SCENESETTER FOR VISIT OF SECRETARY OF STATE

S E C R E T LIMA 000847

SIPDIS

NOFORN
SIPDIS

E.O. 12958: DECL: 03/02/2016
TAGS: PREL PGOV ETRD SNAR PE
SUBJECT: SCENESETTER FOR VISIT OF SECRETARY OF STATE
CONDOLEEZZA RICE, MARCH 11-12, 2006

Classified By: Political Counselor Alexander Margulies.
Reason: 1.4 (d).


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WELCOME
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1. (C) Madam Secretary, Embassy Lima warmly welcomes your
visit to Peru -- the first by a Secretary of State since
Secretary Powell,s attendance at the OAS General Assembly

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here on the fateful September 11, 2001. Your visit provides
an excellent opportunity to highlight for Peruvians, as they
consider who they want to guide their country for the next
five years, the immense tangible benefits they have obtained
through better relations with the United States. President
Toledo,s meeting with President Bush on March 10 will
emphasize the same message.

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THE POLITICAL SCENE
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2. (C) You will arrive in the midst of an increasingly fierce
election campaign that presents Peruvians with as clear a
choice as any Latin American electorate faces. While there
are a record 23 candidates for President, polls indicate that
only three are really in the running. "Systemic" candidates
Lourdes Flores (Unidad Nacional) and Alan Garcia (APRA)
basically stand 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. "Outsider" Ollanta Humala
is a close Chavez ally who advances policies that reflect the
path propounded by Venezuela's leader: a stronger executive
promoting state intervention in the economy, suspicion of
foreign trade and investment, and unsustainable, populist
social programs.


3. (C) Chavez did his preferred candidate a disservice by
blatantly seeking to influence the election. According to
recent polls, Peruvians overwhelmingly reacted negatively to
statements by the Venezuelan leader in early January that
favored Humala's candidacy and denigrated Flores'
presidential bid. In what was hardly a coincidence, Humala's
steep rise in the polls ground to a halt following Chavez's
intervention, while Flores' numbers rose from one-quarter to
over one-third of the vote.


4. (S) We, by contrast, have been cautious in commenting on
the campaign, avoiding discussion of the merits of particular
candidates. Instead, we have emphasized that the U.S. is
prepared to work with any president elected by the Peruvian
people who shares our objectives of promoting an effective
fight against narcotrafficking and terrorism, democracy,
human rights, and poverty reduction/job creation through
economic development. Our strategy is to influence the
electorate indirectly, by highlighting the immense tangible
benefits that Peru has gained through closer cooperation with
the U.S., such as the 800,000 new jobs generated here by
Andean Trade Promotion and Drug Eradication Act (APTDEA)
benefits. Opinion polls show that 55 percent of Peruvians
favor the Peru Trade Promotion Agreement (PTPA) which will
lock-in these benefits and create additional opportunities
for expanded trade; only 35 percent oppose PTPA. The same
polls show however that nearly 80 percent of the electorate
believes that the incoming Congress rather than the unpopular
outgoing legislature should make the decision whether to
ratify PTPA. Seizing on this difference, Humala has
generally avoided taking a clear public position on PTPA
while insisting that ratification should not occur during
Toledo,s term. To keep the electorate,s eye on the real
ball, we have publicly side-stepped the ratification timing
issue. (Ratification is in fact almost certain to happen
during the present government.)



5. (C) President Toledo is not/not in a position to
contribute to either a favorable outcome to the election
campaign or public approval of the PTPA. While his
government can boast of significant political, economic and
social accomplishments, the President remains unpopular. As
a result, his personal identification with and/or promotion
of a policy can be counterproductive. In our public comments
we are respectful of the President, but also take care to
speak over his head to credit the Peruvian people for their
contributions to the country's successes over the past four
years in building a stronger partnership with the U.S.

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THE ECONOMY
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6. (U) Peru's economy grew by 6.3 percent in 2005, marking
five consecutive years of strong growth. Exports have more
than doubled during the four years of the Toledo
Administration to USD 16.5 billion. Much of this success can
be attributed to APTDEA as we buy 30 percent of all Peruvian
exports and from 50 to 80 percent of labor intensive apparel
and agricultural exports.


7. (U) The sustained growth over the last five years is
starting to bring down poverty, particularly in areas that
led the export boom. Poverty declined from 54.3 percent when
Toledo took office in 2001, to 49.5 percent in 2005. Extreme
poverty (those living on less than a dollar a day) is
estimated to have declined from 24.1 percent to 18 percent
during the same period. Experts believe that the economy
must grow at more than six percent annually for an extended
period to archive a more rapid and sustained poverty
reduction. While poverty has fallen, it has not occurred
fast enough to counter the popular perceptions that
trickle-down has failed and that Peru's economic achievements
over the past four years have chiefly benefited the rich and
bypassed the poorer sectors of the population. All
presidential candidates are singing this tune during the
current campaign.

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UN SECURITY COUNCIL
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8. (C) Foreign Minister Oscar Maurtua desires to coordinate
closely with the U.S. during Peru's 2006-2007 tenure on the
UNSC. He has told the Ambassador that he views the
Secretary's visit as an opportunity to gain a greater

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appreciation for the USG's views on the Middle East peace
process, Iraq, Iran and the IAEA, Sudan, and other major
issues under consideration by the Security Council. With
respect to the contest between Venezuela and Guatemala for a
UNSC seat, the Foreign Ministry is hesitant to take a
position given that the next government will be in office
when the vote will be taken. That said, Toledo has made it
clear to the Ambassador that he is looking for a chance to
upstage Chavez and the Peruvian leader could be prevailed
upon to lobby behind the scenes on Guatemala's behalf, or, at
the very least, to block South American consensus behind
Venezuela's candidacy.

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TERRORISM
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9. (S/NF) Colombian President Alvaro Uribe has said that his
country has no better friend and partner south of the Rio
Grande than Peru. In addition to assisting its northern
neighbor in combating the FARC, the GOP has also had to
confront an upsurge in attacks by two Sendero Luminoso (SL)
columns in the jungle that survived the GOP,s
counter-terrorism campaign that was successful elsewhere.
The Embassy responded quickly to Toledo's request for
increased intelligence assistance, contributing to a recent
successful operation against a top SL commander.

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NARCOTICS
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10. (C) The CNC's 2005 Peru Coca Estimate concluded that coca
cultivation increased from 27,500 to 38,000 hectares over the
past year. The growth in cultivation actually has been
building up over the past few years (as reflected in Embassy
and UN reporting during that period),and an expansion of the
areas surveyed by CNC accounts for an important part of the
increase. The success of eradication efforts in Colombia has
driven coca leaf prices to 10-year highs in Peru. Over the
past year the GOP has improved its counter-narcotics
cooperation with the Embassy, exceeding its programmed coca
eradication target of 8000 hectares by almost 1000 hectares,
as well as eradicating 92.5 hectares of opium. The GOP also
interdicted 11.5 metric tons of cocaine HCl and 4.49 metric
tons of cocaine base, and destroyed 518 cocaine-base labs and
584 tons of precursor chemicals. For 2006, the GOP adopted
an eradication plan that increases planned programmed
eradication by 20 percent, to 10,000 hectares. Close to 500
hectares have already been eradicated this year, despite
commencing during the rainy season east of the Andes.
STRUBLE