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### Viewing cable 05LIMA2235, AMBASSADOR DISCUSSES FREE TRADE IN PIURA

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
05LIMA2235 | 2005-05-18 18:52 | 2011-05-21 12:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Lima
Appears in these articles: elcomercio.pe

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    UNCLAS SECTION 01 OF 02 LIMA 002235

    SIPDIS

    DEPT FOR WHA/AND
    DEPT PASS TO PEACE CORPS
    USTR FOR B. HARMAN

    SENSITIVE

    E.O. 12958: N/A
    TAGS: ETRD EINV ECON PGOV PE
    SUBJECT: AMBASSADOR DISCUSSES FREE TRADE IN PIURA

    ¶1.  (SBU) Summary.  During a May 5-6 trip to Piura in
    northern Peru, the Ambassador met with local dignitaries to
    discuss free trade and economic development, inaugurated a
    new AID-sponsored small business center, toured a local
    textile plant, and visited Peace Corps volunteers.  Although
    the World Bank lists Piura as a relatively wealthy
    department, the Regional Government asserts that Piura's
    poverty rate is over 50 percent.  The Regional Government
    recognizes the need to promote economic growth in all
    sectors, particularly in agriculture, textiles and
    handicraft work.  Even though local agriculture producers
    benefit from access to U.S. markets, local cotton producers
    fear that American cotton will flood the Peruvian market
    under a U.S.-Andean Free Trade Agreement.  End Summary.

    Rich in Resources, But High Levels of Poverty
    ---------------------------------------------

    ¶2.  (U) Piura Department has abundant natural resources,
    with over 245,000 hectares of arable land and large
    phosphate deposits.  Despite mineral wealth, the northern
    Department suffers from high levels of poverty.  Over 50
    percent of the population (approximately 700,000 people)
    lives in rural areas.  Although Piura's per capita GDP in
    2000 was $1,800, close to the national levels of $2,100, the
    standard of living in the rural areas was significantly
    lower, with a per capita GDP of less than $800.  The
    majority of Piurans make their living by producing
    agricultural products, including mangos and lemons.  Piura
    produces 64 percent of Peru's total mango crops - more than
    three-quarters of these are exported to the United States,
    totaling $13.5 million in 2004.  Textile and artisan
    production accounts for 25 percent of employment.

    Local Government Interested in Investment
    -----------------------------------------

    ¶3.  (SBU)  During his trip, the Ambassador met with the
    Regional President, Mayor of Piura, and the Mayor of
    Catacaos to discuss social and economic development,
    including the benefits of an FTA and possible U.S.
    investment.  Regional President Cesar Trelles Lara (APRA)
    explained that his government is coordinating with several
    other northern departments, including Tumbes, Lambayeque,
    Cajamarca, and La Libertad, to establish an economic zone.
    The priority of the Piura government is to improve the
    region's competitiveness by expanding agricultural
    production and improving infrastructure, including building
    highways, expanding the airports, and developing the ports
    at Paita and Bayovar.  With improved transportation
    linkages, Trelles stated, investment, exports, and people
    will move more freely in and out of Piura.

    ¶4.  (SBU) Mayor Eduardo Caceres (APRA) declared that the
    local government is committed to reducing the level of
    poverty.  The recent privatization of Bayovar Phosphates, he
    noted, should help with economic growth.  Caceres also
    hinted that there were several regional projects, including
    airport and port concessions, which will be open to any
    future U.S. investment.

    Inauguration of New Economic Service Center
    -------------------------------------------

    ¶5.  (SBU) On May 5, the Ambassador participated in an
    inauguration ceremony for the opening of a USAID/Poverty
    Reduction and Alleviation Activity (PRA) Economic Service
    Center in Piura.  The center will offer non-financial
    services, including market analysis, supply information and
    organization, and technical assistance, to local small
    businesses in an effort to promote business development.  By
    encouraging economic growth in the region, the Economic
    Service Center will help prepare small businesses for future
    business opportunities under a U.S.-Andean FTA.

    Ambassador Discusses Cotton Issues
    ----------------------------------

    ¶6.  (SBU) Piura is one of four places in the world that
    produces pima cotton, which is used to make high-quality
    textiles.  The Ambassador, on May 6, toured Textil Piura,
    one of Peru's largest spinning factories.  Textil Piura,
    like many other textile plants in Peru, uses a substantial
    amount of U.S. cotton - 20 to 50 percent - to make its
    finished products.  During a lunch before the tour, the
    Ambassador addressed local business officials about the
    economic benefits of an FTA.  Piura Congressmen Humberto
    Requena questioned how the FTA would affect the local cotton
    industry, highlighting local fears that U.S. cotton will
    either flood the market or will hold down local prices once
    the FTA is signed.  Noting that Peru produces only 50
    percent of the cotton used by local manufacturers, the
    Ambassador explained that U.S. cotton does not displace
    Peruvian cotton.  Imports of U.S. cotton, rather, enable
    Peru to continue producing and exporting high quality
    textile products; the Ambassador noted that overall Peruvian
    textile exports to the U.S. have grown since January 2005
    despite the elimination of quotas for China.  That is
    because Peru exports high quality goods in a niche where
    China does not compete well.  Congressman Requena agreed,
    and asked that the Ambassador further clarify the issue to
    the Peruvian Congress.  (Note: The Ambassador emphasized the
    same point in a meeting at Congress' Economic Commission one
    week later.  End Note.)

    Visit to Peace Corps Sites
    --------------------------

    ¶7.  (U) The Peace Corps has a robust presence in Piura, with
    25 volunteers living and working throughout the region.
    Volunteers work in several sectors, including small business
    development, community health, and youth development.  On
    May 6, the Ambassador toured two of the regional Peace Corps
    sites; one a small business program approximately 15 minutes
    from Piura where locals can learn how to produce high
    quality silver and gold jewelry; the other a rural health
    post in a small town 30 minutes from Piura.

    Comment
    -------

    ¶8.  (SBU)  On paper, Piura, a wealthy department along the
    northern coast of Peru, should benefit from the U.S.-Andean
    FTA.  Even though the regional government supports the FTA,
    popular support varies by economic sector.  Agriculture
    continues to be a key sticking point.  Piuran mango farms
    currently benefit from improved access to U.S. markets under
    ATPDEA and are firm supporters of the FTA.  In contrast,
    local cotton farmers mistakenly continue to fear that a
    trade agreement will allow U.S. cotton to undermine them.
    This trip highlighted that regional governments and local
    leaders need to do a better job of explaining the benefits
    of trade and investment to these uninformed groups.  We will
    continue working with local governments on outreach efforts
    in the departments.

    STRUBLE

`