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### Viewing cable 05LIMA2600, VISIT OF STAFFDEL WALKER TO PERU

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
05LIMA2600 | 2005-06-10 14:49 | 2011-05-25 00:00 | 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 05 LIMA 002600

    SIPDIS

    STATE FOR E, EB, WHA/AND, WHA/EPSC, INL
    USTR FOR B. HARMANN
    COMMERCE FOR 4331/IEP/WH/MCAMERON

    SENSITIVE - NOT FOR INTERNET DISTRIBUTION

    E.O. 12958: N/A
    TAGS: ETRD ECON SNAR EFIN EINV SOCI PGOV PE

    id: 34426
    date: 6/10/2005 14:49
    refid: 05LIMA2600
    origin: Embassy Lima
    classification: UNCLASSIFIED//FOR OFFICIAL USE ONLY
    destination:
    header:
    This record is a partial extract of the original cable. The full text of the original cable is not available.

    ----------------- header ends ----------------

    UNCLAS SECTION 01 OF 05 LIMA 002600

    SIPDIS

    STATE FOR E, EB, WHA/AND, WHA/EPSC, INL
    USTR FOR B. HARMANN
    COMMERCE FOR 4331/IEP/WH/MCAMERON

    SENSITIVE - NOT FOR INTERNET DISTRIBUTION

    E.O. 12958: N/A
    TAGS: ETRD ECON SNAR EFIN EINV SOCI PGOV PE
    SUBJECT:  VISIT OF STAFFDEL WALKER TO PERU

    ¶1.  SUMMARY.  (SBU) During a busy two-day visit, Staffdel
    Walker raised pending U.S. company commercial disputes,
    trafficking of narcotics and persons, and the benefits of an
    U.S.-Andean Free Trade Agreement (FTA) in discussions with
    Members of Congress, high-ranking government officials, and
    private sector leaders.  Most of the Peruvians emphasized
    the importance of the FTA as a national development tool to
    reduce the country's high levels of poverty and to provide
    alternatives to illicit coca production.  The well-received
    visit proved useful in explaining the difficult
    Congressional vote on CAFTA and reiterating the message that
    a U.S.-Andean FTA with Peru will require that the GOP
    resolve its few remaining ATPDEA commercial disputes.  END
    SUMMARY.

    ¶2. (SBU) House Western Hemisphere Subcommittee Staff
    Director Mark Walker and Professional Staff Member Dan Getz
    discussed the benefits of a U.S.-Andean FTA with a wide
    cross-section of Peruvians during a June 1-4 visit to Peru.
    Among public officials, they met with Congressmen from
    different political parties, Peru's Chief FTA negotiator,
    the ATPDEA Commercial Disputes Coordinator, officials in the
    Foreign, Finance, and Trade Ministries.  Their private
    sector meetings included discussions of the Central American
    and Andean FTAs' prospects with the AmCham Board of
    Directors, business association leaders, and top economic
    consultants.  Walker and Getz reviewed USAID trade capacity
    building efforts and a pilot project focused on a key
    Millennium Challenge Account criterion - business
    registrations.  On drug trafficking, the StaffDel met with a
    leading NGO and two Congressmen, including the chairman of
    the counternarcotics commission.  During a site visit in the
    port city of Callao, Walker and Getz reviewed efforts by
    Catholic nuns to combat the trafficking in persons.

    FOREIGN MINISTRY ON TRADE AND TIPS
    ----------------------------------

    ¶3. (SBU) Following a Country Team briefing at the
    Ambassador's residence, Walker and Getz visited the Foreign
    Ministry to discuss the U.S.-Andean FTA with Undersecretary
    for Economic Affairs Gonzalo Gutierrez; Director for North
    America Nestor Papolizio; Director for Economic Affairs Juan
    Carlos Gamarra; Foreign Ministry FTA Commission members
    Sylvia Alfaro and Roberto Rodriguez, and FTA Agriculture
    Negotiator Cecilia Gervasi.  Walker expressed appreciation
    for the dinner Peruvian Ambassador Ferrero hosted for
    Western Hemisphere Subcommittee Chairman Dan Burton,
    Walker's boss, and Latin American Ambassadors.

    ¶4. (SBU) Under Secretary Gutierrez highlighted Peruvian
    sensitivities in agriculture and intellectual property
    rights, and urged that the pace of FTA negotiations be
    accelerated because of upcoming Andean elections.  Gutierrez
    noted that there is the perception that the Central American
    Free Trade Agreement (CAFTA) is limiting U.S. flexibility in
    the Andean deal.  Gutierrez emphasized that successes in
    Plan Colombia has had the effect of increasing coca prices
    and production in Peru; yet illicit narcotics are not even
    mentioned during the FTA negotiations.  Gutierrez cautioned
    that if there is too much pressure on traditional small
    farmers growing corn and cotton, there could be a switch to
    illicit crops, such as coca.  The objective, he said, is to
    give Peru stability, eradicate poverty and support
    democratic processes.

    ¶5. (SBU) Director for Human Rights Carlos Roman highlighted
    the Foreign Ministry's new social diplomacy role in
    combating Trafficking in Persons (TIP).  He described how
    the Foreign Ministry had taken the lead in organizing every
    sector that had previously operated on its own with TIP-
    related programs.  Roman stated that the Peruvian Congress
    is now working on a law that will, for the first time,
    define the TIP problem in legal terms.  This will enhance
    the GOP's ability to marshal all its resources to fight TIP.
    (Note: Congress in fact has passed the law.  End note).
    Because of Peru's leadership, the Inter-American Development
    Bank chose Peru to participate in one of three new TIPS
    projects.  Walker praised the Ministry for its work against
    the trafficking in persons, particularly for its quick
    reaction and the leadership role Peru has assumed.  Walker
    stated he would brief Congressman Burton, who served
    previously as the Human Rights Subcommittee Chairman and
    cares deeply about this issue.

    CHIEF FTA NEGOTIATOR: CONCERN ABOUT CAFTA
    -----------------------------------------

    ¶6. (SBU) Peru's Trade Vice Minister and Chief FTA Negotiator
    Pablo de la Flor asked about CAFTA's prospects on Capitol
    Hill, noting that Peru's fate is probably tied to the
    outcome of the Central American trade deal.  Walker
    cautioned that the CAFTA vote will be difficult and close.
    While Congressman Burton had opposed several Free Trade
    deals in the past including NAFTA, he is now a strong
    proponent of CAFTA and the Andean FTA because of our broad
    national interests in the region.  Walker noted that
    Congressman Burton keeps a list and on a daily basis
    discusses the CAFTA vote with undecided Members.  Walker
    welcomed the White House's engagement, which will entail
    calls from President Bush to fence-sitting Members.  Walker
    described why trade votes are so difficult.  Burton's
    district in Indiana, for example, lost its manufacturing
    base following NAFTA's approval:  RCA, Whirlpool, AC Delco,
    Ford, among other companies, relocated their plants to other
    countries.

    ¶7. (SBU) De la Flor stated that Peru's Ministers of Trade,
    Finance, Production, and Agriculture will visit Washington
    the third week of June to lobby for the U.S.-Andean FTA.
    Walker offered to organize a meeting for the Ministers with
    the members of the Western Hemisphere Subcommittee.  De la
    Flor added that Peru's widely-acclaimed economist Hernando
    de Soto has agreed to help with Peru's lobbying, but the
    Vice Minister was not sure of the details of this effort.
    De la Flor made a final plea for increased U.S. flexibility
    on agriculture, noting that it would be short sighted if the
    deal were to collapse over issues such as market access,
    which are not the U.S.'s overriding interests in Peru.  De
    la Flor expressed concern over recent demonstrations by
    agricultural and coca farmers who oppose the FTA.

    ATPDEA DISPUTES NEARING CLOSURE
    -------------------------------

    ¶8. (SBU) Peru's ATPDEA Disputes Coordinator Aurelio Loret de
    Mola reviewed in detail each of the remaining ATPDEA
    disputes.  He highlighted that three arbiters are near a
    final decision in the Northrop Grumman case, and that the
    Tax Court should be issuing a final ruling shortly in the
    dispute involving Luz del Sur (owned by New Jersey-based
    PSEG and California-based Sempra Energy).

    ¶9. (SBU) Loret de Mola stated that in both the Princeton
    Dover and Engelhard cases, a fifth and final Superior Court
    justice will issue an opinion to break the 2-2 ties in each
    dispute.  Oral hearings are scheduled for June 13 and June
    28 respectively.  If either company loses 3-2, the U.S. firm
    can make a final appeal to the Constitutional Court; the GOP
    cannot appeal a 3-2 decision against it.

    ¶10. (SBU) In the LeTourneau case, Loret de Mola reviewed a
    document written by the company in 1968 that his team found
    recently in the Agriculture Ministry's archives.  Loret de
    Mola argues that the GOP should use the total value of the
    road assessed by the company's then-Vice President, which
    totaled about $865,000.  According to Loret de Mola, the
    exercise should now be to take that number through time to
    2005, leaving to a three person panel the task of
    determining the final compensation figure by selecting the
    mix among U.S. Treasury Bills, Treasury Bonds, and the Prime
    Rate.

    ¶11. (SBU) Walker described the frustration among some
    Members of Congress over the long delays in resolving the
    U.S. company disputes, and informed de la Flor, Loret de
    Mola, and the Foreign Ministry officials that failure to
    resolve the pending ATPDEA commercial disputes would prevent
    Peru's inclusion in the U.S.-Andean FTA.  At Walker's
    request, Loret de Mola promised to send via e-mail
    developments in the ATPDEA disputes.

    PERUVIAN CONGRESS: GENERALLY SUPPORTIVE OF FTA
    --------------------------------------------- -

    ¶12. (SBU) During a meeting at the Ambassador's Residence
    with three Members of Congress -- Jacques Rodrich
    (Independent), Kuennen Franceza (Unidad Nacional) and Cesar
    Zumaeta (APRA) -- Walker and Getz discussed the U.S.-Andean
    FTA and the prospects for its approval in Peru.  The three
    Congressmen were generally optimistic.  Zumaeta said he
    believes the Peruvian Congress will approve the trade deal
    provided the Peruvian team has negotiated well.  He noted
    that Peruvians are concerned about the FTA's impact on
    agricultural production and the cost of medicines, and are
    apprehensive since this is Peru's first FTA negotiation.

    ¶13. (SBU) Rodrich stated that timing is key for FTA
    approval, the sooner the better.  The electoral campaign
    will begin shortly as political parties must register in
    October for national elections in April.  Rodrich noted that
    President Toledo will be a lame duck and he exercises little
    party discipline; however, at the moment there appears to be
    a comfortable majority in Congress that supports the FTA.
    Kuennen said that an FTA would be good for Peru because it
    would improve the country's economic integration and reduce
    widespread poverty.  He expressed concerns, however, noting
    that opponents (such as coca growers) are increasing
    pressure through demonstrations in an effort to turn public
    opinion against the FTA.

    PRIVATE SECTOR LEADERS AND ECONOMISTS FULLY BEHIND FTA
    --------------------------------------------- ---------

    ¶14. (SBU) During a meeting with the Board Directors of the
    AmCham, which represents more than 400 companies that
    produce roughly 60 percent of Peru's GDP, Walker answered
    questions about CAFTA and its prospects for approval.  He
    encouraged representatives from large U.S. companies to take
    an activist role in support of CAFTA, emphasizing that
    approval of the Central American trade deal is key to
    obtaining approval of the Andean FTA.  Walker explained that
    there is organized opposition to the CAFTA bill on several
    fronts (labor unions and Democratic party leadership) and
    that the Bush Administration will need to win the vote
    convincing one Member at a time.

    ¶15. (U) Over lunch with Peruvian Business Association
    Leaders -- Foreign Trade Association (Comex) Executive
    Director Patricia Teullet; Peruvian Private Business
    Confederation (Confiep) Vice President Raul Sanchez; and
    former Confiep President Leopoldo Scheelje -- Walker and
    Getz heard about the FTA's importance for Peru's economic
    development and the positive effects it would have on the
    country's fragile democracy and institutions.  All agreed
    that investors would benefit from clearer rules of the game,
    including a well-defined dispute resolution mechanism.

    ¶16. (SBU) In a separate meeting, both Apoyo Consultant
    Alvaro Quijandria and Instituto Peruano de Economia
    Consultant Roberto Abusada highlighted Peru's outstanding
    economic performance and praised the results that ATPDEA
    helped generate.  They stressed the importance of
    consolidating ATPDEA benefits through an FTA.  The
    economists also expressed concerns about the negative impact
    of failing to conclude a trade deal, notably lower economic
    growth and investment and increased social pressures.
    Quijandria emphasized that the FTA is an essential
    development tool; if implemented successfully, the trade
    pact would generate alternatives for traditional farmers in
    the sierra -- the FTA's least likely beneficiaries.
    Quijandria noted that underemployed highland farmers are
    currently migrating to booming agriculture areas, such as La
    Libertad and Ica Departments, but they could easily move to
    the coca-growing, eastern jungle areas of Peru if the FTA is
    not concluded and the economy stagnates.

    FTA-RELATED TRADE CAPACITY BUILDING
    -----------------------------------

    ¶17. (U) AID briefed Walker and Getz on a pilot project in
    the Municipality of Villa del Maria del Triunfo on the
    outskirts of Lima that has dramatically reduced the number
    of days to register a business there, from 211 to between 5-
    7 days.  The project became a success because the
    Municipality was able in six months to reduce duplication
    and confusion in the business registration process as well
    as increase its revenues.  The project helped lower the
    number of registration forms from 20 to seven or eight.  Now
    there is one office that handles the registrations;
    previously there were at least six, and the number of
    officials that review the applications has been reduced from
    34 to six.  USAID would like to reproduce this success story
    in more of Peru's 1800 municipalities, but the agency
    cautioned that a prerequisite is a committed mayor who is
    willing to revamp the registration system.

    ¶18. (U) The Consortium of Private Organizations to Promote
    the Development of Small and Micro Enterprises (Copeme)
    explained how through training and technical assistance it
    helped improve the performance of 30 microfinance
    institutions, improving operational efficiency, lowering
    interest rates, and significantly increasing their
    portfolios and the number of loans issued.

    ¶19. (SBU) Walker and Getz also visited the OAS and State INL-
    sponsored conference of the Andean Countries Cocoa Export
    Support Opportunities (ACCESO), which is a regional network
    designed to provide support and coordination of cocoa
    initiatives in Bolivia, Colombia, Ecuador, and Peru.  The
    goal is to improve the production and marketing of quality
    cocoa and increase the income of small farmers.  The ACCESO
    Secretariat, financed by the Cocoa Industry and USAID, will

    SIPDIS
    be located in Lima and share information and best practices
    throughout the Andean region.  Walker and Getz discussed the
    initiative with representatives from U.S. industry, such as
    Mars, and officials from USAID, OAS, INL, and the World
    Cocoa Foundation.  U.S. industry would like to diversify its
    cocoa supply from Africa (70 percent) and Indonesia (12
    percent) and increase its share from the Andes (5 percent).

    COCA: CONCERNS ABOUT BALLOON EFFECT
    -----------------------------------

    ¶20. (SBU) Alejandro Vassilaqui, the Executive Director of
    CEDRO, a drug-awareness NGO, briefed Walker and Getz about
    expanding coca and poppy production in Peru and the positive
    effects an FTA could have in deterring the production of
    illicit coca.  Congressmen Jose Miguel Devescovi (FIM) and
    Luis Iberico (FIM) -- President of the National Defense,
    Intelligence, Alternative Development and Counternarcotics
    Committee -- also participated in the discussion.  They both
    expressed support for the quick conclusion of the trade
    accord.  The two Congressmen plan to meet with House Foreign
    Affairs Committee Chairman Henry Hyde to discuss Peru's
    narcotics situation during an upcoming visit to Washington.

    ¶21. (SBU) Vassilaqui stated that while Peruvian coca
    production has dropped from 150,000 hectares in 1985 to less
    than 40,000 hectares in 2004, the price of coca has reached
    new highs, raising incentives to produce coca.  He is
    concerned that effective eradication in Colombia has created
    opportunities in Peru for poor farmers to produce illicit
    coca.  Regarding latex production in Peru, which is of a low
    quality, Vassilaqui stated that no one knows the number of
    hectares under poppy cultivation.  He guessed the figure
    ranged between 500-1,000 hectares, but he noted these cannot
    be located by aircraft.  Latex seizures in the first few
    months of 2005 now exceed seizures during all of last year,
    which Vassilaqui attributed to improved police work.

    DOING GOD'S WORK:  FIGHTING TRAFFICKING IN PERSONS
    --------------------------------------------- -----

    ¶22. (U) Walker and Getz visited The Center of the Lima
    Woman, a facility operated by The Adoring Sisters (Las
    Hermanas Adoratrices), an order of nuns that dedicates
    itself to helping prostitutes.  The center provides a home
    and vocational training for 65 underage girls who have
    suffered sexual exploitation.  Twenty of the young women are
    accompanied by their children (one girl forced into
    prostitution over three years gave birth on her twelfth
    birthday).  Formerly an abandoned state facility in the port
    city of Callao, the center teaches the young women how to
    operate a bakery and store, word processing on computers,
    and hair styling and beauty salon skills.  The government
    donated the facility and covers the utility costs of the
    center.  The GOP also provides a psychologist from the
    Ministry of Women's Affairs.  The nuns help cover medical
    expenses including dental care for the young women and their
    children.  The young women stay two-to-three years on
    average at the center, and the nuns estimated that two-
    thirds of those that return to society do not go back to
    prostitution.  The nuns are recognized as heroes in the
    Department's Country Report on Trafficking in Persons.

    COMMENT: A USEFUL MESSAGE
    -------------------------

    ¶23. (SBU) Staffdel Walker successfully conveyed to different
    Peruvian audiences the difficult task ahead for the Bush
    Administration in obtaining Congressional approval of CAFTA.
    He helped dampen expectations that the USG can be more
    flexible in its FTA negotiations with its Andean partners.
    The Staffdel also helped reinforced the USG message to the
    GOP:  that Peru needs to resolve its outstanding ATPDEA
    commercial disputes to be part of a U.S.-Andean FTA.

    ¶24. (U) The Staffdel cleared this message.

    STRUBLE

    =======================CABLE ENDS============================

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