VZCZCXYZ0000
RR RUEHWEB

DE RUEHSN #0037/01 0261915
ZNY SSSSS ZZH
R 261914Z JAN 10
FM AMEMBASSY SAN SALVADOR
TO RUEHC/SECSTATE WASHDC 0262
INFO WHA CENTRAL AMERICAN COLLECTIVE

SIPDIS 
 
E.O. 12958: DECL: 2020/01/19 
TAGS: PREL PGOV ECON ES
SUBJECT: With ARENA Fractured, Funes is FMLN's Only Rival 
 
REF: 09 SAN SALVADOR 1101; 09 SAN SALVADOR 789; 09 SAN SALVADOR 978 
09 SAN SALVADOR 1033; 09 SAN SALVADOR 1238; 09 SAN SALVADOR 1045 
 
CLASSIFIED BY: RBlau, CDA, DOS; REASON: 1.4(D) 
 
¶1. (C) Summary: Eight months into the Funes presidency, the GOES 
can best be characterized as schizophrenic.  The part of the 
government that Funes controls is moderate, pragmatic, responsibly 
left-of-center and friendly to the USG.  The part he has ceded to 
hard-line elements of the (left-wing) Farabundo Marti National 
Liberation Front (FMLN) is seeking to carry out the Bolivarian, 
Chavista game-plan, including implacable hostility towards the USG. 
Divisions on the right have given the FMLN a dominant position in 
the Legislative Assembly.  However, the FMLN does not have an 
outright majority in the legislature, and it faces strong 
opposition in the popular and independent-minded President Funes. 
Funes's popularity could erode quickly if his administration does 
not start showing visible results in reducing violent crime and 
reviving the economy.  The government's long-run inability to 
tackle crime or produce economic growth, coupled with petty 
infighting and corruption within the country's political parties, 
raises questions about the future of democratic governance in El 
Salvador.  End summary. 
 
 
 
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FUNES-FMLN RELATIONS STRAINED BUT CIVIL 
 
--------------------------------------- 
 
¶2. (S) The FMLN's relationship-of-convenience with Mauricio Funes 
has soured since the March 2009 election.  Early in his tenure, 
Funes surrounded himself with centrist advisors and laid out a 
moderate, pro-U.S. foreign policy - moves FMLN hardliners saw as an 
attempt to distance himself from their influence.  Recognizing 
Funes's popularity and needing his support, the FMLN sought subtle 
ways to challenge Funes's independence.  Starting in September 
2009, FMLN hardliners within Funes's cabinet (most notably Vice 
President and Education Minister Salvador Sanchez Ceren) gave 
anti-American speeches, announced El Salvador's intention to join 
ALBA, and made high-profile visits to Cuba and Venezuela - each 
action carefully choreographed to defy Funes's agenda but with the 
pretense that the officials were acting as FMLN representatives, 
not as members of the Funes government (see reftel A).  Meanwhile, 
Public Security Minister Manuel Melgar has sought to politicize the 
National Civilian Police (PNC) and the FMLN has used its 
"territorial" ministries (Labor, Health, Education and Gobernacion) 
to extend their geographic and bureaucratic hold over the GOES. 
Funes advisors told us the FMLN may have also used their control of 
the Salvadoran intelligence agency to bug phones in the Casa 
Presidencial (see reftel B).  Thus far, however, the two sides 
continue to cooperate on issues of mutual interest, including the 
budget and tax reform passed in December. 
 
 
 
¶3. (C) While the Funes-FMLN conflict would appear to benefit the 
right, internal divisions there have prevented the (center-right) 
National Republican Alliance (ARENA) from mounting a serious 
opposition.  Since October, thirteen legislative deputies and 
scores of mayors and local party functionaries have left ARENA, 
most of them joining the newly-formed Grand Alliance for National 
Unity (GANA) (see reftel C).  ARENA leaders blame these defections 
on former president Antonio Saca, whom the party expelled from its 
ranks in December 2009.  While not officially a member of any 
party, Saca is widely rumored to be the inspirational and financial 
force behind GANA. 
 
 
 
¶4. (C) This crisis has not only dashed ARENA's hope of forming a 
majority alliance in the Legislative Assembly, it has also called 
into question the identity of the party, for years considered one 
of the most well-organized and ideologically-unified in Latin 
America.  Still, XXXXXXXXXXXX told 
PolOff that the crisis has galvanized the party's base, which XXXXXXXXXXXX 
says is "angry as hell" at Saca and the GANA "traitors."  According 
to XXXXXXXXXXXX, in February ARENA plans to roll out a Contract with 
America-style publicity campaign that will emphasize "center-right 
pragmatism" and distance the party from President Saca's corrupt 
legacy.  XXXXXXXXXXXX said that ARENA president Alfredo Cristiani has 
instructed party leaders to focus their criticism on the FMLN and 
avoid attacking GANA or President Funes, both of which ARENA views 
as potential allies.  Until the 2012 legislative elections, 
 
however, ARENA will remain a marginalized force in national 
politics. 
 
 
 
¶5. (C) Aside from the FMLN and ARENA, the country's other political 
parties are small, weak, and ideologically malleable.  Their only 
real selling points are as coalition partners providing the final 
votes on closely fought legislation.  Neither the FMLN nor ARENA 
can achieve a legislative majority without the support of GANA or 
the (opportunist) National Conciliation Party (PCN).  In recent 
months, the FMLN has teamed with both GANA and the PCN to reshuffle 
the legislature's leadership positions and pass a contentious tax 
increase (see reftels D and E).  Given their strategic positions, 
GANA and the PCN will likely remain major players in legislative 
battles ahead, demanding, as they were rumored to have done in 
their previous votes with the FMLN, political favors and covert 
payments in exchange for their support. 
 
 
 
----------------------------------------- 
 
Funes's Challenges: Crime and the Economy 
 
----------------------------------------- 
 
¶6. (C) Public security ranks atop most polling on the nation's 
priorities, particularly after a 37 percent increase in homicides 
in 2009.  Despite great efforts, successive administrations have 
failed to make much of a dent in the intractable street-gang 
problem, so Funes's team will need to be both creative and 
ambitious in its approach to make any headway.  So far, they have 
been neither.  Funes's most significant public security reform to 
date has been a temporary deployment of troops to patrol high-crime 
areas (see reftel F) which news reports suggest may have moderately 
reduced crime in those areas since the November 2009 deployment. 
However, the constitution limits such deployments to six months, 
and Funes has yet to propose reforms to the GOES security apparatus 
that would make those gains sustainable.  He has not moved to 
provide the National Civilian Police (PNC) with significant 
increases of badly-needed personnel, equipment and training, nor 
sought institutional changes in PNC culture, that will result in 
more effective law enforcement and crime control. 
 
 
 
¶7. (C) The other major concern for the GOES is the sluggish 
economy, which continues to feel the effects of the global 
financial crisis and the recession in the U.S.  According to the 
GOES, GDP declined 3.5 percent in 2009 and is projected to grow 
less than 1 percent in 2010 - its worst two-year performance since 
¶1992.  Unfortunately, Funes has few options available to stimulate 
a recovery: the GOES has limited funds for countercyclical fiscal 
activity, even with President Funes's modest tax increase, and 
dollarization rules out monetary stimulus.  Funes and his economic 
team understand the importance of free-market incentives, but have 
been anemic in their efforts to attract private investment. 
Ultimately, powerful trade and remittance relationships mean that 
the Salvadoran economy will only recover following a sustained 
economic recovery in the U.S. 
 
 
 
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Comment 
 
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¶8. (C) GANA's threat to ARENA now appears more serious than it did 
at first.  GANA has poached dozens of ARENA-loyalists in recent 
weeks and has demonstrated through an extravagant convention and a 
subsequent publicity campaign that it has the deep pockets to put 
up a real fight.  Whispers within ARENA also suggest GANA's 
critique of ARENA's elitism has struck a chord among mid-level 
party functionaries, many of whom secretly sympathize with GANA 
despite remaining within ARENA.  ARENA's rebound depends on 
recuperating financing, which it lost when it became an opposition 
party without GOES patronage to hand out.  It still represents the 
only organized force capable of confronting the growing influence 
of the FMLN. 
 
 
 
¶9. (C) Funes's ego has little chance of rapprochement with the 
hard-line FMLN.  If things continue to deteriorate, we could see an 
open break between the two sides, possibly resulting in a new 
 
alliance between Funes and an existing party (perhaps the 
center-left Democratic Change (CD)) for the 2012 legislative 
elections.  Funes would then need to shake up his cabinet and seek 
right-of-center allies in the Legislative Assembly to pass his 
agenda.  The FMLN response would be ugly - massive street protests, 
labor strikes, road blockages, threats of violence, legislative 
logjams - and paralyze some government operations and place a 
further drag on the struggling economy. 
 
 
 
¶10. (C) The GOES's inability to make gains in public security, 
continued anemic growth and the disintegration of the right taken 
together present a challenging road ahead for democracy in El 
Salvador, especially if coupled with a Funes-FMLN split.  Funes's 
persistent high popularity ratings, now well over 80 percent, make 
it too soon to sound the alarm, but democratic institutions are 
vulnerable.  Sanchez Ceren's recent call for sweeping 
constitutional reforms to institute "participatory democracy" is a 
timely reminder that the hard-line FMLN's threat to Salvadoran 
democracy is real.  The Embassy, allied with civil society, will 
continue to engage and support moderates in the GOES while working 
with democratic forces across the political spectrum to strengthen 
Salvadoran constitutional institutions. 
BLAU