PRESIDENT GARCIA'S FIRST MESSAGE TO THE NATION

UNCLAS LIMA 002997

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV SNAR PREL ECON PE
SUBJECT: PRESIDENT GARCIA'S FIRST MESSAGE TO THE NATION


Sensitive But Unclassified, Please Handle Accordingly.
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Summary
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1. (SBU) On 7/28 Alan Garcia Perez was sworn in as President
and delivered his first message to the nation. Running an
hour and a half, the President put forward an overlong list
of initiatives and specific policy recommendations. Garcia
focused on actions to help the 13 million Peruvians in
poverty. The five main themes of his plan were:
reconstruction of the state; job creation; labor rights;
policies that favor women, youth, and children; and citizen
security. He pushed government austerity, including measures
to reduce officals' salaries and their international travel.
These were coupled with proposals for significant
infrastructure investments, including clean water, roads, and
irrigation. Garcia said he would decentralize decision
making and project implementation. He pledged to work for
South American integration, arguing that regional trade blocs
were needed to defend people against the "advance of
globalization."


2. (SBU) Garcia made some populist flourishes. He stated
that the "Washington consensus" had passed into history (even
as his own rhetoric about austerity, state efficiency and
promoting market-based investment paralleled its tenets). He
sometimes took seemingly tough poses on issues (asking for
more money for local investment from mining companies, for
example) that are, in fact, pre-cooked. More importantly, it
is far from clear that the austerity measures and redirected
expenditures announced by Garcia can pay the bill for the tax
exemptions and spending initiatives that he presented. End
Summary.

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The Latin American Consensus
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3. (U) Alan Garcia opened his speech by stating that "the
Washington Consensus" had become exhausted, and had to be
replaced by a "Latin American Consensus" that would emphasize
effective, efficient state action to protect citizens and
regional unity to head off the possible negative effects of
globalization. He then laid out a long list of initiatives
and specific policies to promote change in essential areas:
reconstruction of the state; job creation; labor rights;
policies that favor women, youth, and children; and citizen
security.

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State Reform
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4. (U) Garcia emphasized the need for government reform. He
organized his ideas around several key themes:

--Austerity: Garcia announced that he would cut his
Presidential budget and staff in half, reducing his
presidential salary by 60 percent. He asked Congress to
reduce its expenses by a third. He pledged to close six
embassies as well as make other reductions. For every cut,
Garcia identified specific projects (water, rural
electrification, school improvements) in needy areas that
would benefit from the redirected funds.

--Administrative Reform: Garcia proposed a common electronic
state purchasing program to economize on state services and
eliminate corruption.

--Decentralization: Garcia pledged to give more resources and
decision-making authority to regional and municipal
governments.

--Moral Responsibility: The President proposed judicial
reform and promised to appoint people outside his own APRA
party as Anti-Corruption Czar and as Comptroller.

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Job Creation
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5. (U) Garcia proposed creating jobs through attracting
investment and through opportunity-creating government
programs. Among points he made:

-- The President identified the following as critical
job-creating initiatives: the Callao port project to open
Pacific markets, a steel plant in Chimbote, and the
Inter-Oceanic Highway which link Brazil to the Pacific Coast
via southern Peru.

-- He called for the creation of a working group that would
negotiate additional contributions from mining companies for
local infrastructure.

-- He pledged to promote agriculture through the Agrarian
Bank and via increased technical assistance from the Ministry
of Agriculture.

-- Garcia proposed establishing a tax-free industrial,
tourist, and commercial zone in Puno, a key area in the south
where Humala had strong support.

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Labor and Social Rights
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6. (U) Garcia put forward a number of proposals to protect
workers and citizens.

-- The Labor Ministry will increase the number of inspectors
and enforce the eight-hour work day and requirements for paid
overtime. The President criticized companies that misuse
temporary service contracts (temporary workers) and pledged
to enforce laws against abuses in this area.

-- Garcia identified access to water as a social right. He
said that his "Water for All" ("Agua para Todos") program
would provide water and sewerage in the next five years to
half of the estimated 5 million Peruvians who lack these
basic services.

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A Protective State: Women's Issues, Youth and Crime
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7. (U) Garcia put forward a vision of a state that would
protect the vulnerable, including measures to promote gender
equality, enhance youth opportunities and protect citizens
from sexual predators and criminals.

-- Garcia highlighted the number of women in his cabinet and
mentioned gender equity issues, including equal pay,
mother-friendly work places, and actions to eliminate
domestic violence.

-- The President pledged to end sex tourism and to amend the
constitution to increase drastically the punishments for
repeat child molesters.

-- Garcia pledged to enhance opportunities for youth
participation in municipal government and proposed special
credit opportunities for young business people.

-- The President called for 20,000 new Police Officers.

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Counternarcotics
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8. (SBU) Garcia did not present a comprehensive
counter-narcotics plan, but he did touch on CN issues. He
acknowledged that drug trafficking has increased and that the
government must be firm ("like Colombia") with international
cartels, including accelerating extraditions. As a test of
decentralization, Garcia pledged to hand over the management
of ENACO, the para-statal company that buys and sells licit
coca, to Cusco's Regional Government. (Note: Most licit coca
is grown in Cuzco, though the majority of leaf grown in that
department goes to narcotrafficking. End Note.) Finally, the
President identified narcotrafficking, along with delinquency
and kidnapping, as threats to citizens' security.

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Comment
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8. (SBU) Garcia's speech was not bad, but in our view he
missed an opportunity to hit one out of the ball park.
Instead of focusing on big themes -- where he is at his
rhetorical best -- the President ran through a laundry list
of detailed initiatives, at times providing program-specific
information one would expect from a Vice Minister rather than
a President.


9. (SBU) Garcia's comment about the "exhaustion" of the
Washington Consensus contained more than a dose of irony.
His own proposals, with their emphasis on investment, state
efficiency and austerity, incorporated many elements that
international financial institutions have been pushing for
years. If these are pillars of his new Latin American
Consensus, then we are all for them.


10. (SBU) In a similar vein, the President sometimes struck
populist poses (calling for increased spending by mining
companies in local communities or re-negotiating gas prices
with Camisea) on issues that have been quietly pre-cooked.
(The mining companies are already pulling together resources
for a social fund and Camisea's operators have let us know
their willingness to be flexible on domestic gas prices.)


11. (SBU) Garcia's call to austerity is admirable.
Nonetheless, we are dubious that austerity and redirected
spending can pay for the big ticket infrastructure items the
President put forward. Garcia has appointed a reliable
Finance Minster in Luis Carranza, but the new administration
still needs to do the math on some of its proposals.


12. (SBU) Garcia might also have been more graceful in
reference to the Toledo Administration. For example, he
attributed the drop in poverty during his predecessor's term
entirely to out-migration, which he said was impelled by
economic hardship.
STRUBLE