze the existing social programs and eliminate those that
are ineffective while improving the others.

9. (U) Calderon highlighted a number of steps his
administration has taken to improve the life of the country's
poorest citizens. Oportunidades, the most important social
program in the Calderon administration, reaches 5 million
families -- one in four Mexicans. In addition to health,
food, and education assistance, the government also provides
subsidies for electricity and domestic gas. The government
has invested 4.7 billion MXP (USD 427 million) in the "100 X
100" program. This program provides support to the 100
poorest municipalities, the majority of which are indigenous.
In education, the government is focusing its attention at
the high-school and university level. The government has
also provided more than 1 million scholarships for
high-school students and 347,000 for college and university
students. Calderon pointed out that increasing the coverage
and the quality of teachers is the government's next
challenge. He praised his Health Insurance for a New
Generation and the Popular Insurance program as steps toward
achieving universal health coverage and the "70 and Older"
and the "Childcare Centers for Working Mothers" programs for
helping the underprivileged elderly and children.

Sustainable Development
-----------------------

10. (U) Calderon described protecting the environment as an
issue of national security. The Mexican government has
prepared a national strategy on climate change to reduce
greenhouse gas emissions and foster the development and use
of alternate energy sources. The protection of water

MEXICO 00004816 003 OF 004


sources, mainly in urban areas, is another high priority.
The government has increased the number of protected natural
areas which currently represent 12% of the total territory.
Calderon maintained that overcoming poverty and caring for
nature are linked.

Effective Democracy and Responsible Foreign Policy
--------------------------------------------- -----

11. (U) Calderon praised Congress for demonstrating the
political will to approve needed reforms. The government
appreciates the importance of constant dialogue with the
existing political forces. He praised the relationship the
federal government has with the state governors. With regard
to human rights, Calderon said that his government has been
and will continue to be open politically. He understands
that the country's democracy needs to improve and modernize,
but that political actors must first have the political will
to negotiate and be subject to increased transparency and
responsibility. He has been following the discussions
regarding the electoral reform and is in favor of shorter,
less expensive political campaigns, as well as a level
playing field for all candidates.

12. (U) Calderon said that a challenge for the government
will be to strengthen Mexico's international position while
exercising a responsible foreign policy. He has instructed
the Secretariat of Foreign Affairs to promote Mexico abroad
and to attract more investment to Mexico, using the term
"more Mexico in the world, and more of the world in Mexico".
He said that Mexico needs to increase its international
leadership, beginning with Latin America. Calderon said that
the Mexico needs to increase open markets for its products on
each continent. He announced that his government has
nominated Mexico for a non-permanent seat on the UN Security
Council.

13. (U) Calderon remarked that during the SPP leaders,
summit, he stressed that the three countries should use the
regional advantages they have to compete globally, without
hurting sovereignty, while resolving migration, organized
crime, and investment issues. Calderon criticized U.S.
immigration policies dealing with the persecution of illegal
Mexican migrants in the U.S. The Mexican government will
continue to push for a comprehensive migration reform.

Comment
-------

14. (U) The Informe contained nothing that has not been said
before. Calderon explained that he will continue his fight
against organized crime; his push for reform, development,
and equality; and his drive to gain Mexico a larger role in
global affairs. Notably absent was mention of the cross
border trucking program, which the GOM had hoped to highlight
as a success for North American competitiveness. Also,
immigration constituted a mere one paragraph mention in the
course of the 15-page address.

15. (U) Many opinion makers agree with Calderon's call for a
dialogue and debate to replace the long standing tradition of
the president presenting his State of the Union Address to
Congress without any opportunity for the latter to respond.
They complain that the Informe has become only a list of
statistics and that Mexico requires a fuller debate to tackle
its problems. Currently, no mechanism exists to guarantee
the level of civility required to adopt a new system.

16. (U) The majority of the population has a positive opinion
of the President and his administration. He is seen as a
capable politician and, despite the divided Congress, was
able to deliver his speech in front of Congress without
interruption - more than can be said for Fox in his last two
years. Some opinion makers, however, complained that the
lack of media coverage of the PRD representative's comments
at the presentation before Congress was reminiscent of the

MEXICO 00004816 004 OF 004


cloaking that occurred during the days of the PRI's reign.
The address itself was directed at highlighting all the good
things the administration has done, while at the same time
placing a strong emphasis on the additional things that need
to be accomplished to guarantee a bright future for Mexico.
It was a fairly realistic assessment of Mexico's challenges.


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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