Wikileaks El Salvador VII and VIII - McDonalds

The subject of the seventh and eighth Wikileaks cables on El Salvador relate to McDonald's efforts to prevent anti-US FMLN judges from hearing its cases get a fair hearing in court.

The seventh cabled is entitled "Appeals Court Awards Former McDonald's Franchise $24 Million." The document was written by US Ambassador Hugh Barclay on December 21, 2005 during the second year of President Saca's administration.

Here's the summary:

In an unexpected twist in McDonald's ten-year legal battle with former franchisee Servipronto, the Second Court of Appeals ruled on December 7, 2005, that the U.S. fast-food giant had illegally terminated its franchising agreement with Servipronto on July 1, 1996, and therefore owed the local firm $24 million in damages for unrealized earnings during what would have been a 20-year extension, to June 30, 2016. One other case involving McDonald's and Servipronto has been resolved in favor of McDonald's, while two others are unresolved. The Salvadoran Courts are inefficient, politicized, and occasionally corrupt. Their inability to effectively enforce commercial law detracts from the country's ability to attract investment. Post will continue to encourage the Government of El Salvador to press for meaningful judicial reform.

The eight cable is an "Update on McDonald's Contractual Dispute."  This document was also written by US Ambassador Hugh Barclay on February 16, 2006.

Here's the summary for this cable:

On December 7, 2005, an appeals court ruled that McDonald's had illegally terminated its contract with a local franchisee on July 1, 1996, and therefore owed him $24 million in losses and damages. McDonald's is appealing the decision, but the composition of the chamber that will hear the case makes it unlikely that justice will be served. On February 10, McDonald's corporate representatives outlined for the Ambassador the company's strategy to pressure the Salvadorans to ensure a fair hearing by linking the case to CAFTA-DR implementation--an approach the Ambassador suggested would be counterproductive. They also outlined efforts to convince Salvadoran government officials of the importance that the case get a fair hearing, which the Ambassador agreed to support vigorously.

The Guardian has the story here.  In reading the cables, it appears that McDonald's was successful in several court cases against a former franchisee, Roberto Bukele.  Bukele lost his franchise rights after not abiding by the terms and conditions set by McDonald's.  However, in 2005 another appeals court found for Bukele.  McDonald's continued to engage in lobbying campaigns in both El Salvador and Washington in hopes of attaining a positive outcome to the case as it moved to the Supreme Court.

The Guardian labeled the story McDonald's used US to put pressure on El Salvador, but it could just have easily been written as "McDonald's Disappointed with Support from US Embassy." 

The US Ambassador and others mentioned the McDonald's case to President Saca and other members of the government, "emphasizing the stakes at play for a government in desperate need of foreign investment."  Depending on how this statement was conveyed, it could obviously be taken as a threat or simply a statement of fact.

However, the ambassador disagreed with some of the steps taken by (or threatened by) McDonald's and warned them that the actions would be counterproductive to McDonald's efforts to get a fair hearing in El Salvador and that they would undermine US economic interests in the country (the passage of CAFTA-DR).  From the February cable,

On February 10, McDonald's Vice President for Government Relations Dick Crawford and Maria Legett briefed the Ambassador on the company's efforts to see a fair resolution of the case. They explained that the company has engaged in a Washington-focused advocacy effort to put pressure on the Salvadorans to resolve the case according to the rule of law, suggesting that CAFTA-DR implementation should be delayed pending resolution of the case. The Ambassador, however, voiced concern that McDonald's strategy ran directly counter to U.S. interests in seeing CAFTA-DR implemented as soon as possible. Emboffs also noted that McDonald's invocation of CAFTA-DR in the lead-up to legislative elections would play into the hands of those who have resisted CAFTA-DR by alienating senior government officials who are already working to see that the case is resolved according to the rule of law and by complicating efforts to get additional CAFTA-related reforms through the Legislative Assembly. It would also unnecessarily thrust the case into the public spotlight, creating just the kind of negative publicity that McDonald's representatives have said they seek to avoid. Crawford acknowledged these concerns and agreed to tone down, but not cease, his company's efforts on this issue.