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
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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