Identifier
Created
Classification
Origin
06LIMA2083
2006-05-25 22:14:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Lima
Cable title:  

VISIT OF CONGRESSMAN GREGORY MEEKS TO PERU, MAY 26-

Tags:  ECON PGOV ETRD PE 
pdf how-to read a cable
VZCZCXYZ0005
RR RUEHWEB

DE RUEHPE #2083/01 1452214
ZNR UUUUU ZZH
R 252214Z MAY 06
FM AMEMBASSY LIMA
TO SECSTATE WASHDC 0681
UNCLAS LIMA 002083 

SIPDIS

SENSITIVE
SIPDIS

FOR CONGRESSMAN MEEKS FROM AMBASSADOR STRUBLE

E.O. 12958: N/A
TAGS: ECON PGOV ETRD PE
SUBJECT: VISIT OF CONGRESSMAN GREGORY MEEKS TO PERU, MAY 26-
28, 2006


UNCLAS LIMA 002083

SIPDIS

SENSITIVE
SIPDIS

FOR CONGRESSMAN MEEKS FROM AMBASSADOR STRUBLE

E.O. 12958: N/A
TAGS: ECON PGOV ETRD PE
SUBJECT: VISIT OF CONGRESSMAN GREGORY MEEKS TO PERU, MAY 26-
28, 2006



1. (SBU) On behalf of the Country Team, I welcome your
visit to Peru, May 26-28. Peru is at a historic
crossroads, with a close presidential election on June 4
and the opportunity to ratify the free trade agreement with
the United States. With a stable political system and a
strong economy, Peru nevertheless faces political, economic
and social challenges that the U.S. government is helping
Peru to meet.

Demographic Overview
--------------

2. (U) Peru is a country of 27.2 million people, of whom 30
percent live in the Lima/Callao metropolitan area. Most
Peruvians are either Amerindians (45 percent, largely
Quechua-speaking but also many Amazon languages) or Spanish-
speaking mestizos (37 percent, a mixture of indigenous and
European roots). The remainder of the population includes
persons of European (15 percent),African, Japanese, and
Chinese ancestry. Peru's distinct geographical regions are
mirrored in a socioeconomic divide between the coast's
mestizo-Hispanic culture and the more diverse, traditional
cultures of the highlands and jungle area. Although the
Government of Peru has made progress in reducing poverty
during the Toledo administration, almost 50 percent of
Peruvians still live below the poverty line (less than
$2/day),including 18 percent in extreme poverty (less than
$1/day).

The Political Scene
--------------

3. (SBU) Following first round presidential elections on
April 7, the two top vote-getters, Alan Garcia of the APRA
party and Ollanta Humala of the Union for Peru (UPP) party,
will face each other in a June 4 runoff. This election
offers voters a clear choice between two quite different
alternatives. Garcia stands for the continuation of
policies that have brought Peru nearly five years of five
percent annual economic growth, respect for human rights,
job creation and poverty reduction through market-based
economic growth, and improved relations with the U.S.


4. (SBU) Humala, in contrast, is an ally of Venezuelan
President Chavez and Bolivian President Morales and
advances policies that resemble theirs: a stronger
executive promoting state intervention in the economy,
suspicion of foreign trade and investment, and

unsustainable, populist social programs.


5. (U) Current polls show Garcia leading Humala by more
than 10 percent, however many analysts expect a closer race
given that the polls likely under-represent rural areas
where Humala is favored. The elected president and the new
120-member Congress (elected April 7) will take office on
July 28.


6. (SBU) President Toledo's priorities as his term winds
down are: congressional passage of the free trade agreement
(called Peruvian Trade Promotion Agreement or TPA) with the
U.S. and ensuring an orderly transition to his successor.
It appears his party, Peru Possible, will squeak into
Congress barely garnering sufficient votes for
representation. Toledo in past months has climbed up from
the lowest approval ratings in the hemisphere (consistently
below fifteen percent) to 30 percent, the highest they have
been since after his election.


7. (SBU) Congressional election results are 95 percent
complete, and the new Congress will probably consist of
seven parties, with no party having more than about a third
of the seats. The fragmented nature of the incoming
Congress will be a challenge for whoever wins the
presidency.

Peruvian Labor
--------------

8. (SBU) The Peruvian labor movement is small and weak.
Only 3-5 percent of Peruvian workers are members of unions.
Nonetheless, the labor movement, particularly the Marxist-
led National Confederation of Peruvian Workers (CGTP),is
capable of producing large marches in the capital for
positions it favors. Peruvian labor opposes the TPA and
advocates stronger labor inspections and approval of a new,
comprehensive labor law, which has been bottled up in
Congress for a year. Labor, government and business sector
representatives remain divided over a series of questions,
the most significant being whether employers should
continue to have the right to fire workers without
reference to a specific cause listed in law. Employers
argue that they need this freedom to ensure
competitiveness. Labor leaders state that the ability to

fire without reference to a legally defined cause has been
used against rising labor organizers.

The U.S.-Peru Trade Promotion Agreement
--------------

9. (SBU) President Toledo has called the completion of a
free trade agreement with the United States a "policy of
State" and intends to present the TPA to the Peruvian
Congress after the June 4 Presidential election. The
Toledo Administration views the TPA as a way to consolidate
ATPDEA benefits and to energize much-needed reforms in
education, infrastructure, government efficiency and
competitiveness. Proponents argue that the TPA would
generate more jobs in the formal economy, thus enhancing
the protection of worker's rights. The TPA's environmental
chapter would require Peru to enforce its extensive but
often unenforced environmental laws.


10. (SBU) U.S. companies present in Peru support the TPA
because it would strengthen institutions and lock in rules
of the game, notably by establishing an effective dispute
resolution mechanism. Recent Peruvian public opinion polls
show 56 percent approval of the TPA, and the private sector
is largely supportive, with the exception of some local
pharmaceutical firms and traditional agricultural
producers.

Strong Economic Growth has Continued
Even in the Face of Political Uncertainty
--------------

11. (U) Just-released first quarter 2006 economic results
indicate that Peru's economy grew 6.8 percent for the
quarter, surprising the Peruvian government and analysts
alike. Exports continued to play a strong role in GDP
growth, growing 22 percent to $4.6 billion. Imports
reached $3.4 billion, a 28 percent increase, including
nearly $1 billion in capital goods imports. Although still
under control, inflation has been inching upwards,
registering 2.9 percent on an annualized basis during the
first quarter of 2006.


12. (U) Peru has capitalized on new trading arrangements,
especially the Andean Trade Promotion and Drug Eradication
Act (ATPDEA) that granted the Andean countries trade
preferences for more than 6,500 products, and a receptive
global economy to grow its non-services exports to $17.2
billion in 2005 (from a base of $7.7 billion in 2002).
Apparel/textile, agricultural and mineral exports have all
grown impressively over the last several years, and current
forecasts project that Peru will reach $20 billion in
exports in 2006. The United States remains Peru's top
export market with $5 billion in 2005, a 37 percent year-on-
year increase. Trade with China continues to grow rapidly
at 50 percent year-on-year growth to account for $1.8
billion in exports as Peru's second most important trading
partner.

Your Schedule: Outreach Opportunities
--------------

13. (SBU) Your day will start with a breakfast briefing by
Ambassador Struble and his Country Team, at his residence.
Your outreach activities begin with a meeting with Prime
Minister Pedro Pablo Kuczynski and Trade Minister Alfredo
Ferrero at the Ambassador's residence. Following that
meeting, you have a meeting with President Alejandro Toledo
at the Presidential Palace. All speak excellent English.


14. (SBU) The Ambassador will host a luncheon at his
residence with representatives of the Afro-Peruvian
community, planned to include several Afro-Peruvian members
of the Peruvian Congress.


15. (SBU) A following meeting with business leaders
representing both Peruvian and American companies will also
be at the residence. These leaders can provide valuable
insights into import/export businesses as well as the
investment climate for U.S. firms. They are also well
versed in the labor, environmental and commercial
challenges as well as opportunities present in Peru.


16. (SBU) In the early evening, we have scheduled a meeting
at the hotel with representatives of various trade unions,
including the AFL-CIO and the National Confederation of
Peruvian Workers (CGTP).


17. (SBU) Dinner will be hosted by the Executive Director
of the American Chamber of Commerce and will include
leaders from Peruvian and U.S. companies.


18. (SBU) We have requested telephone conversations with

the presidential candidates Ollanta Humala and Alan Garcia.
If confirmed, you would likely make these calls from the
Ambassador's residence during the afternoon.

STRUBLE