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