DECENTRALIZATION: THE VIEW FROM LORETO

C O N F I D E N T I A L LIMA 003581 SIPDIS SIPDIS E.O. 12958: DECL: 11/06/2016 TAGS: PREL PGOV PHUM ECON ETRD EINV PE SUBJECT: DECENTRALIZATION: THE VIEW FROM LORETO REF: A. LIMA 0309 ¶B. LIMA 2026 Classified By: Pol/C Alexis Ludwig for Reasons 1.4 (c,d) ¶1. (C) Summary: As one of Peru's most isolated and poorest regions, Loreto is in some ways a microcosm of the challenges facing the administration's efforts to decentralize state functions and improve government. A variety of political actors in Loreto agree that decentralization has failed, at least in the short term, to improve the lives of ordinary citizens. Should current trends continue, pessimists suggest that anti-systemic radicals could capitalize on this public discontent to win regional elections in 2010. Others believe that the acute administrative incapacity of local leaders has exacerbated underlying problems. The Loreto experience shows local leaders struggling to solve bread and butter issues within a system that presents daunting challenges to reform. It also illustrates that decentralization and development depend on local circumstances, including political leadership. End Summary. Benefits of Decentralization Unseen in Loreto -------------- ¶2. (C) One of the Garcia government's top priorities has been to accelerate administrative decentralization in order to expand the reach of government and bring it closer to the people while improving service delivery and reducing corruption (refs). The remote Amazonian region of Loreto, among Peru's poorest and most isolated, is in some ways a case study of the challenges facing the national government's decentralization policy. During a recent visit to Iquitos (Loreto's capital),we heard mostly about the problems, pitfalls and limitations of this government policy. ¶3. (C) According to government officials in Loreto, administrative decentralization so far has changed little on the ground. Regional President Ivan Vazquez, Iquitos Mayor Salomon Abensur, and one of the region's three congressmen, Mario Pena, told Embassy representatives in separate meetings that the central government had transferred administrative functions without providing adequate funding for the increased responsibilities that these transfers entailed. Vazquez noted, for example, that earlier this year provincial public teachers had gone three months without being paid. The central government had argued that, under decentralization's new rules, local authorities 
were responsible for the salaries. In protest, Vazquez led a three-day strike in June, and the two sides compromised, agreeing to split the 8 million soles (approximately USD 2.7 million) in back pay. But President Vazquez said the issue of who pays teacher salaries remained unresolved. ¶4. (C) The Loreto representatives agreed that these kinds of failures were fueling public discontent and fomenting popular support for political radicals. Congressman Pena mentioned that his congressional colleague from Loreto, Victor Isla of the Nationalist Party (PNP),was working with radicals in the Patriotic Front of Loreto to push a "Bolivarian" agenda. Pena said Isla this year had arranged two flights to Caracas, totaling 200 passengers, to obtain free medical care. President Vazquez said he had decided to lead the June protest to pre-empt action from the Patriotic Front and to avoid losing political support to pro-Venezuela forces in the region. Both Vazquez and Abensur said the Patriotic Front continued to support strikes, demonstrations, and protests throughout Loreto. Local Administrative Incapacity -------------- ¶5. (C) The Ombudsmen's office, local NGOs, and the Catholic Church claimed the political picture in Loreto was more complicated than elected officials suggest. Iquitos Ombudsmen Lilia Reyes said that municipal and regional budgets had sufficient resources but that the entire budget process remained murky, with no central authority able to define how much money was going in and out of local government. Complicating the situation was Vazquez' lack of planning: in office for over a year, he had yet to define the department's spending priorities. Reyes also noted that governments at all levels had not solicited the views or participation of citizens, a failure that helped spawn street protests. For Reyes, decentralization meant replacing a cumbersome and unresponsive government system in Lima with a cumbersome and unresponsive system in Iquitos. ¶6. (C) The bishop of Iquitos, Monsignor Julian Garcia, said the problem in Loreto was a political culture that did not hold local officials accountable for their misdeeds. According to Garcia, the former mayor of Iquitos, Augusto Varga, ignored campaign promises and stole public funds while in office, but voters rewarded him with a seat in congress. Luis Campos Baca, the president of the Amazonian Institute of Investigations -- an NGO working with the central government to implement decentralization -- said money was available to fund local services, but neither Vazquez nor Abensur were able to create the administrative structures necessary to implement programs. Alfredo Urrutia, president of the NGO Caritas, gave a blunt explanation for this failure: talented officials long ago fled the substandard schools, hospitals, and roads of Iquitos. The result was a government of political hacks incapable of managing public services. The Patriotic Front of Loreto: Pragmatic Nationalists? -------------- -------------- ¶7. (C) Although most observers doubt that local government will improve before the 2010 elections, some believe that its failure to do so will not automatically convert into support for radical alternatives. Eva Matute, the president of the Patriotic Front of Loreto and a member of Patria Roja -- Peru's revolutionary communist party -- claimed the organization sought above all to press the government to pay attention to local needs. Matute told us two goals were pre-eminent: resisting Ecuadorian territorial designs on Loreto and protecting the special tax breaks given to residents of the department. Matute said intermittent protests served to get the attention of governmental officials, and emphasized that Loreto's congressmen, Pena, Vargas, and Isla -- representing the right-wing Accion Popular, the centrist APRA, and the left-wing Nationalists -- had all been Front members at one time. In that sense, she said, talk of a radical threat was a smokescreen designed to cover the government's inability to deliver basic services. Comment -- The Importance of Local Circumstances -------------- --- ¶8. (C) If decentralization's trials in Loreto are in some ways representative of the policy's challenges nationwide, they are also a commentary on Loreto itself. Loreto is Peru's largest region, occupying fully one third of the national territory, and also its most sparsely populated -- with 885,000 inhabitants according to the 2005 census. Transportation to, from and within the region is exceedingly difficult -- Iquitos is Peru's largest city not reachable by land -- which exacerbates obstacles to commerce, investment and other hopes for regional development. Moreover, the quality of local leadership, which still looks instinctively to Lima for solutions while struggling with even basic administration, does little to overcome these intrinsic limitations. In that sense, Peru will have to look to other regions for a kit of best practices in facing decentralization. MCKINLEY