TOLEDO AT THE HELM

C O N F I D E N T I A L SECTION 01 OF 03 LIMA 003418

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CONFIDENTIAL

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E.O. 12958: DECL: 06/11/06
TAGS: PGOV PHUM KDEM PHUM KDEM PHUM KDEM PE PEPGOV PEPGOV
SUBJECT: TOLEDO AT THE HELM

REF: LIMA 03297

CLASSIFIED BY AMBASSADOR JOHN R. HAMILTON FOR REASONS
1.5(B) AND 1.5(D).


1. (C) SUMMARY: ALEJANDRO TOLEDO WAS TENACIOUS IN HIS
STRUGGLE TO REACH THE PRESIDENCY AND WILL APPLY THE SAME
TENACITY TO SUCCEED IN OFFICE. HE COMES TO OFFICE WITH NO
GOVERNMENT OR MANAGEMENT EXPERIENCE, HOWEVER, AND HIS
PROPENSITY TO BE A ONE-MAN SHOW CAN BE A NAGGING
SHORTCOMING. NONETHELESS, IN OUR VIEW, HE WILL ULTIMATELY
EXERCISE SOUND JUDGMENT. HE FACES THE PRESSURE OF
EXORBITANT CAMPAIGN PROMISES, EXPECTATIONS THAT A VICTORY
FOR DEMOCRACY CAN SPEEDILY RESOLVE PERU'S ILLS, AND
POLITICAL DEBTS. HE ALSO FACES DIFFICULT ECONOMIC
CONDITIONS. IT IS THE ECONOMY WHERE HE WILL FOCUS, WHILE
TRYING TO GIVE OTHER PRIORITIES, SUCH AS JUDICIAL AND
MILITARY REFORM, THEIR DUE. INTERNATIONALLY, HE WILL
PURSUE AN INDEPENDENT COURSE, WHICH NEVERTHELESS WILL BE IN
ACCORD WITH US MUCH OF THE TIME, AND BE LESS CONCERNED
ABOUT BEING IN LOCKSTEP WITH PERU'S NEIGHBORS. WHETHER HIS
GOVERNMENT SUCCEEDS OR FAILS WILL ALSO BE SEEN AS A TEST
FOR DEMOCRACY. END SUMMARY.

GOVERNING STYLE
===============

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2. (C) WHEN ALEJANDRO TOLEDO ASSUMES THE PRESIDENCY JULY
28, HE WILL BRING TO OFFICE A STRONGLY PERSONAL ONE-MAN
STYLE. DECISION-MAKING WILL RESIDE WITH HIM AS IT HAS
DURING THE CAMPAIGN. ALTHOUGH HE TALKS A GOOD GAME ABOUT
EMPOWERING HIS MINISTERS, TOLEDO HAS NOT PROVEN ABLE TO
DELEGATE AUTHORITY. A SOLITARY LEADER, HE DOES NOT EASILY
EXTEND HIMSELF OR HIS TRUST TO OTHERS. CLOSEST TO HIM IS
HIS WIFE, ELIANE KARP. NEGATIVE PERCEPTIONS OF HER
INFLUENCE HAVE LED THE TOLEDO CAMP TO LOWER HER PROFILE
TEMPORARILY, BUT HER INFLUENCE IS SIGNIFICANT AND WILL
LIKELY GROW.


3. (C) ALSO AFFECTING TOLEDO'S PERSONAL STYLE IS HIS NEED
FOR AFFIRMATION, DOMESTIC AND INTERNATIONAL. AT HOME, THIS
CHARACTERISTIC, ACCORDING TO CRITICS, BRINGS HIM TO THE
BORDERS OF A MESSIANIC COMPLEX. AFTER THE VINDICATION OF
HIS ROLE IN RETURNING DEMOCRACY TO PERU, TOLEDO NOW SEES
HIMSELF AS SINGLE-HANDEDLY RESPONSIBLE FOR LIFTING PERU OUT
OF POVERTY OR, AT A MINIMUM, OUT OF ECONOMIC RECESSION.
THE TEST OF THE TOLEDO GOVERNMENT ON ECONOMIC ISSUES IS
ALSO THE TEST OF TOLEDO THE MAN - HIS PERSONAL SUCCESS OR
FAILURE BOUND UP WITH THAT OF HIS GOVERNMENT. ON THE
INTERNATIONAL SCENE, TOLEDO'S NEED FOR APPROVAL INFLUENCES
HIS ATTITUDE TOWARDS THE USG. HE HARBORS SOME RESENTMENT,
FOR EXAMPLE, THAT WE DID NOT BACK HIM OPENLY WHEN HE
OPPOSED FUJIMORI AND SOUGHT INTERNATIONAL RECOGNITION. HE
WILL EXPECT TO BE TREATED ON EQUAL FOOTING WITH WORLD
LEADERS, INCLUDING WITH PRESIDENT BUSH, AND WILL USE THE
ATTENTION ACCORDED HIM BY OTHERS, REGARDLESS OF THE MERITS
OF THE COMPARISON, AS A BASELINE.

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4. (C) THE POSITIVE SIDE OF TOLEDO'S INDIVIDUALISM IS HIS
TENACITY AND HIS DETERMINATION TO SUCCEED. HE IS PROUD OF
BEING A FIGHTER, DEMONSTRATED IN HIS TWO-YEAR STRUGGLE TO
GET TO THE PRESIDENTIAL PALACE. HE COMES TO THE JOB,
HOWEVER, WITH NO EXPERIENCE AS AN ELECTED OFFICIAL OR IN
MANAGEMENT. THIS SHORTCOMING WILL MAKE THE DECISION-MAKING
PROCESS IN TOLEDO'S GOVERNMENT APPEAR DYSFUNCTIONAL, BUT WE
BELIEVE TOLEDO'S DECISIONS ON THE KEY ISSUES OF IMPORTANCE
TO THE U.S. WILL ULTIMATELY BE THE RIGHT ONES.

PRESSURES
=========


5. (C) CHIEF AMONG THE PRESSURES TOLEDO WILL FACE ARE THE
EXPECTATIONS HE HAS RAISED WITH HIS CAMPAIGN PROMISES.
NEWSPAPERS HAVE PUBLISHED LISTS OF THEM AND THERE ARE MANY
THAT WILL BE KEEPING SCORE. ONE ANTI-TOLEDO DAILY, FOR
EXAMPLE, DID NOT WAIT A DAY AFTER THE JUNE 3 ELECTIONS TO
HIGHLIGHT THAT TOLEDO ADVISORS HAD ALREADY BACKTRACKED ON
TWO PROMISES RELATED TO TAXES. TOLEDO'S POPULAR SUPPORT
WILL HELP HIM WEATHER MUCH OF THE CRITICISM, AT LEAST IN
THE FIRST THREE TO SIX MONTHS IN OFFICE. HE IS AWARE THAT
HE HAS TO BE PUBLICLY AGGRESSIVE IN REDUCING THOSE
EXPECTATIONS, AND HAS ALREADY BEGUN TO DO SO, SPEAKING OF

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NSAE-00 NSCE-00 OIC-02 OIG-03 OMB-01 OPIC-01 PA-00
PC-01 PM-00 PRS-00 ACE-00 P-00 SP-00 STR-00
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P 191453Z JUN 01
FM AMEMBASSY LIMA
TO SECSTATE WASHDC PRIORITY 0718
INFO AMEMBASSY ASUNCION
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SUBJECT: TOLEDO AT THE HELM

THE NEED FOR PATIENCE.


6. (C) THERE IS ALSO THE QUESTION OF WHAT HE MAY OWE
POLITICALLY TO HIS CAMPAIGN'S SUPPORTERS. WITH ONLY
RUDIMENTARY CAMPAIGN FINANCING RULES, THERE IS LITTLE
INFORMATION ABOUT POSSIBLE FINANCIAL BACKERS AND THEIR
INTERESTS. WITH THE EXCEPTION OF THE ONE MILLION DOLLARS
GEORGE SOROS' OPEN SOCIETY PROVIDED FOR THE JULY 2000 ANTI-
FUJIMORI PROTESTS (CUATRO SUYOS),ONLY MEDIA BUSINESSMAN
BARUCH IVCHER HAS BEEN IDENTIFIED AS A CONTRIBUTOR. THERE
ARE RUMORS THAT ANOTHER, SOMEWHAT UNSAVORY BUSINESSMAN,
LEON RUPP, HAS BEEN A MAJOR BACKER. RAUL DIEZ CANSECO, THE
FIRST VP FROM AN OLD, WEALTHY LIMA FAMILY, ALSO HELPED TO
BANKROLL TOLEDO'S CAMPAIGN.


7. (C) TOLEDO'S MOST PROMINENT POLITICAL DEBT IS TO
MORALIZING INDEPENDENT FRONT (FIM) LEADER FERNANDO OLIVERA.
FIM PLAYED THE CAMPAIGN ATTACK DOG AGAINST APRA'S ALAN
GARCIA AND PLEDGED ITS ELEVEN LEGISLATORS TO BACK TOLEDO IN
THE CONGRESS. OLIVERA, HOWEVER, IS NOT VIEWED AS A
RELIABLE POLITICAL PARTNER (REFTEL). THE KEY FOR TOLEDO
WILL BE TO BALANCE ANY REWARDS FOR OLIVERA AGAINST
MAINTAINING COHESION IN HIS OWN PARTY'S RANKS. WITHOUT THE
FIM, THE ONLY OTHER SUBSTANTIAL CONGRESSIONAL BLOC TOLEDO
HAS SUCCESSFULLY COURTED, TOLEDO'S LEGISLATIVE AGENDA MAY
SUFFER.

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YES, IT'S THE ECONOMY
=====================


8. (C) TOLEDO WILL FOCUS HIS ENERGIES ON THE ECONOMY,
WHERE HE IS DESPERATE TO GET POSITIVE GROWTH FAST. HE HAS
STAKED MUCH ON REVITALIZING THE AGRICULTURE SECTOR,
GENERATING EMPLOYMENT AND BRINGING PERU OUT OF RECESSION.
HE HAS A SOLID, IF SOMEWHAT ECLECTIC, ECONOMIC TEAM AND IS
BANKING ON THE LYNCHPIN CABINET APPOINTMENT OF WELL KNOWN
INVESTMENT BANKER PEDRO PABLO KUCZYNSKI. HIS TWO VICE
PRESIDENTS, RAUL DIEZ-CANSECO AND DAVID WAISMAN, BRING
BUSINESS EXPERIENCE TO THE LEADERSHIP TEAM.


9. (C) THE ANTENNAE ARE OUT, HOWEVER, FOR POSSIBLE TURNING
POINTS IN HOW TOLEDO HANDLES ECONOMIC MATTERS WHEN THESE
ARE TOUGH ISSUES AND POTENTIALLY COMPETING ADVICE AND
INTERESTS. ONE FEAR IS THAT HE MAY RESORT SIMPLY TO HIS
OWN ECONOMICS EXPERTISE RATHER THAN RELYING ON OR LISTENING
TO ADVISORS. ANOTHER IS THE POSSIBILITY THAT HE MAY BEGIN
TO PURSUE POPULIST MEASURES IN RESPONSE TO SOCIO-ECONOMIC
PRESSURES AS HIS ECONOMIC RECOVERY PROGRAM EITHER TAKES
LONGER THAN EXPECTED OR DOES NOT MEET EXPECTATIONS.


10. (C) NON-DOMESTIC FACTORS, BEYOND TOLEDO'S CONTROL,
WILL ALSO INFLUENCE HOW HE DOES ON THE ECONOMY. ON A
MACRO-LEVEL, A SLOW DOWN IN THE U.S. AND WORLD ECONOMIES
WILL HAVE A SIGNIFICANT EFFECT. IF THE U.S. ECONOMY
SLIDES, EVEN GOOD DECISIONS MAY NOT HAVE THE DESIRED
EFFECT. WORLD PRICES FOR PERU'S COMMODITIES AND THE
POSSIBLE RETURN OF THE DESTRUCTIVE EL NINO WEATHER PATTERN
ARE ADDITIONAL FACTORS THAT COULD AFFECT PERU'S GROWTH IN
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THE COMING YEARS. MORE SPECIFICALLY, HOW THE ANDEAN TRADE
PREFERENCES ACT (ATPA) FARES IN THE U.S. CONGRESS WILL ALSO
BE IMPORTANT.


11. (C) IN ADDITION TO THE ECONOMY, WE CAN EXPECT TOLEDO
TO DEVOTE ATTENTION TO JUDICIAL REFORM AND TO THE MILITARY.
THE INDEPENDENCE OF THE JUDICIARY HAS RECEIVED A STRONG
BOOST UNDER THE PANIAGUA GOVERNMENT AND IT IS LIKELY TO
REMAIN ON THE SAME TRACK UNDER TOLEDO. NEVERTHELESS,
ALTHOUGH JUDICIAL INDEPENDENCE HAS BEEN LARGELY RESTORED TO
THE STATUS QUO ANTE FUJIMORI, THE PERUVIAN JUDICIAL SYSTEM
REMAINS IN DIRE NEED OF RADICAL REFORM AND MODERNIZATION.
THE MILITARY, DISCREDITED FOR ITS CORRUPT LINKS TO FORMER
INTELLIGENCE ADVISOR VLADIMIRO MONTESINOS, FACES AN
UNSYMPATHETIC MASTER IN TOLEDO. HE HAS PUT THE ARMED
FORCES ON NOTICE ABOUT PURSUING CORRUPTION AND ABUSES,
FAVORS MILITARY BUDGET CUTS AND WILL PRESS FOR GREATER
CIVILIAN CONTROL.

TOLEDO ON THE WORLD STAGE
=========================


12. (C) TOLEDO IS UNLIKELY TO PURSUE POLICIES INIMICAL TO
THE UNITED STATES. FAMILIAR WITH THE SCOPE OF THE

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INFO LOG-00 NP-00 AID-00 AMAD-00 CIAE-00 SMEC-00 INL-00
DODE-00 DOEE-00 SRPP-00 DS-00 EB-00 EUR-00 VC-00
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DCP-01 NSAE-00 NSCE-00 OIC-02 OIG-03 OMB-01 OPIC-01
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SP-00 STR-00 TRSE-00 USIE-00 PMB-00 DSCC-00 PRM-01
DRL-02 G-00 NFAT-00 SAS-00 /015W
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P 191453Z JUN 01
FM AMEMBASSY LIMA
TO SECSTATE WASHDC PRIORITY 0719
INFO AMEMBASSY ASUNCION
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TAGS: PGOV PHUM KDEM PHUM KDEM PHUM KDEM PE PEPGOV PEPGOV
SUBJECT: TOLEDO AT THE HELM

BILATERAL RELATIONSHIP, HE WILL NONETHELESS SEEK TO ENSURE
HE MAKES HIS MARK. IN COUNTER NARCOTICS, FOR EXAMPLE,
TOLEDO WILL LIKELY SUPPORT COCA ERADICATION, BUT HE WILL
INSIST ON CREATING JOBS FOR FORMER COCA GROWERS. TO ASSIST
THESE FARMERS, TOLEDO WILL LIKELY ARGUE FOR TRADE
PREFERENCES ON TEXTILES AND OTHER PRODUCTS. IN SUPPORTING
ALTERNATIVE DEVELOPMENT, TOLEDO WILL FAVOR ALTERNATIVE
CROPS, BUT HE MAY PROMOTE INTERNATIONAL PRICE SUPPORTS.
OVERALL, TOLEDO HAS INDICATED HE WILL TAKE A HARD LINE
AGAINST NARCOTICS TRAFFICKERS.


13. (C) UNLIKE THE INTERIM PANIAGUA GOVERNMENT, WHICH
FAVORED WORKING IN CONSENSUS WITH ITS NEIGHBORS REGARDLESS
OF DIFFERENCES, TOLEDO WILL PLAY A MORE INDEPENDENT ROLE IN
REGIONAL RELATIONS. LINKS WITH BRAZIL WILL NEED REPAIR
AFTER THE RECENT HISTORY OF BRAZILIAN FAVORING OF FUJIMORI
AND OF ONE OF TOLEDO'S FIRST ROUND OPPONENTS, LOURDES
FLORES NANO. SIMILARLY, THERE IS NO LOVE LOST WITH
VENEZUELA'S HUGO CHAVEZ, REGARDED BY TOLEDO AND MANY IN HIS
CAMP AS THE ANTI-DEMOCRAT. IN ADDITION, THERE IS THE
COMMON PERCEPTION THAT, IN PART THANKS TO CHAVEZ,
MONTESINOS HAS BEEN SUCCESSFUL IN REMAINING A FUGITIVE.

BOTTOM LINE
===========


14. (C) TOLEDO HIMSELF HAS GENERATED HIGH EXPECTATIONS FOR
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HIS PRESIDENCY. HIS EVERY ACTION WILL BE SUBJECT TO
SCRUTINY. AND JUST AS HE SEEKS TO PUT HIS PERSONAL MARK ON
HIS TENURE, SO WILL HE BE HELD PERSONALLY RESPONSIBLE. BUT
THERE IS MORE AT STAKE IN PERU THAN WHETHER TOLEDO SUCCEEDS
OR FAILS. THE DEMOCRATIC PROCESS GAVE PERUVIANS A CHOICE
BETWEEN TWO -- FOR MANY UNPALATABLE -- CANDIDATES. HOW
WELL TOLEDO FARES WILL ALSO BE SEEN AS A TEST FOR DEMOCRACY
IN PERU AND THE REGION.

HAMILTON

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