AMBASSADOR PROMOTES FTA IN TRUJILLO

UNCLAS LIMA 002439

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR WHA/AND, EB/TPP/BTA/ANA
USTR FOR B. HARMAN
COMMERCE FOR 4331/MAC/WH/MCAMERON

E.O. 12958: N/A
TAGS: ETRD EAID ECON EAGR PE
SUBJECT: AMBASSADOR PROMOTES FTA IN TRUJILLO



1. (SBU) Summary. During his June 12 trip to Trujillo, a
city along the northern coast, the Ambassador met with local
dignitaries and agricultural producers to discuss the U.S.-
Peru free trade agreement and economic development. The
Ambassador, accompanied by press, toured a Peruvian
agricultural processing plant - a plant that not only
exports to the United States but also serves as a model for
other companies with social responsibility programs. The
Ambassador also spoke at the Chamber of Commerce, explaining
the realities of the U.S.-Peru FTA and how it will help
enable the incoming government to reduce poverty. End
Summary.

Promoting Corporate Social Responsibility
--------------


2. (U) The Ambassador, during a June 12 trip to the coastal
city of Trujillo, met with officials from the DanPer
agricultural plant, a Peruvian company that produces and
exports products including asparagus, artichokes and
pequillo pepper. DanPer, which began its operations in
1994, employs more than 3,300 people, 60 percent of whom are
women. The company is known for its strong social
responsibility programs, including building its own medical
clinic where it provides free vaccines for workers and their
families, establishing a good working environment,
recycling, and working with poorer communities to teach
people the importance of hygiene and sanitation.


3. (U) In its 12 years of operation, DanPer witnessed a 642
percent increase in its exports, from $4 million in 1994 to
$29.7 million in 2005. Exports to the U.S. have also
increased dramatically, from 19 percent in 2003 to 51
percent in 2005. During a tour of the DanPer plant, the
Ambassador, accompanied by the local press, explained how
the FTA would benefit agricultural producers, such as
DanPer. He noted that asparagus, which is one of Peru's
leading agricultural exports, currently enters the U.S.
market duty free under ATPDEA. With the FTA, duty free
benefits continue; however without the FTA, Peruvian
asparagus would be assessed a 9 percent tariff, making the
product less competitive in the U.S. market.

FTA Outreach
--------------


4. (U) The Ambassador also took the opportunity to discuss
the realities of the FTA at the Chamber of Commerce.
Addressing an audience of more than 100 people, the
Ambassador explained how the FTA is a strategy to reduce
poverty in Peru, a prevalent theme during the elections. By
promoting trade capacity building and growth of exports in
high-value sectors, Peru will be able to create new jobs in
the formal sector. The Ambassador also rebutted several
myths about the FTA, noting that smaller countries such as
Chile, Morocco and Singapore experienced significant
economic benefits from trade with the United States due to
their bilateral FTAs. On the topic of medicines, the
Ambassador emphasized that 98 percent of medicines in Peru
are generic and that the new intellectual property and data
protections will not affect the price of these medicines.
He noted, however, the medicine prices will also decrease
under an FTA due to improved government procurement
processes and the elimination of the EsSalud 20 point
preference system.


5. (U) Using NAFTA as an example, the Ambassador
acknowledged that there are winners and losers from trade.
In agriculture, although the timeframe for reduction of
tariffs is long for sensitive products, the Peruvian
Government needs to learn from Mexico's mistakes and
establish an internal agenda to respond to competition from
U.S. producers. The Peruvian Government is developing a
compensation program for agricultural producers, but it
should also encourage small farmers to manufacture products
that have a high export value, such as asparagus, artichokes
and peppers.

Comment
--------------


6. (SBU) Trujillo, a decidedly pro-FTA area, has benefited
greatly from ATPDEA. Over the past three years, the region
has seen a 9 percent decrease in its poverty rate. This
reduction in poverty is linked to the creation of export-
oriented jobs under ATPDEA. Officials in Trujillo (many of
which belong to the APRA party) eagerly await the Peruvian
Congress' decisio on the FTA and expects that other
departments in Peru will look to Trujillo as a model of
economic growth and prosperity through trade.

STRUBLE