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Reference ID Created Released Classification Origin
05GUATEMALA659 2005-03-11 19:07 2011-02-06 21:09 CONFIDENTIAL Embassy Guatemala
This record is a partial extract of the original cable. The full text of the original cable is not available.


E.O. 12958: DECL: 03/11/2010

Classified By: EconCouns Steven S. Olson for reason 1.5 (d)

1. (SBU) Summary: Guatemala's Congress passed legislation
by an overwhelming majority to reinstate data protection for
drugs and agrochemicals, paving the way for consideration of
the CAFTA in the U.S. Congress. This was the end of a drama
played out over years that was fraught with misinformation,
conflict of interest, partisan politics, and a pronounced
lack of decisiveness by top political leaders. It has
consumed in aggregate more of our full-time attention than
any other issue in recent months. Most of what follows has
been reported in e-mails and, to a lesser extent, cables as
we have moved from one operational crisis to the next. Here,
we lay out more systematically the extent of the problem, the
forces at play, and the efforts of many to succeed on an
issue where the easy arguments lie on the other side. End

Brief History of Data Protection in Guatemala
2. (U) Guatemala's Congress passed decree 30-2005 on March
9 to reestablish data protection for pharmaceutical and
agricultural products. When signed by the President and
published in the national gazette, the new law brings
Guatemala back into compliance with the intellectual property
obligations it assumed when it signed the CAFTA. Guatemala
had fallen out of compliance when its Congress passed decree
34-2004 in November 2004 and the executive allowed it to
enter into force in December. Resolving this issue was
critical, as the U.S. Congress, specifically the Ways and
Means Committee, had made clear that it would not consider
scheduling hearings on CAFTA ratification if any signatory
adopted measures that ran contrary to the letter and spirit
of the agreement.

3. (U) Guatemala was the first (and to date only) Central
American country to adopt domestic legislation to implement
the WTO's TRIPS agreement on intellectual property and
provide specific periods of data protection, and it did so in
2000 (decree 57-2000). Opponents of patent and data
protection for pharmaceutical products have been trying to
eliminate that protection ever since. Data protection was
briefly stripped from the legislation in late 2002 but was
reestablished in April 2003, after intense Embassy lobbying,
via decree 9-2003, which reduced data protection periods from
fifteen years under decree 57-2000 to five years for drugs
and ten years for agrochemicals (the same as in the U.S.).
Several court challenges of 9-2003 failed.

Mistaking Transnationals and IPR as the Problem
--------------------------------------------- --
4. (SBU) The Berger Administration, installed in January
2004, inherited a number of broken and looted institutions,
among them the national social security and healthcare
program (IGSS). The best known of the IGSS scandals
involved millions of dollars that disappeared from an
unlicensed brokerage house and millions more "invested" in
wildly overvalued land. Those scandals were public before
Berger took office. Berger administration officials
reviewing contracting practices were shocked to discover what
the IGSS was paying for drugs, finding that retail prices in
private pharmacies were often far below prices that the IGSS
paid for bulk orders. They also found that IGSS managers
ordered that some particularly expensive drugs could only be
purchased by brand name. Their outraged reaction was to
assume that transnational pharmaceutical companies were
conspiring with IGSS officials to engineer purchases of
brand-name medicines at exorbitant prices in return for

5. (SBU) We explained at the time that we would be obliged
to report any evidence of corruption by U.S. pharmaceutical
laboratories, but we urged the new government to investigate
more deeply before drawing conclusions. We noted that
specifying the use of brand name products was common when
generics were not available or were not subject to adequate
quality control. We also noted that international
laboratories did not sell directly to the IGSS as they are
required to work through a local representative. We asked
that the authorities ensure that kickback schemes were not
the work of local wholesalers before accusing international
laboratories. We also urged the government not to do
anything that would violate the WTO TRIPS agreement or the
CAFTA text that had been negotiated.

Allies are Found, but the Momentum Builds Elsewhere
--------------------------------------------- ------
6. (C) The Ministry of Economy understood our message
clearly. So did the new Ambassador to Washington, Guillermo
Castillo, and Presidential Commissioner for Investment and
Competitiveness Miguel Fernandez. We further learned that
Attorney General Florido had opened a criminal case against a
Guatemalan pharmaceutical wholesaler who supplied the IGSS
and was not pursuing further the allegations against the
international companies. However, the damage was done, and
much of public opinion had come to accept that transnational
pharmaceutical companies' were conspiring to deny access to
generic drugs. Health Minister Marco Tulio Sosa produced
draft legislation to repeal decree 9-2003 on grounds that it
restricted access to the generic drugs, and Nobel Peace Prize
Laureate and human rights icon Rigoberta Menchu supported
him. Sosa's bill mentioned data protection using language
drawn from TRIPS but then failed to provide it. Human Rights
Ombudsman Sergio Morales joined the campaign, filing a series
of constitutional challenges against in the courts, all of
which failed. The local office of Doctors Without Borders
organized seminars and, with help from the local copying
industry, brought in Argentine anti-IPR "expert" Carlos
Correa, the same person the USG ejected from the Andean FTA
discussions (Correa himself boasted about his expulsion in
publicity for one of his seminars here).

Blocking Bills in the Congress and Industry
7. (C) Minister Sosa's bill to overturn decree 9-2003 was
joined by a competing bill proposed by Victor Hugo Toledo,
then a deputy of the PAN party. Toledo's bill was every bit
as bad as Sosa's, but it had the salutary effect of
preventing a rush to pass either. We met several times with
the congressional leader of Berger's coalition and explained
the risk either bill posed to the CAFTA, and he assured us
that neither bill would make it onto the agenda for floor
debate. The opposition FRG party, responsible for both
decrees 57-2000 and 9-2003 and consistently supportive on the
issues within, provided a backchannel for ensuring that the
bills in fact remained dormant. It also organized a
breakfast for EconCouns to discuss data protection and CAFTA
obligations with the members of the congressional Health

8. (C) We were in frequent contact with the Chamber of
Industries, a majority of whose members supported the CAFTA
but which included a subsidiary chamber of domestic
pharmaceutical producers (Asinfargua) who opposed data
protection and were working with Argentine "expert" Correa.
In May, we sat in on conciliation sessions sponsored by the
chamber with representatives of the international
pharmaceutical industry association (Fedefarma); Bayer's
Central America chief; the Ministries of Economy and Health;
and the PAHO's supposed "expert consultant" to see if it were
possible to draft a CAFTA-consistent text to replace 9-2003,
which had become politically unviable. A text eventually
emerged that Bayer accepted, and FEDEFARMA agreed to try to
clear it with its membership. The issue lay dormant until
November, but we repeatedly urged the executive to be sure
nothing happened, and the Ambassador explained to President
Berger and Vice President Stein on August 2 why Minister
Sosa's initiative would spell disaster for the CAFTA if it

Sosa and Menchu Steamroll Supposed Consensus Bill
--------------------------------------------- ----
9. (C) Without warning, Sosa and Menchu appeared in the
Congress in November with a new bill to eliminate data
protection that was rushed through by unanimous vote. The
FRG alerted us as it was happening, saying that nobody would
vote against it for fear of being branded as a tool of the
transnationals by Sosa and Menchu. When the Ambassador asked
the President and Vice President why they had let Sosa go
ahead, they replied that Sosa had assured them that the bill
he introduced had been fully vetted with the international
laboratories. They were taken aback when we explained that
there had been something approaching consensus on the Chamber
of Industries document back in May but that Sosa's bill bore
no resemblance to that document. The Ambassador urged them
repeatedly to veto the bill, and they indicated that they
would probably do so. However, they needed first to prepare
and alternative bill that they could introduce at the same
time as the veto.

This Will Not Be Fixed by Waiting for CAFTA...
--------------------------------------------- -
10. (C) We stressed at all levels (as we had all along)
that neither the USG nor our Congress could accept
Guatemala's argument that it didn't matter what happened to
data protection because it would be reinstated once CAFTA
entered into force. From the U.S. perspective, any backward
movement from the commitments in the signed CAFTA document
would be considered bad faith and would fuel doubts in our
Congress that Central America was ready for the
responsibilities of a modern trade agreement. As the
deadline approached for vetoing the bill before it
automatically came into effect, Berger told the Ambassador he
felt obliged to sign the bill, and he did so on December 22
despite a telephone call from Ambassador Zoellick the day

...So Somebody Needs to Start Moving
11. (C) The executive branch said it would prepare new
legislation to be ready when the Congress reconvened for the
new year in mid-January. That date approached and no
progress was evident, though we met repeatedly with Berger's
designees for overseeing the new legislation, the
Presidential Commissioners for Plan of Government and for
Competitiveness and Investment. DUSTR Amb. Allgeier arrived
right as Congress was reconvening for a lightening visit,
flying into San Salvador and traveling overland due to a
strike by air traffic controllers at Guatemala City's
airport. Amb. Allgeier explained clearly and persuasively to
Berger and his senior management team why data protection had
to be restored immediately to prevent CAFTA from falling off
the U.S. congressional agenda, perhaps permanently. Berger
said that the new legislation would be ready within days.
When it wasn't, AUSTR Chris Padilla and IPR expert Dan
Mullaney visited to help hammer out new language. They
stayed for what proved a difficult week, as the Vice Minister
of Economy with the supposed technical expertise in the field
insisted on including elliptical language to address
shibboleths of IPR opponents rather than simply laying out
Guatemala's obligations under CAFTA and TRIPS. Frequent
recourse to the Presidential Commissioners and VP Stein was
needed to keep this process on track, but acceptable language
was finally achieved -- subject to written legal
interpretation to be provided by the executive branch.

Public Diplomacy Blitzkrieg
12. (U) Parallel to the U.S. private diplomacy effort to
get satisfactory new legislation drafted and ready, we
launched a major public diplomacy effort to spread the
message that data protection wasn't the obstacle to
affordable public health that opponents were claiming.
Starting with columnists and editorial writers from the print
press, we then placed an op-ed by the Ambassador in a leading
daily, appeared on many of the most widely heard radio
interview and debate programs, and debated Asinfargua and a
pro-generics NGO (coached by Doctors Without Borders) on the
country's leading television public affairs program (Dionisio
Gutierrez's "Libre Encuentro"). We also methodically
approached leaders of the major political parties and their
congressional whips to debunk the myths circulated by the
opponents of data protection and IPR. Many had come to
believe that data protection amounted to a ban on generics
and were surprised to learn that no drug that had received
data protection under the vilified decree 9-2003 was
available in generic form in the U.S., the world's largest
consumer by value of generic medications.

Then Getting the Congress to Move
13. (C) The new data protection legislation was finally
introduced to the Guatemalan Congress at the end of January
together with the bill to ratify CAFTA, with the clear intent
that the two would progress in tandem. Data protection was
then passed to the Economy and Health Committees for markup,
while CAFTA went to Economy and Foreign Affairs. None of the
three committees was controlled by Berger's GANA coalition.
The Chair of the Economy Committee, Mariano Rayo of the
Unionista party of former President Arzu, promptly announced
that he would hold a couple of months of hearings to be sure
that CAFTA was duly ventilated. Rayo seemed unfazed by our
initial urging to move quickly, but it eventually dawned on
him that he would bear the blame if CAFTA fell off the U.S.
congressional agenda because he dallied. However, it also
became clear that his party as a whole would oppose data
protection, despite assurances given us by ex-president Arzu
that all but Pablo Duarte, a longtime and sharp tongued
critic of any IPR protection for pharmaceutical products,
would be with us in the end. The late February visit of the
Business Roundtable delegation of congressional staffers,
including Angela Ellard of the Ways and Means Committee, may
have helped tip the balance with its clear message that CAFTA
would likely die on the vine without immediate action on data
protection. We also got a helpful push with Unionista
President Arzu from visiting former U.S. Ambassador to
Guatemala Donald Planty.

The Final Push
14. (C) The three committees finally voted the data
protection and CAFTA bills out for approval on the floor on
March 3, but not before the Health Committee proposed 12
amendments on data protection. We had received a bootleg
text of the revisions on March 1 and shared them with USTR.
Ten were constructive, but two were not. With the help of
immediate turnaround by USTR on providing us guidance, FRG
deputies made the necessary fixes, including completely
replacing one paragraph we had never liked but the Vice
Minister of Economy had insisted upon. The full Congress
took up the data protection bill first and was set to approve
it as a matter of "national urgency" (a procedure requiring
the approval of 2/3 of all deputies, or 105 votes) after 109
deputies voted to do so on a show of hands. However,
Unionista deputy Pablo Duarte tied the congressional
leadership in knots via procedural tactics, forcing
suspension until the following Tuesday, March 8. Throughout
this and on following days, we were in cellular telephone
contact with the President of the Congress (GANA) and leaders
of three opposition parties on the floor.

15. (C) Proceedings March 8 were marred by miscues over
when proceedings were to start, brinksmanship by some parties
on unrelated issues, demands by the Patriota party (later
joined by others) that an agenda for "compensatory measures"
be negotiated before taking up the CAFTA, and demonstrators
blocking access and throwing rocks, water and animal feces at
deputies who tried to enter the Congress. As issues of
substance were being resolved and absent deputies were
arriving, others had left and the quorum was broken. The
following day, members of the relatively large UNE party
failed to appear, and the new Integracionista grouping of FRG
and PAN defectors walked out. Still, sufficient deputies
remained to approve the bill by simple majority once the
congressional leadership ruled that the March 3 vote on
national urgency was still valid. The vote was an
overwhelming 96 to 14.

16. (C) How Berger lost control of data protection: Until
the very end, President Berger listened only to his Health
Minister. Sosa had convinced the president that
transnational companies had worked with corrupt public
officials at the IGSS and were manipulating TRIPS data
protection standards to deny access to affordable generic
drugs. Berger was angry. He was hearing the same message
from Rigoberta Menchu, whom he felt he could not afford to
ignore, even after hearing that Sosa's arguments may have
been overblown. Moreover, Menchu's collaboration with
Berger's government provides tremendous human and indigenous
rights credibility to a government often characterized as
serving the oligarchy, and the president did not want to see
her leave in protest. His Minister of Economy and Ambassador
to Washington both knew better, but they confessed to us that
they had tried to persuade the President to veto the
Sosa/Menchu bill but that he no longer listened to them on
the subject.

17. (C) Conflicts of Interest: Menchu, and reportedly
Sosa, also have conflicts of interest that could explain
their insistence on eliminating data protection. Menchu
holds the Central American franchise for Mexico's Farmacias
Similares chain of generics stores and is selling rights to
open individual stores of the chain for "US$ 25,000 cash,"
according her full page ads. Sosa is widely rumored to have
links to a Guatemalan generics firm, Biocross, which packages
bulk Indian and Chinese ingredients in individual doses. He
is also rumored to be having financial difficulties with his
own businesses. Former officials of the health ministry tell
us that IGSS delayed purchases of generic medications until
new Biocross products received rushed market approval
(allegedly, 170 products approved in a single week).
Biocross is also linked to former President Portillo's
brother-in-law Juan Antonio Riley Paiz and friend Cesar
Medina Farfan, both under investigation in other corruption
cases. Presidential Commission for Investment and
Competitiveness Fernandez is aware of these allegations
against Sosa and is trying to verify them.

18. (C) The role of local industry: Guatemala's domestic
pharmaceutical copying industry has played an important role
in opposing data protection, though mostly behind the scenes.
Most opposition backed off when we asked for examples of
drugs copied in Guatemala that weren't already free of data
protection worldwide. They were also nervous whenever we
suggested that Guatemalans would be better served by focusing
on quality controls. These same arguments may have helped
quiet Rigoberta Menchu, whose stores do not carry the latest
drugs still under data protection. However, a few local
companies stayed in the fight to the end. Unionista
firebrand Pablo Duarte has reportedly long been financially
associated with the industry and an opponent of IPR since the
first decree in 2000. Draft legislation proposed by one
company's lawyer inadvertently left Carlos Correa's name as
drafter on the "properties" page. PAHO consultant Juana
Mejia de Rodriguez, present and speaking at virtually all
events opposing data protection, is the daughter and wife of
a partner and employee of a major local generics producer.
19. (SBU) A lesson learned on making the IPR case: The
core argument against IPR for drugs pits transnationals'
profits against the poor and infirm. It is simple and
effective, and we found no magic bullets for refuting it.
The information we tend to push back is so complex that
listeners quickly tune out. We were more effective with a
Socratic approach, engaging the critics before an audience
and asking them to explain their concerns in detail. How,
exactly, will data protection make generics unavailable in
poor countries? What drugs that are critical to public
health are kept out of poor countries by data protection?
Etc. Without exception, they slipped up when challenged to
explain how data protection works and affects access to
generics. The most common assertion was that data protection
adds five years to the life of a patent. Whenever we could
say, "No it doesn't," the audience was interested in learning
why not. It is time consuming, but it erodes the credibility
of the sound bites that otherwise resonate so well.