RESIGNATION OF FOREIGN MINISTER ENDS

C O N F I D E N T I A L SECTION 01 OF 02 LIMA 003518 SIPDIS E.O. 12958: DECL: 08/15/2015 TAGS: PGOV PREL PINR PE SUBJECT: RESIGNATION OF FOREIGN MINISTER ENDS INTERGOVERNMENTAL CRISIS, BUT TOLEDO STILL HAS TO NAME NEW CABINET REF: A. LIMA 3489 ¶B. LIMA 3476 Classified By: Political Counselor Alexander Margulies. Reason: 1.5(d ). ¶1. (U) SUMMARY: The intergovernmental political crisis resulting from the resignation of Prime Minister Carlos Ferrero on 8/11, following the appointment of Fernando Olivera as Foreign Minister, was resolved the evening of 8/12, when President Alejandro Toledo asked Olivera to step down. Toledo has vowed to present a new Cabinet this week, with pro-GOP Congressman (and former President of Congress) Henry Pease likely to be named Prime Minister. Olivera's response has been to blame Ferrero for the crisis and to pull his Independent Moralizing Front (FIM) and its members out of the GOP, although he has not/not discounted continuing to cooperate with the Government in the future. The political crisis, in addition to threatening the GOP's plurality in Congress, has also resulted in Toledo's popularity taking a plunge in the polls. END SUMMARY. ¶2. (U) On the evening of 8/12, the Presidency issued a communique announcing that there would be a "significant recomposition" of the Cabinet, "including the Ministry of Foreign Relations." This followed a series of meetings at the Presidential Palace between Toledo, Ferrero, former Housing Minister Carlos Bruce and members of the President's Peru Posible party, culminating in a session between Toledo and Olivera, at which the former requested the latter's resignation as Foreign Minister, which was forthcoming. ¶3. (U) Olivera responded in a series of press conferences on 8/13, at which he blamed Ferrero for instigating the political crisis, and of being behind a plan to, "assassinate me politically and morally." Olivera also announced that neither he nor any other member of the FIM would again occupy a ministerial or other position in a Toledo Government. The FIM leader hedged his bets, however, as to whether his party would continue to support the GOP in alliance with Peru Posible, declaring that, "The Governability Pact" he signed with Toledo in May 2001 remains in force, "as it is a commitment with Peru." ¶4. (C) FIM legislator Luis Iberico, in an 8/15 lunch with Emboffs, stated that the FIM's future relations vis-a-vis the GOP and Peru Posible have yet to be determined. He discounted the possibility that his party would go into open opposition, but also observed that its seven legislators would not/not continue to take the lead in supporting Toledo and the Government as in the past. Iberico predicted, however, that the FIM will continue to back GOP policies, provided they follow the same lines as before, and held open the possibility that the FIM and Peru Posible could still enter into an electoral alliance in 2006. ¶5. (U) President Toledo, on 8/14, told the press that he intends to name a new Cabinet within the next few days. The President also took pains to keep his bridges open to all of those involved in the recent intergovernmental crisis, saluting Ferrero, Bruce, Olivera and the FIM for their contributions to Peru and to his Government. ¶6. (C) Congress President Marcial Ayaipoma (Peru Posible), in an 8/15 breakfast hosted by the Ambassador, was confident that the intergovernmental crisis had abated and confirmed media reports that Peru Posible Congressman (and former Congress President) Henry Pease is likely to be the next Prime Minister. Ayaipoma added that the Cabinet will be made up of respected figures who do not/not have future political ambitions (NOTE: Pease, who has had health problems linked to diabetes, has made it clear that he plans to retire from active politics once he leaves office next year. END NOTE). The Congress President was confident that such a Cabinet would have no/no difficulty obtaining ratification by the Congress (required within 30 days of a new Prime Minister's appointment),explaining that the opposition parties share the GOP's desire to stabilize the political scene as soon as possible given the upcoming election campaign. ¶7. (U) In addition to reducing the pro-GOP bloc in Congress from 40 to 33 (out of 120 legislators),the political crisis has had a severe immediate impact on the President's approval rating. A nationwide poll by the respected APOYO consultancy found that Toledo's popularity has halved, from 16 to eight percent. Likewise a Lima/Callao poll determined that the President's approval ratings in the capital had fallen from 20 to 10 percent. ¶8. (C) COMMENT: Olivera's removal from the Cabinet has indeed abated the intergovernmental crisis, although the prospects for the next Cabinet will depend upon its composition. A Cabinet headed by Henry Pease and made up of respected technocrats and/or political figures without electoral pretensions should be in a position to obtain congressional approval and restore political stability. Toledo and Olivera have taken care to leave the door open to future cooperation, and one cannot discount the possibility that, once passions have cooled, the two will work out a new modus vivendi and perhaps even an electoral alliance for ¶2006. Given that the GOP, the FIM and the opposition parties are in agreement on most pending political issues (reform of the State, responsible economic management, a smooth electoral process and transition to the next government),it is likely that the recent Cabinet contretemps will not/not have a lasting effect on political, economic or social stability. Similarly, President Toledo's sharp drop in the polls should not/not adversely affect governability, and could be recouped in short order once the political situation normalizes. END COMMENT. STRUBLE