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S E C R E T SECTION 01 OF 05 GUATEMALA 001403 SUBJECT: GUATEMALA COUNTERDRUG PERFORMANCE: C-CN500289 REF: STATE 87299 Classified By: DBWHARTON, DEPUTY CHIEF OF MISSION. REASON 1.4(C). 1. (C) The Berger Government (GOG) is seized with and increasingly alarmed by the growing power of drug traffickers in Guatemala. Guatemala,s political, business, and even NGO and Church leaders recognize drug trafficking and the crime and violence it spawns as a very serious threat to the nation,s institutions, economy and society. At the same time, lack of resources ) both material and legal -- and the endemic corruption that GOG leaders acknowledge and are doing their best to combat, prevent the GOG from making meaningful progress in the effort to fight drug trafficking and other forms of organized crime. (C) A recurring theme in US-Guatemalan relations is expressed by GOG officials as "We want and need to reduce drug trafficking, but cannot do so without American assistance." There is some truth to this,

in that US restrictions on the Guatemalan military are a significant factor in the GOG,s lack of air and sea interdiction capabilities. It is also the case that, at roughly $2.5m. to $3m. per year of INCLE funds, we are not/not making an investment in anti-drug assistance commensurate with our interests in preventing Guatemala from becoming a narco-state. At the same time, a persistent tendency of senior Berger government officials to see the issue in resource terms fails to recognize legal and procedural reforms Guatemala could make to greatly strengthen its ability to fight crime. Specifically, Guatemala needs to enact legal reforms that would give its police and prosecutors the right to use court-ordered wiretaps, conduct undercover operations such as controlled deliveries, and prosecute criminals on conspiracy charges. The GOG also needs to enact changes in law and process so that criminals, property and cash can be seized, made forfeit, and put to use in law enforcement activities against organized crime before the associated criminal cases run their full course. (S) If the GOG does enact needed legal reforms, as we have been advocating, US interests would be well served by increasing our anti-drug assistance. Specifically, establishment of DEA-managed Special Investigative Units (SIUs) in Guatemala and normalization of military-to-military relations with restored security assistance along regional norms would help give Guatemala the intelligence gathering and end-game capabilities it must have to mount an effective counternarcotics program.

2.

Responses to INR,s specific questions follow: A.(S) What improvements to Guatemala,s counterdrug laws and performance have been made during the past year? Have seizures increased? Any significant legal developments? (C) There has been progress toward better cooperation between the Ministry of Government (responsible for police) and the Public Ministry (responsible for investigators and prosecutors) on procedural matters. A June 2004 agreement signed between the two ministries codified procedures for inter-agency control and sharing of evidence. The Embassy has also worked hard to promote legal reform, hiring a former Supreme Court justice to prepare a legal brief arguing that wiretapping is not unconstitutional. The Ambassador has promoted the idea persistently with all senior officials, from the President on down. We have also been working with key members of Congress to promote legislative action on the reforms needed to give GOG police and prosecutors the legal tools needed to go after criminal organizations and leaders. (C) With the exception of an increase in opium poppy eradication (due to an increase in opium poppy cultivation), GOG counterdrug results are not encouraging. Cocaine seizures in the first half of CY 2005 are about 700 kg, only about 6% of the CY2005 target (12,000 kg), less than 20% of CY2004 (4,481 kg) seizures, and less than 10% of CY2003 seizures (9000kg).

(C) The drop in cocaine seizures is due to lack of resources, changes in trafficking patterns, and corruption in law enforcement organizations (acknowledged by and of concern to senior GOG officials). The Guatemalan Air Force, responsible for protection of national airspace, investigation of air tracks of interest (ATOIs ) suspected drug flights), and transportation of police and prosecutors to ATOI landing sites in the remote Peten province, has literally worn out its equipment and it will be several months before the MAP funds released in February 2005 begin to restore the lost capability. A narrow interpretation of our ability to provide assistance from INCLE funds to the Guatemalan military and inadequate funding levels (from both the USG and the GOG) has precluded adequate repair, training and fuel for Guatemala aircraft and has taken the Air Force out of action. Similar shortages of equipment and fuel have precluded effective operations by the Guatemalan Navy. Moreover, traffickers have shifted from daylight-hour drug flights to night flights and increased use of go-fast boats to move cocaine into Guatemala. The Guatemalan Air Force, even if it had flyable aircraft, has no capacity for night operations and the cost of becoming capable of nights ops is prohibitive at current INCLE funding levels. Endemic corruption within the SAIA (specialized anti-drug police), PNC (national civilian police), customs officials and port authorities make road and port seizures highly unlikely. B. (S) What has the new administration done to

combat corruption Guatemala?

within

the

Government

of

(U) The GOG is making substantial efforts against corruption. It is actively prosecuting several high-level corruption cases, has dismissed several hundred police officers and brought charges against many others, and has implemented new, transparent procurement and contracting procedures. (U) Candidates for entry into SAIA (the specialized anti-drug police) undergo a background investigation, polygraph exam, and urinalysis testing. On average, these procedures eliminate 60 percent of the applicants. This program has been expanded to the Anti-Corruption, Money Laundering and Narcotics prosecutors, offices, and includes the periodic re-testing of all active SAIA members. (U) The GOG has also moved aggressively against all forms of public corruption. In 2004 the anti-corruption prosecutor (an Embassy-supported program) brought cases against 383 individuals, including many high-ranking former government officials, army officers and police. These cases include the former vice president, finance minister, and head of the revenue and customs service. Former President Portillo fled to Mexico when it became apparent that he was about to be arrested on corruption-related charges. With support from US prosecutors, the GOG is pursuing two major embezzlement cases in which money was likely moved through US institutions. (U) The Director General of the police has

established a "zero tolerance" policy on corruption. During 2004, more than 2,000 cases were opened against police officers, including 23 command-level officers. Half of the 650person criminal investigative division was fired. A counter-drug prosecutor who solicited a bribe from a defendant was sentenced to 13 years in prison, and another counter-drug prosecutor is currently under investigation for theft of government funds. C. (S) How has the reduction of Guatemalan military forces affected the drug trade in Guatemala? (C) The reduction in the overall number of soldiers from about 27,000 to about 15,000 has not had a significant effect. The change of Army structure from geographic commands to functional commands has, however, led to the closure of numerous military bases and a subsequent decline in GOG presence in isolated sections of the country, particularly along the northern border with Mexico in the San Marcos region and throughout the Peten. Sadly, there is no evidence that the former military presence in these areas ever deterred drug trafficking. In fact, removing the military presence from areas used by drug traffickers has probably had the effect of reducing both traffickers, payrolls and military corruption. As described above, lack of funding for maintenance, fuel and training of military aircraft and naval vessels has essentially ended GOG capability to interdict cocaine shipments by air and sea, but this is not a consequence of military

downsizing. D. (S) Is there evidence of narco-corruption in the political system? Are drug monies flowing to political parties? (S) There is anecdotal evidence of trafficker support to parties, candidates and politicians. Accounts include political candidates being offered the use of aircraft that may be owned by persons associated with drug trafficking. We are also aware of campaign contributions of murky provenance. At least one member of Congress has close relations with persons thought to be involved in drug trafficking. These accounts tend to be hearsay, though, and very difficult to document or refute. There is no evidence of parties or national politicians providing protection or other favors for traffickers. On the contrary, all of the party leaders and politicians with whom we have regular contact beseech us for support in the fight against drug trafficking and practically beg us to take suspected traffickers to the US for trial and imprisonment. (S) Narco-corruption is a greater concern in courts and police forces. A judge,s decision in late 2004 to allow bail for one of Guatemala,s leading traffickers, someone known to be wanted by the USG, is a good example of suspected corruption. The accused trafficker, Byron Linares, absconded. National Civilian Police (PNC) and the specialized anti-drug police,

SAIA, are considered even by PNC Chief Erwin Sperissen and Minister of Government Carlos Vielmann to be corrupt. Police are very badly paid, poorly managed, trained and equipped, and not respected by the population at large. The government has a police reform plan that bears promise, and we are currently working with the government to identify ways we can provide support for the reform program. The government has made a good effort to prosecute corruption in the PNC and SAIA, and a number of officers have been arrested, tried and convicted, but corruption remains endemic throughout the police. DEA manages a small vetted unit of counter-drug police that has proven to be reliable. Beyond this vetted unit, however, we do not trust the police,s ability to resist corruption. E. (S) How are the Guatemalan police effective in countering drug trafficking? In what areas are they lacking? Do they have adequate resources and personnel to be effective? (C) The Guatemalan police are not effective against drug trafficking. They lack integrity, training, motivation, equipment, transportation and management. The problems of integrity and motivation are due in large part to the lack of effective middle management. SAIA has, however, been effective in manual eradication of poppy and marijuana, which they have been willing to do on short notice whenever the Embassy has organized a mission. There are enough SAIA agents (about 300) to have some effect, but without the resources mentioned above, they are

not effective. (C) PNC and SAIA forces need an effective internal investigative capability in order to detect corrupt officers via financial and lifestyle investigations. Our ESF-funded Law Enforcement Development (LED) program is working closely with the newly re-organized PNC internal inspection unit (with the full support of PNC Chief Sperrisen but this function remains underresourced and investigator case-loads are too heavy to allow real effectiveness. F. (S) What evidence is there of police or military collusion with drug traffickers, such as helping in off-loading drugs or providing security for facilitated drug shipments? (C) We doubt that police or military collusion includes direct, physical involvement in drug trafficking. The most compelling evidence of police and/or military assistance to traffickers is the virtual absence of seizures. Accepting the estimate of 100 to 200 tons of cocaine per year moving through, over or around Guatemala, current seizure rates are well under 1%. In late 2003 there were indicators of active police and military assistance to traffickers. In mid2005, police and military seem to prefer passive collusion ) looking the other way ) rather than activities such as actual unloading or security operations. G. (S) What is the division of labor between the police and the military in the drug arena?

What is the level of cooperation? (U) For ground operations, the military only provide support) transportation, communication, and perimeter security. In these operations the military have no powers of arrest or investigation and its intelligence service is greatly degraded. In maritime operations, the Guatemalan Navy has vested authority to stop and detain suspect maritime traffic. If suspects are detained or contraband seized, arrangements are made for pier-side transfer to civilian authorities upon return to port. The police bear responsibility for arresting traffickers, but have no air or marine transportation resources of their own. Cooperation between the police and military is fair but marked by mutual distrust and intense competition for limited resources. H. (S) Does Guatemala cooperate with other countries on counternarcotics issues? (C) Yes, but mostly on an ad-hoc basis, primarily involving informal agreements to permit hot pursuit of traffickers along national frontiers. Intelligence sharing is minimal. Of note, Guatemala has allowed both the El Salvadoran and the Mexican air forces to conduct intercepts over Guatemalan territory. I. (S) Who are the major drugs traffickers in Guatemala? What are their nationalities? How large are their organizations?

(C) The five largest trafficking organizations in Guatemala are known by the family names of their leaders. They are:

Leon Lorenzana Mendoza Zarceno Paredes

The leaders of each of these organizations are Guatemalan. We do not have hard information about the size of the organizations, but believe they are small, essentially family-based and run groups. J. (S) What role do Colombian and Mexican cocaine traffickers play in Guatemala,s drug trade? At what point to Mexican and Colombian traffickers establish ownership over cocaine? How often do they finance cocaine loads up front? How do they pay for the services of Peruvian and Bolivian drug groups? (C) Mexican and Colombian traffickers are much larger and more powerful than Guatemalan drug trafficking organizations. Guatemalans are at a distinct disadvantage in the cocaine trade because they can only acquire cocaine from Colombians, and need the cooperation of Mexicans to move the drugs north.

Guatemalans often play an important role in the drug business by acting as &escrow accounts8 for drugs transferred from Colombian suppliers to Mexican buyers. A large cocaine shipment may be held in Guatemala until the Colombians receive payment from the Mexicans. (C) Ownership of cocaine is determined early in the trafficking process, usually in one of the two following ways: Scenario A: Colombian traffickers ship their own product north by using a Guatemalanbased drug transporting organization. In this scheme, the Colombian trafficker simply pays for the services of a Guatemalan transporter (and, eventually, a Mexican transporter) to get his Colombian cocaine north to the US. The scheme involves many alliances and requires considerable trust among the owner of the cocaine and those who are contracted to transport it. The farther north a Colombian can land his cargo (by air or sea), the fewer people he must pay for transportation and protection of the shipment. Accordingly, alliances between Colombian and Mexican cartels are important, and Guatemalan traffickers have been junior partners. Due to the increasing effectiveness of Mexican anti-drug operations, however, Colombian traffickers have shifted their landing points south into Guatemala. From Guatemala, single large shipments (multi-ton quantities) are broken up into many smaller shipments, thereby reducing exposure to loss through seizure in Mexico.

(C) Scenario B: Guatemalan traffickers purchase cocaine from Colombian suppliers and ship their Guatemalan cocaine north to the US. On occasion, if the Guatemalan trafficker has a good reputation and is considered powerful enough, the Colombians willfront the cocaine to the Guatemalan for repayment later. Colombians sell cocaine to Guatemalans at a price that is higher than the local Colombian price but still considerably lower than the US price. (C) Scenario C: We are also seeing Colombian groups moving into Guatemala to set up shop. With increased pressure in their home country, some Colombian organizations have found it easier to conduct business in Guatemala, using Guatemalans as mid-level managers and hired help. K. (S) How do drug groups in Guatemala launder their funds? Where do they keep or invest their illicit income? (U) In the last 2 years the Guatemalan banking system has become much better at policing itself (Guatemala was removed from the FATF black list in mid 2004) and is no longer a major mechanism for laundering money. C) Guatemalan traffickers use 2 dealing with US Dollar proceeds: methods of

A - They smuggle bulk quantities of

dollars to Guatemala and use illegal exchange houses to convert the money into Quetzals. With the Quetzals, they buy land, real estate, and durable goods in Guatemala. Those items are then sold immediately to legitimate buyers. B ) They use the Black Market Peso Exchange (BMPE) to convert Dollars to Colombian Pesos. In this scenario the Guatemalan trafficker gives Dollars to a member of the BMPE. The BMPE converts the Dollars to Colombian Pesos, pays the Colombian cocaine supplier on behalf of the Guatemalan trafficker, and smuggles the US Dollars to Panama where they are used to pay legitimate bills in the free-trade zone. L. (S) What is the role of gangs in the drug trade in Guatemala? What, if any, evidence is there of gangs cooperating with drug trafficking groups? (C) Gangs in Guatemala serve as the low-level distributors of illegal drugs to the local population and serve as outlets for the sale of cocaine left in Guatemala as payment for logistics and security. Although we do not have definitive information on their cooperation with trafficking organizations, we believe that, thus far, gang cooperation with drug trafficking groups is at the street level and does not extend to transportation, money laundering, communication or other higher level activities. Gang members, with their attention-getting

tattoos, clothing, signs and criminal records, are too high profile for work with traffickers seeking to maintain relatively low profiles. For the same reason, gang members are not useful as body-smugglers. HAMILTON (Edited and reading.) reformatted by Andres for ease of