PERU'S REGIONAL RELATIONS POST EU SUMMIT

C O N F I D E N T I A L LIMA 001012

SIPDIS

E.O. 12958: DECL: 06/11/2018
TAGS: PGOV PREL ETRD PINR PE
SUBJECT: PERU'S REGIONAL RELATIONS POST EU SUMMIT

REF: LIMA 877 AND PREVIOUS

Classified By: Ambassador P. Michael McKinley for reasons 1.4 (b) and (
d).


1. (C) Summary: Following the successful EU-LAC summit in
May, poloffs spoke to contacts inside and out of government
about Peru and the region. Peru's relationship with Brazil
got a boost in post-summit bilateral meetings focused on
promoting Brazilian investment here. Lima has also publicly
signaled its interest in Brazil's South American Security
Council initiative but privately expects it to go nowhere.
While Foreign Ministry contacts said that diplomatic
relations with Chile had not yet recovered from Peru's
decision to take its maritime border "dispute" to the Hague,
with Ecuador things were advancing smoothly in the run-up to
the ten-year anniversary of the bilateral peace agreement.
GOP officials are communicating with Ecuadorian and Colombian
counterparts to facilitate a normalization between those two
countries. Negotiations over an Association Agreement
between the Andean Community and the European Union continue
"bloc to bloc," although the EU has said that individual
countries -- i.e. Bolivia and Ecuador -- may opt out of the
trade portion of the deal (our CAN contacts say this is not
so). End Summary.

Brazil: Commercial Links and the South American Security
Council
-------------- --------------

2. (C) Peru's already strong relations with Brazil got a
significant boost during post-summit bilateral meetings in
Lima, which included presidential and high-level private
sector meetings. According to MFA Director General for South
America Jose Luis Salinas, the thrust of the bilateral
meetings was on expanding Brazilian invetment and commercial
participation in Peru. Salinas underscored the participation
of prominent business group from Sao Paolo -- the Sao Paulo
State Federation of Industries -- in the meetings as an
important signal of Brazil's interest and intentions in this
respect. He noted that press reports regarding a $2.5
billion Petrobras investment in a petrochemical plant and
elsewhere was for the purpose of "exploration;" assuming the
success of this investment and the completion of ongoing and
future road infrastucture projects connecting the two
countries, Peru's relations with Brazil would only grow
deeper and more intensive over time.


3. (C) In the subsequent South American Presidents meeting
in Brazil, Salinas noted, Peru had signed on to the South
American Union (Unasur) project as a symbolically important
step towards regional unity. As for Brazil's proposed South
American Security Council, the GOP publically supported the
proposal -- primarily as a nod to Brazil -- but privately
believed the agreement would not move forward. Given the
opposition of Colombian President Alvaro Uribe on the grounds
that all members of such a council would have to share a
vision of regional security challenges, including terrorism
and the reality that the FARC was a terrorist group, the
initiative was unlikely to prosper. Several analysts,
including a senior military officer, told us it made more
sense to utilize one of the many inter-American institutions
already in existence than to create a new one that would
further muddle the region's institutional landscape and
almost inevitably falter in its implementation. That said,
Defense Minister Flores-Araoz told the Ambassador that if
consensus ever emerged on the proposal, Peru would join.

Chile: Relations Still Face Hurdles
--------------

4. (C) Our Foreign Ministry counterparts told us relations
with Chile had not returned to normal as quickly as hoped in
the aftermath of Peru's presentation of the maritime border
dispute to the Hague in January. According to the MFA's
Chile desk officer, the GOP proposed restarting the regular 2
2 Defense and Foreign Minister meetings (halted in
January),but Santiago had not responded. Meanwhile, the
bilateral trade agreement continues to languish in Chile's
congress after being taken off fast track. MFA DG Salinas
told us the problem was not at the presidential level --
Presidents Garcia and Bachelet got along fine and had a
positive bilateral meeting during the EU-LAC Summit (the
Chilean DCM confirmed this) -- but rather rooted in political
pressures coming from political opposition and civil society
groups on both sides of the border. Salinas added that there
were two more moments in the Hague process that could inflame
tensions: March 2009 when Peru must submit a report outlining
the fundamentals of its case, and March 2010 when Chile must
submit its response. After that, the judicial process will
take over and the Foreign Ministry hopes the dispute will
become less prey to political forces and more securely on
strict legal tracks.

Ecuador: Positive Ties
--------------

5. (C) Peru's relations with Quito are on a generally
positive course, according to Salinas. Bilateral working
group meetings continue and facilitate useful dialogue on a
range of border, commercial, security and other issues.
Currently, the two countries are planning celebrations for
the ten year anniversary of the Brasilia peace accord ending
hostilities between the two countries. Trade Minister
Mercedes Araoz affirmed Salinas' perspective in a recent
public statement calling relations with Ecuador "very good"
and stating that she believed Peru had Ecuador's support to
change an Andean Community (CAN) regulation on intellectual
property that conflicts with implementation requirements of
Peru's trade agreement with the United States. (Note: Our
contacts at the CAN are less certain that Ecuador will
ultimately support Peru's request, but are hopeful that a
compromise can be found that will not force Peru to leave the
organization. End Note.)

Ecuador-Colombia
--------------

6. (C) The GOP is also seeking to help Ecuador restore
normal relations with Colombia. Peruvian Foreign Minister
Jose Garcia Belaunde told the Ambassador this week that he
plans to travel soon to Quito where he will offer the GOE
Peru's help to find a solution. Peruvian Defense Minister
Antero Flores Araos told the Ambassador he explained to
President Uribe during his recent visit to Colombia that OAS
Secretary General was doing his best to mediate the conflict,
but that Uribe should not depend on the OAS as an institution
because too many member governments in the region are
beholden to Venezuela through preferential aid deals or
ideological sympathies.

CAN-EU: Making Negotiations More Flexible
--------------

7. (C) After the EU-LAC summit in May, there were reports
that the European Union had agreed to negotiate a free trade
agreement on separate tracks with different members of the
Andean Community (CAN),i.e. faster with Peru and Colombia
(which wanted the agreement),and slower with Bolivia and
Ecuador (which had significant reservations). Other reports
said that the EU and the CAN agreed to allow individual
countries to opt out of one of the three pillars of the
negotiations -- trade, cooperation, and political dialogue --
while maintaining the broader Association Agreement.


8. (C) According to CAN Director General Adalid Contreras,
both of these reports are incorrect and based on public
misrepresentations of private CAN-EU meetings held during and
around the May summit. Contreras explained to poloffs that
the EU only has a mandate to negotiate "bloc to bloc" and
allowing countries to pick and choose which pillars of a
three-pillar agreement to accept would contradict the
normative basis of the negotiation. He added that the trade
pillar must remain but the EU and the CAN were considering
allowing individual countries to adopt modified trade rules
in certain areas in order to build concensus, but this
approach has not yet been adopted.
MCKINLEY