WHA/AND DIRECTOR'S MEETINGS WITH LEADING

C O N F I D E N T I A L SECTION 01 OF 03 LIMA 004568

SIPDIS

E.O. 12958: DECL: 10/20/2015
TAGS: PGOV ECON SNAR PE
SUBJECT: WHA/AND DIRECTOR'S MEETINGS WITH LEADING
PRESIDENTIAL CANDIDATES

REF: LIMA 3998

Classified By: Political Counselor Alexander Margulies. Reason: 1.4(d
).

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SUMMARY
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1. (C) SUMMARY: WHA/AND Director Philip French,
accompanied by the Ambassador and DCM, on 10/17, met
separately with leading presidential hopefuls Lourdes Flores
(Unidad Nacional alliance) and Alan Garcia (APRA party); the
third principle contender, former Interim President Valentin
Paniagua, was out of the country. Flores said that her
priorities as President would be to improve education and
health care. Garcia provided a spirited denunciation of
traditional coca use, called for the total eradication of
coca, expressed support for a Free Trade Agreement, and
proposed the creation of a revolving fund to finance the
transition to export-oriented crops in the Altiplano. END
SUMMARY.

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LOURDES FLORES
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2. (C) Flores addressed the following issues during a
breakfast hosted by the Ambassador on 10/17:

-- Priorities for Governance: If she becomes President,
Flores said that her top priority will be education reform.
She recognizes that this will be difficult, and will require
active discussion with the SUTEP teachers union (controlled
by the Maoist Communist Party of Peru - Patria Roja). She
would also like to reform health services, but knows that
this would be biting off too much so will have to wait until
education reform is well underway. Her other priorities are
to pay more attention to the Armed Forces, where she sees a
lot of discontent, judicial reform and the police. The
Ambassador noted that these reforms would be expensive.
Flores agreed and said that tax reform and greater efficiency
in revenue collection would be needed.

-- The Unidad Nacional alliance in the 2006 elections.
Flores said that she has a firm deal with Lima Mayor Luis
Castaneda that his National Solidarity (SN) party will remain
tied to the Unidad Nacional (UN) alliance and together they
will present a joint congressional slate in 2006. She
acknowledged that there have been some tensions in the
coalition because Castaneda feels he won the mayoralty of
Lima on his own, and while she admitted that this uncertainty
will continue until a formal announcement is made, she was
confident it will happen. Castaneda likes to keep the public
guessing even when he has made up his mind, Flores noted,
citing the ambiguity he projected about whether he would
resign as mayor to run for President. Thus, she is not able
now to publicly discuss the coalition, which Castaneda
probably will not announce until 11:00 PM on the last day
(November 9) for registration of such deals. Flores
predicted that UN will also draw in a couple of regional
movements. It has an agreement with the mayor of Cuzco to
incorporate his wife in the UN list, and the same deal with
the mayor of Puno. It also expects to line up regional
parties/movements in San Martin and Ucayali. Flores thought
that a recently released national poll by the respected Apoyo
consultancy had the ratio of presidential votes to
congressional votes about right. That is to say, if she
polls 30 percent in April, the UN/SN coalition will poll 20
percent of the congressional votes (Note: the poll gives
both UN and SN about 10 percent of the vote each. End Note).

-- Post First Round Coalitions: Flores assumed that either
she or Paniagua will face Alan Garcia in the second round.
She would like to form a formal coalition with Paniagua's
Accion Popular (AP) party after the first round and before
the second. She said she would be happy to do this for
Paniagua if he beats her out. The Ambassador asked who else
she would find as acceptable coalition partners. Her answer:
President Alejandro Toledo's Peru Posible party, if it
makes it past the four percent nationwide floor required to
elect a candidate to Congress. Flores thought that the
pro-Fujimori parties were another possibility, though this
could lead AP to withhold its support, which she thought was
more important. Flores added that she would not/not be
willing to give Fujimori amnesty as the price for his
support. She also did not/not exclude the possibility of
some sort of governance pact with APRA after the second round.
-- Valentin Paniagua: Flores described Paniagua as an
excellent interim President, but opined that, because he has
already held the office, he is not motivated to run again and
face the possibility of loss. Strong pressure from his AP
party to run, however, will probably lead him to cast his hat
into the ring. She thought that AP was making a mistake in
trying to assemble a coalition that runs from center-right to
center-left, as this breadth will come at the cost of
weakening the clarity of its platform and make it more
difficult to develop the necessary internal support for
needed reforms.

-- Praise for PRA: Lourdes had just come back from Satipo
in Junin Department. She was very impressed by the
USAID-funded projects carried out by the NGO PRA to link
agricultural producers to buyers, an initiative that she
described as spot on. The coast can largely take care of
itself, Flores observed, but the mountain and jungle regions
need a strong push from the government. She does not favor
hand-outs, but rather PRA-style assistance to access markets
for higher value products. She criticized the Toledo
Government's trickle-down approach as "demoralizing" for the
countryside, where more active government promotion is
needed.

-- President Toledo: History, Flores predicted, will
remember Toledo more fondly than his contemporaries. Toledo,
she noted, grossly over-promised, during his campaign and his
presidency, costing himself and other politicians
credibility. She acknowledged that if she wins the
Presidency, it will not be with enthusiasm of the voters,
but rather with their wary acceptance, and that this
acceptance will be lost or extended depending upon how
quickly she moves and how credible she is seen to be.

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ALAN GARCIA
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3. (C) Former President and leader of the major opposition
party APRA, Alan Garcia, in a 10/17 coffee hosted by the
Ambassador, addressed the following issues:

-- Narcotics: On the narcotics issue, Garcia was a chest
beater. He dismissed the talk about coca leaf as being a
sacred, traditional or culturally valuable plant. To the
contrary, he said, it was used both by the Incas and the
Spanish in a cruel way to dull indians to abusive treatment.
Garcia pronounced himself as against trying to facilitate or
protect traditional use and said that all coca should be
eliminated. He also dismissed the possibility of gradual
reduction schemes or inducing producers to give up coca in
favor of alternative development. Yes there had to be a
greater effort at rural development, he said, but the answer
for coca is to spray it, eradicate it, get rid of it. While
Garcia rarely touches upon the mistakes or lessons he learned
during his Presidency, he said that his own effort to take a
gradual approach to controlling the coca problem was a
mistake, noting how the growing coca problem fed terrorism.
He praised Fujimori for winning the fight against Sendero,
but faulting him for not being equally tough with coca.


-- Agricultural Reform and the FTA: Garcia opened the
conversation by saying he has been working on a book
concerning agricultural conversion in the Sierra. He hopes
to deliver it to the printer next week. His basic thesis is
that the Sierra needs to convert 30,000 hectares per year for
five years from traditional crops to new higher value
export-oriented crops like artichokes, picilla peppers,
paprika and oregano. This could be done, he argued, with a
USD 110 million revolving fund. Noting the dependence on
export markets, WHA/AND French said, "Then you must be for
the FTA." Garcia said yes and turned to the two areas in the
negotiation that are most controversial -- intellectual
property and protection for traditional agricultural
producers. He dismissed the complaints about the impact of
better IPR protections on the cost of medicines, saying the
consequences would be insignificant. On the agricultural
side, he noted that APRA has an important support base in the
provinces where traditional agricultural is an important
concern. If APRA dismissed this issue it would be shooting
itself in the head, but the fact is that the traditional
producers need to modernize. "We have to sign the FTA at all
costs," he said. As he has in the past, Garcia also spoke of
how APRA founder Victor Raul de la Haya had called for a
special trading relationship with the United States in a 1940
book as the way to develop Peru and Latin America. The
Ambassador mentioned the USAID-funded our economic service
centers and the fine work they had done in Huanuco with
artichokes and with pimenta piquilla in Huanta, near
Ayacucho. Garcia knew about the latter project, including
the fact that it had not self-replicated yet even though the
results were so positive. He was very impressed
with/supportive of the work of our contractor ADRA, but did
not realize that we were the ones who paid the freight on
this project.

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COMMENT
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4. (C) Flores appeared to be very comfortable with her
current position as presidential front-runner (she leads
Garcia by 10 points in the Apoyo poll),but also realizes
that the campaign is just beginning. Her assessment of
Paniagua's and Castaneda's positions appear to be on the
mark, as does her recognition that an alliance with the
Fujimoristas would entail serious costs. Garcia has a knack
for tailoring his presentations to his audience, and his
strong anti-coca pro-FTA message conformed to this pattern.
While Garcia's past performance in office would lead one to
doubt the sincerity of his apparent conversion to being more
Catholic than the Pope on these issues, he did take the lead
in denouncing the regional pro-coca ordinances and defending
coca eradication when the Constitutional Tribunal was
considering these issues last month (Reftel). Furthermore,
Garcia's APRA party has been a steady proponent of concluding
an FTA with the United States, albeit with sufficient
considerations in return for Peru's agricultural sector. END
COMMENT.
STRUBLE