PERU'S CONGRESS APPROVES AMENDMENTS TO FREE TRADE

UNCLAS LIMA 002250 SIPDIS SENSITIVE SIPDIS STATE FOR E, EB, EB/TPP, WHA/AND STATE PLEASE PASS TO USTR FOR VERONEAU, EISSENSTAT, HARMON COMMERCE FOR MCAMERON TREASURY FOR LEE, JEWELL PLEASE PASS TO EXIM E.O. 12958: N/A TAGS: ETRD ECON PGOV PE SUBJECT: PERU'S CONGRESS APPROVES AMENDMENTS TO FREE TRADE AGREEMENT ¶1. (SBU) Summary: Almost a year to the day after passing the U.S.-Peru Trade Promotion Agreement (PTPA),the Peruvian Congress approved the agreement's subsequent amendments June 27 by vote of 70 to 38, with one abstention. Following two hours of spirited debate, the three major political blocs, as announced, supported the bill. Nationalist parties (UPP and PNP) voted against, and used the debate to criticize the government. Business groups received the news positively. A victory for President Alan Garcia, the GOP now only awaits action on the PTPA by the U.S. Congress, which the GOP hopes will approve the agreement with amendments before the August recess. End Summary. ¶2. (U) Trade Minister Mercedes Araoz, who had jubilantly signed the amendments Monday June 23 in a widely publicized event, outlined the documents to the Congress on the afternoon of June 26. Accompanied by Prime Minister Jorge del Castillo and the rest of the cabinet, Araoz, in top form, explained how the amendments were clearly in the country's interest. She asked legislators how could any of them vote against better health, better enforcement of core labor rights, and more resources to fight illegal logging? Citing Chilean and Mexican experts at a well-timed conference earlier this week (sponsored by the Congress),Araoz pointed to the successes of US free trade agreements with those countries. THE "INTERNAL" FTA -------------- ¶3. (U) Araoz described the PTPA as necessary for the Garcia government's policies, i.e. implementing an FTA "hacia adentro," an "internal" FTA agenda that would enable more Peruvians to take advantage of free trade agreements, as well as other antipoverty programs that seek to decrease poverty by 10% by 2011, lower child malnutrition, eliminate forced and child labor, and improve infrastructure and government services. ¶4. (SBU) Several congresspersons stressed the need for internal reforms to properly implement and take advantage of the PTPA, such as increasing formalization and improving infrastructure. One curious absence in the past weeks has been economist and Presidential envoy Hernando de Soto, who had been replaced in January 2007 as the GOP's chief lobbyist in Washington by former Production Minister David Lemor. De Soto's absence was even noted in the debate. Nevertheless, both FTA opponents and supporters echoed de Soto's idea of an FTA "hacia adentro," i.e. an effort to enable Peruvians to take fuller advantage of a trade agreement. SUPPORTERS POINT TO ATPA, BIOFUELS -------------- ¶5. (U) Among the government's allies, the Fujimoristas (Alianza para el Futuro) said they supported continuing progress along the economic reform / trade opening lines that former President Alberto Fujimori initiated in the early 1990s. Others, from the pro-business Unidad Nacional (UN) party, cited the need to continue the success of the one-way Andean Trade Preferences Act (ATPA). Rafael Yamashiro, a UN Congressman from Ica, the seat of the asparagus industry, described how the growth of the agro-export industry in his region through ATPA and ATPDEA had reduced poverty and created full employment and a substantial higher quality of life in the last 10 years. The PTPA, he said, was necessary to give that chance to other egions in Peru. ¶6. (U) A number of Members expressed with satisfaction that Peruvian ethanol would now enter the US duty-free and exempt from internal US taxes as a result of the PTPA. Peru, which will likely be self-sufficient in energy, notably gas, by 2011, is attracting new investment in biofuels. Several Members expressed hope that the amendments would improve labor and environmental enforcement in Peru. Others thanked U.S. Democrats for improving Peru's access to generic medicines. OPPONENTS: "GENUFLECTING" BEFORE THE U.S. -------------- ¶7. (SBU) The debate included vocal (and often abusive) complaints from anti-FTA Members: criticizing the Garcia Administration for signing the amendments without thoroughly consulting the Congress, that they were only given the text the day before, and that they were only allowed a couple of hours of floor debate without review by the relevant committees (a motion to send to committees was defeated 38-70). PNP Member Isaac Mekler, representing Callao, asked how Peru could accept that the U.S., the "world's worst environmental offender" could monitor Peru's forests. He criticized pro-trade advocates, saying that while they might believe that "rising tides lifted all boats," in reality, "only the yachts" would be lifted. Anti-FTA groups had organized a protest in front of the Congress the night before the vote, but only 30-40 people participated. ¶8. (U) Opposition Members also complained that the amendments were entirely imposed by the USG, with no amendments by the GOP (such as more protection for Peru's farmers). Several Members referred to U.S. imperialism or Peru "genuflecting" before the U.S. They also criticized President Garcia for flip-flopping on his early campaign promises to renegotiate the PTPA to make it more favorable to Peru's farmers. ¶9. (U) Peru's principal business groups reacted positively to the vote. Jaime Caceres, president of CONFIEP, Peru's most important business association, expressed his hope that this vote would lead to the U.S. Congress' s approval of the agreement. Jose Luis Silva, president of Peru's exporters association(ADEX) congratulated the Congress for supporting jobs and economic integration, and urged his countrymen to work together on the "internal agenda". COMMENT: BALL IN WASHINGTON'S COURT -------------- ¶10. (SBU) Despite the sharp comments in the debate, the Congressional discussion over the PTPA amendments actually had an almost palpable air of inevitability. In fact, most Peruvians do agree that the PTPA is essential for the country's continued economic growth and for the government's plans to significantly reduce poverty. The latest polls (CPI, 2007) actually show public support for the trade agreement increasing from 55% in May 2006 to 59% in May 2007. With the Peruvian legislature expeditiously approving the amendments requested by the U.S. Democratic congressional majority, all eyes are now on the U.S. Congress. Peruvians most earnestly hope the U.S. Congress will take up and approve the amended PTPA before the August recess now that Peru has completed its side of the bargain. STRUBLE