TOLEDO'S STATE OF THE NATION SPEECH

UNCLAS SECTION 01 OF 04 LIMA 003337

SIPDIS

E.O. 12958: N/A
TAGS: PGOV ECON PREL PHUM PE
SUBJECT: TOLEDO'S STATE OF THE NATION SPEECH


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SUMMARY
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1. A confident President Alejandro Toledo delivered his
annual State of the Nation speech on 7/28, in which he touted
his administration's economic, political and social
successes; emphasized that these accomplishments were
achieved in conjunction with the Congress, political parties
and the population; vowed to maintain fiscal discipline while
expanding social assistance programs; rejected attempts by
regional governments to enact their own coca legislation;
called on all politicians and parties to conduct positive
campaigns in the lead-up to the April 2006 elections;
expressed support for electoral reform aimed at limiting the
number of parties in the next Congress and strengthening
parties' control over legislators; and challenged his
potential successors to maintain and build upon his
government's policies. In contrast to the past 3 years,
Toledo projected the air of a confident leader who is in
control. Unfortunately, the length of Toledo's speech (2:20)
watered down its positive message, and the seemingly endless
barrage of statistics opened the door to nit-picking
criticism by opposition leaders and commentators, which have
dominated media coverage of the address. End Summary.

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ACCOMPLISHMENTS TO DATE
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2. The President divided his speech into three parts: (1) a
review of his government's accomplishments over the past four
years; (2) a listing of its objectives and commitments for
the coming year; and (3) a reflection on the 2006 election
and the issues at stake. He particularly stressed his
administration's economic achievements: 47 consecutive
months of sustained growth; 25 percent cumulative growth;
inflation below 2 percent; 75 percent increase in
international monetary reserves; reduction of the fiscal
deficit from 3.4 percent to 1.1 percent; and the doubling of
exports, powered by new non-traditional agricultural
products.


3. Toledo cited numerous statistics to demonstrate that this
growth is trickling down to the poorest sectors, with those
living in extreme poverty falling from 24.1 to 19.2 percent
of the population, those living in poverty decreasing from
54.3 to 51.6 percent, and a 31 percent increase in food
consumption by the poorest sectors over the past year alone.
He also pointed out that much of this economic development is
occurring outside of Lima, with 16 of 24 departments posting
growth rates higher than the capital's and with rural poverty
falling from 77.1 to 72.5 percent.


4. The President cited a wide array of social spending
initiatives over the last four years that had brought
benefits to many Peruvians. These included:

-The amount of paved roads has increased by 15 percent (a
figure that will go up to 20 percent by the end of his term)
thanks to an investment of approximately USD 130 million.

-Public sector salaries have gone up, including an 87 percent
increase for teachers.

-Medical attention to the poor has doubled in rural areas.

-Ninety-five thousand new houses constructed for poor
Peruvians in the last 4 years, a figure that should reach
110,000 by the end of Toledo's term.

-Working with the municipalities, the GOP has given out
346,000 land titles to Peruvians, including citizens in the
Amazon, Cusco, and Madre de Dios regions.


5. Toledo mentioned several investment projects, some long
awaited, that he considered cornerstones of his
administration's export success. These included:

-The Camisea Gas Project, which had been in the planning
stage for 22 years.

-Mining concessions in Bayovar in Piura and Las Bambas in
Apurimac, both projects that had been planned, but never
acted on, for decades. Together, the projects represented
USD one billion in investment, the President said.


6. Toledo emphasized the administration's program of
decentralization, including the imminent transfer, by means
of a Presidential Decree, of 28 more Ministerial duties to
Regional Governments.

7. The President stressed his achievements in foreign
affairs, citing the following:

-The recognition Peru received as recent President of the
Andean Community and as President of the newly formed South
American Community of Nations.

-Peru's recent election to represent Latin America and the
Caribbean in talks with the European Union.

-The GOP's success in forging strategic and economic
partnerships with Brazil (the Inter-Oceanic Highway),China
(Peru's recent designation as a high priority tourist
destination),and the United States. In this last
connection, the President mentioned the eleven negotiating
rounds that Peru has undertaken with the U.S. on the FTA and
acknowledged the important contribution ATPDEA has made to
Peru's economic development and export diversification.

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OBJECTIVES AND COMMITMENTS
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8. The President mentioned commitments and initiatives for
his administration in his final year in office, including:

-The creation of two new Ministries, dedicated to Tourism and
Culture.

-The establishment of Camisea II, an additional gas export
project.

-The construction of an inter-oceanic highway connecting Peru
and Brazil, giving the latter country direct access to the
Pacific through Peru.

-The elaboration of a scheme of subsidies for the poorest
Peruvians under the rubric of the plan &Together8 (Juntos),
which would begin in September in the regions of Chuschi and
Ayacucho. This would include approximately USD 40 million
for housing, health, computers, subsidized nutrition and a
variety of other aid initiatives that will help 1,200 poor
families.

-The investment of USD 30 million in a program of collective
reparations for the populations that suffered most from the
violence of the 1980s and 1990s as well as a promise that the
GOP would study the possibility of offering individual
reparations for victims.


9. In addition, the President described a number of
secondary initiatives, including: a new law for public school
teachers that would emphasize meritocracy; additional road
building projects, an initiative to commit ministries to
create more decentralized, regional offices; natural gas
projects for Junin and Ayacucho; the construction of a new
National Library; a program to enable teachers, police and
others to buy low-cost computers; and the elaboration of a
National Plan for Human Rights.

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AUTHORITY AND GOVERNABILITY
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10. Toledo made several announcements to reinforce the
GOP,s authority and answer citizen concerns about security
and corruption, including:

-A promise that those who block roads will be punished.

-A demand that regional governments respect the limits of
their authority and not seek to legislate on national
matters. (Note: This was a clear reference to recent
attempts by the Regional Governments of Cusco and Huanuco to
legalize coca cultivation. End Note.)

-The creation of three new Anti-Corruption Courts in the
Superior Court of Lima. Toledo said that the GOP would
finance the new courts, but that their effectiveness would
depend upon the willingness of the Justice Sector to act more
swiftly and decisively "prioritizing the most serious cases,"
including those involving financial crimes, human rights,
arms and narcotics trafficking, and avoiding "both the
dispersion of efforts and the creation of spectacles."

-A project to guarantee Citizen Security that will see the
construction of four new police training schools. In
addition, the President also mentioned the construction of
two new, higher security prisons so that criminals can not
use incarceration as a base from which to plan crimes.

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SETTING THE AGENDA FOR THE FUTURE
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11. The President urged several measures to promote future
stability upon his political audience. In particular, he
asked that:

-the basic macroeconomic model based on fiscal responsibility
not be changed. Peru cannot &reinvent itself, every five
years and expect to progress, the President explained, adding
that both the next President and the next Congress must
resist the temptations of short-term populism if sustainable
growth is to continue.

-in order to avoid political fragmentation in the next
legislature, the Congress revise the electoral law to provide
that only parties that obtain a minimum of five percent of
the vote nationwide can elect a member of Congress. The
President also urged the Congress to eliminate the current
system of preferential voting (which allows voters, rather
than parties, to rank the candidates on party lists).

-all political actors agree to run clean campaigns, free of
calumny and excessively divisive rhetoric.

-the next Congress be given constituent assembly powers to
reform the constitution during its first year.

-the next government commit to continuing the achievements of
his administration, including further increases in exports,
tourism, teachers salaries, a continued commitment to
decentralization, and ongoing leadership in the South
American Community of Nations.

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WITH MALICE TOWARD NONE
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12. In mentioning all of the above, often in exhausting
detail, Toledo's language was consistently generous and
inclusive. In a clear and repeated attempt to spread credit
and promote civility, the President employed the refrain, "We
have accomplished this together" as he cited the statistics
that defined his administration's successes. Unfortunately,
this generous message seemed lost on the congressional
audience, which included a few audible hecklers during the
last quarter of the President's address.

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THE OPPOSITION PILES ON
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13. Press and public figures were quick to criticize the
President's speech. Lima daily &La Republica8 ran a
front-page headline that accused the president of
&celebrating8 the fact that 50 percent of Peruvians were
poor. (The President mentioned repeatedly that the number of
Peruvians in extreme poverty had dropped.) Opposition APRA
party leader Alan Garcia said that Toledo had cited positive
overall national statistics, but had omitted other themes,
including traditional agriculture and labor rights, and that
the President's new initiatives threatened a spurt of
irresponsible spending. Toledo,s Vice President, David
Waisman, joined in the critical chorus, stating that the
President might have offered more of a mea culpa for problems
in his administration. He said the state should use its
regulatory power to lower the costs of electricity, telephone
and fuels, adding that he opposed the creation of new
Ministries for Tourism and Culture.

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Comment:
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14. Toledo,s confidence in touting his administration,s
economic successes seemed to get under his opponents,
collective skin. The press largely ignored the President's
attempts to share credit for macroeconomic stability and
consequent growth and, along with opposition political
figures, instead took him to task for excessive optimism as
well as nit-picked on the validity of isolated
growth/employment figures. (This says a lot, unfortunately,
about the state of the President's relations with the media.)
Despite the criticisms, Toledo,s speech emphasized what the
vast majority of political actors recognize, that sound
economic management combined with high raw materials prices
and increased access to the U.S. market have given Peru
almost four years of solid growth resulting in highly
positive economic numbers for the GOP. It is unlikely that
any but the most extreme successors to the President would
want to kill the goose that has laid this golden egg.
STRUBLE