LETOURNEAU AND GOP REACH SETTLEMENT AFTER 35 YEARS

UNCLAS LIMA 001263

SIPDIS

SENSITIVE
SIPDIS

USTR FOR AUSTR EEISSENSTAT AND BHARMAN
COMMERCE FOR 4331/MAC/WH/MCAMERON
TREASURY FOR OASIA/INL
WHA/AND, WHA/EPSC, EB/TPP/BTA

E.O. 12958: N/A
TAGS: ETRD ECON EINV PGOV PREL PE
SUBJECT: LETOURNEAU AND GOP REACH SETTLEMENT AFTER 35 YEARS

REF: LIMA 207 AND PREVIOUS


1. (SBU) Summary: LeTourneau's attorney on March 30
accepted Peru's offer of compensation for road construction
performed more than 35 years ago. Payment of the
approximately $10 million settlement, expected by May 15,
would conclude this ATPDEA commercial dispute. End Summary.

ATPDEA Resuscitated Dormant Claim
--------------


2. (U) In a September 2002 letter to then-U.S. Trade
Representative Robert Zoellick, the GOP committed to settle
nine U.S. company disputes, including a debt it owed to the
LeTourneau firm. The letter was one of a series of
conditions that enabled Peru to qualify for trade benefits
under the Andean Trade Promotion and Drug Eradication Act
(ATPDEA). Peru recognized the need to implement a 1970
Peruvian Supreme Court decision that ordered LeTourneau be
compensated for the value of a 60-kilometer road the company
built in difficult jungle terrain between 1954 and 1968.
For decades, the two sides remained far apart on the value
of the road despite ten appraisals and an inter-agency
commission created to negotiate a solution.


3. (SBU) On March 30, Roy LeTourneau and his attorney Bruce
Kiely traveled to Lima to reach a settlement with the GOP.
After discussions lasting nearly three hours, LeTourneau
accepted the GOP's approximately $10 million settlement
offer. To formally settle the dispute in the judiciary,
LeTourneau's attorney agreed to sign a court settlement
document in the near future.


4. (SBU) The settlement established the value of the road at
$857,645 (38 million Soles Oro). That total was converted
into dollars using the parallel exchange rate from October

1968. To bring this figure to present day value through May
2006, both sides agreed to a 50-50 mix of U.S. Treasury Bill
and Bond rates. EconCouns witnessed the handshake
settlement. That evening LeTourneau's attorney sent a
letter to Loret de Mola formally accepting the Peruvian
offer.

GOP Based Road Value on 1968 Letter
--------------


5. (SBU) The discussion focused on a letter from
LeTourneau's Vice President to the Velasco military
government on October 18, 1968, which cited 38 million Soles
Oro as the road's value. GOP Disputes Coordinator Aurelio
Loret de Mola stated repeatedly that he could not go beyond
this amount, arguing that he would successfully gain
Congressional approval for this figure, but could not
guarantee success in seeking a higher number. Both sides
explored options involving the value of the road, exchange
rate alternatives, and the updating methodology. However,
the GOP's offer from December 2005 (reftel) did not change.

Payment Schedule
--------------


6. (SBU) Loret de Mola explained that the Toledo Cabinet
would approve a supplemental appropriation proposal on April
12 that includes the LeTourneau settlement, among other
disbursement requests. The Executive would then present a
bill to the Congressional Budget Commission for
consideration and approval by the plenary. Loret de Mola
committed to make a lump-sum payment to LeTourneau by May
15, 2006.

Comment: One Final Step
--------------


7. (SBU) The final hurdle to closure is payment by the GOP.
We do not anticipate any difficulties at this point, and
will immediately report any problems or deviations from the
established timeline. The free trade agreement carrot was
instrumental in generating a GOP settlement offer in this
long-standing dispute. Moreover, The Ambassador, in a
recent discussion with LeTourneau's attorney on U.S.
leverage and political uncertainties, recommended a
settlement before the upcoming change in administration.

STRUBLE