GARCIA NAMES FAMOUS ECONOMIST AS PTPA PROMOTER

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E.O. 12958: N/A
TAGS: ETRD ECON EINV PGOV PREL PE
SUBJECT: GARCIA NAMES FAMOUS ECONOMIST AS PTPA PROMOTER



1. (U) Summary. On August 17, President Garcia named renowned
economist Hernando de Soto as his "personal representative" to
obtain the U.S. Congress' ratification of the U.S.-Peru Trade
Promotion Agreement (PTPA). De Soto, a world-renowned economist and
author of "The Other Path," has reportedly taken the position
without pay. The announcement was seen as a major coup by the
business sector. In its initial public statements about the
appointment, the Garcia Administration has played down the lobbying
aspect of the job and stressed De Soto's well-known interest in
issues related to poverty reduction. Full bio to be reported
SEPTEL. End Summary.

Why De Soto?
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2. (U) De Soto is the most popular economist/public thinker in Peru.
While an avid supporter of free market economics, he has also been
a vocal advocate for inclusion of the working poor in the economy.
The combination gives him credibility among both conservatives and
liberals. His close relationship with former President Clinton is
seen as a plus, as the moderate Democrats are considered the most
likely to support the PTPA in the U.S. Congress.

Who Is He?
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3. (SBU) An economist, De Soto is best known for his two
international best-sellers, "The Other Path" (1989) and "The Mystery
of Capital: Why Capitalism Triumphs in the West and Fails Everywhere
Else" (2000),which propose a blueprint for economic reform in
emerging markets focusing on streamlining government, reducing red
tape, and harnessing the strengths of informal economies. In 1980
he founded the non-profit Institute for Liberty and Democracy (ILD)
to help spread the benefits of a market economy to the poor, and to
examine the positive role of the informal economy. De Soto and ILD
were responsible for some 400 initiatives, laws, and regulations
that modernized Peru's economic system, particularly by reforming
Peru's property rights. Some 30 heads of state have since consulted
with him on programs in their countries. De Soto previously served
as Governor of Peru's Central Reserve Bank, President Alberto
Fujimori's personal representative and principal advisor (1990-2),
an economist for the General Agreement on Tariffs and Trade (GATT),
President of the Executive Committee of the Copper Exporting
Countries Organization (CIPEC),Managing Director of Universal
Engineering, and a principal of the Swiss Bank Corporation
Consultant Group.

What's the Message?
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4. (SBU) Ambassador Struble will meet privately with De Soto on
August 22 to discuss the PTPA, and the contents of that meeting will
be reported SEPTEL. The initial statements by members of the
Administration emphasized that De Soto will seek to make sure that
smaller businesses and consumers have access to the opportunities
created by the Agreement. That message is probably more for
domestic consumption, since the negotiations are already over and
the Agreement has already been ratified by the Peruvian Congress.
Most likely, given De Soto's policy interests, is that he will
stress to the U.S. Congress and policy opinion makers that the
pathway to economic development and political stability for Peru
must include a trade agreement with the United States. He will
argue that the Agreement will foster the growth of the formal sector
of the economy, which will create more and better paying jobs.

Playing Well In Lima - The Initial Reaction
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5. (SBU) The decision to name De Soto was widely hailed among
economists and op-ed columnists alike. Carlos Bruce, head of the
Peruvian Congress' Committee on Foreign Trade, praised De Soto as
"first-rate". Former Peruvian PTPA negotiator and Trade Vice
Minister Pablo de la Flor echoed De Soto's own statements about the
need domestically to expand the support base for the Agreement. In
discussions with working-level contacts in the Ministries, Econoffs
found universal pride with the appointment of De Soto. These
contacts cited De Soto's past working relationships with former
President Clinton, and the impact his ideas have had in the United
States. With his U.S. experience and intellectual power, they hope
he will be able to explain to the U.S. Congress how the PTPA will
improve the lives of Peruvians and Americans, and allay their
concerns. They note that when De Soto spoke to U.S. Congressional
audiences over the past years, the legislators themselves (not just
their staffers) packed the room.

Conclusion - Best Choice
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6. (SBU) De Soto appears to be an excellent choice for Peru, since
he is generally held in high regard here by both conservatives and
liberals. He is well known and admired at think tanks and on the
Hill in Washington, and holds the confidence of Members on both
sides of the aisle. The GOP is also in the process of selecting a
new lobbying group in Washington, to be decided in the next days.
Nevertheless, De Soto should be an effective public face of the
campaign to win Congressional approval.

STRUBLE