CONGRESSMAN MEEKS MEETING WITH PRIME MINISTER

UNCLAS LIMA 002367

SIPDIS

SENSITIVE
SIPDIS

USTR FOR AUSTR EEISSENSTAT AND BHARMAN
DEPT FOR WHA/AND, EB/TPP, WHA/EPSC
COMMERCE FOR 4331/MAC/WH/MCAMERON

E.O. 12958: N/A
TAGS: ETRD ECON EINV PGOV KIPR PREL PE
SUBJECT: CONGRESSMAN MEEKS MEETING WITH PRIME MINISTER



1. (U) Summary: During his codel to Peru, Congressman
Gregory Meeks met with Prime Minister Kuczynski to discuss
the Peru Trade Promotion Agreement and the state of
democracy in Peru. The Prime Minister provided a persuasive
case on how the Agreement will boost the economy,
emphasizing the creation of jobs in the formal sector. He
also answered concerns about labor conditions and other
issues. End Comment.


2. (SBU) Congressman Gregory Meeks visited Peru on May 26-28
to meet with Peruvian leaders to discuss the U.S.-Peru trade
agreement. In addition to Prime Minister Kuczynski, The
Congressman met with President Toledo, business and labor
representatives and Afro-Peruvians (septels). Congressman
Meeks' Legislative Director Sophia King accompanied him in
the meetings, as did Ambassador Struble and other embassy
officers.

Economic Gains and Big Challenges
--------------


3. (SBU) Congressman Meeks met with Prime Minister Pedro
Pablo Kuczynski at the Ambassador's residence. The
Congressman opened the meeting by explaining that before he
makes up his mind on a free trade agreement vote, he likes
to visit the country, meet the leaders and speak with the
people.


4. (SBU) The Prime Minister provided an overview of the
economy, noting that the biggest challenge confronting Peru
was job creation. Although the economy has been expanding
for several years, Kuczynski explained, the large size of
the informal sector was making job creation difficult. He
reported that the informal sector had been reduced from 75
percent to 65 percent of the economy over the last four
years due to Toledo Administration initiatives and the
Andean Trade Promotion and Drug Eradication Act (ATPEA).
The Prime Minister also listed infrastructure as an urgent
priority. He reported that in some parts of the country, 60
percent of the population are without indoor plumbing and 90
percent of the sewage goes untreated.

Labor and Other Concerns - Better Than It Used to Be
-------------- --------------


5. (SBU) Kuczynski then described the labor situation as in
a state of transition. The Fujimori Administration,
reacting to an overly rigid labor regime, drastically
loosened labor regulations, according to the Prime Minister.
The result was a collapse of the formal sector and the
simultaneous increase of the informal sector. There had
been a swing back towards more labor protections under the
Toledo Administration, Kuczynski said, but a number of labor
reforms were still needed.


6. (SBU) Congressman Meeks asked about the charge that
workers were not being allowed to organize. Kuczynski
asserted that that was not the case. The Congressman then
asked whether pay disparity indicated a systemic
discrimination against the indigenous. The Prime Minister
responded that, in mining, for instance, the difference in
pay was accounted for by the level of technology. Open pit
mines pay more since their workers use bigger equipment.


7. (SBU) Congressman Meeks then inquired about the State
Department's Human Rights report, noting that opponents of
the FTA are using it as evidence that Peru is not an
acceptable partner for a trade accord. The Prime Minister
responded that the human rights violations occurred during
the Fujimori Administration. Ambassador Struble explained
that the Human Rights report documents failures and goals,
but it does not provide the full context or the trajectory
of the improvements.

Poverty Eradication Plan
--------------


8. (SBU) Congressman Meeks asked whether Peru had in place a
master plan for poverty reduction that would be maintained
into the next administration. Kuczynski responded that the
Toledo Administration had initiated a poverty program, which
was programmed to expand in the next few years. He noted
that education spending was currently four percent of GDP.
Ambassador Struble added that Peru had in place several
interwoven initiatives that included national infrastructure
initiatives and education, and that a compensation package
was being worked out for the companies adversely affected by
the FTA.

Trade Vote - Why Now?
--------------


9. (SBU) The Congressman asked why it was necessary that the
outgoing Congress ratify the FTA. The Prime Minister
responded that delaying until the new Congress convened
would mean that ratification would not take place until
September 2006 at the earliest. Such a delay might inhibit
passage in the U.S. Congress. Congressman Meeks reported
that the perception in Washington is that the average
Peruvian does not want the PTPA. Kuczynski reported that
polls showed that between 60 and 85 percent of Peruvians are
in favor. (Note: The May Datum poll showed support for the
FTA at 53%. End Note)

Comment - Trade = Jobs - Poverty
--------------


10. (SBU) Prime Minister Kuczynski made a persuasive case
why Peru needs the trade accord. Peru not only needs to
create jobs, but also needs to expand the formal sector.
The PTPA would do both. Kuczynski also makes the case that
if the current economic expansion can be maintained, with
the help of the PTPA, Peru could see significant job
creation and consequent poverty reduction in the near to
medium term.


11. (U) This cable was not cleared by Congressman Meeks'
office.

STRUBLE