OLLANTA HUMALA CLAIMS HE CAN SAVE PERU FROM EXTREMISTS

C O N F I D E N T I A L LIMA 001107

SIPDIS

E.O. 12958: DECL: 06/27/2018
TAGS:PGOV, PREL, PINR, PE
SUBJECT: OLLANTA HUMALA CLAIMS HE CAN SAVE PERU FROM
EXTREMISTS

REF: LIMA 1081

Classified By: Amb. P Michael McKinley for reasons 1.b an...
id: 159839
date: 6/26/2008 21:33
refid: 08LIMA1107
origin: Embassy Lima
classification: CONFIDENTIAL
destination: 08LIMA1081
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C O N F I D E N T I A L LIMA 001107

SIPDIS

E.O. 12958: DECL: 06/27/2018
TAGS:PGOV, PREL, PINR, PE
SUBJECT: OLLANTA HUMALA CLAIMS HE CAN SAVE PERU FROM
EXTREMISTS

REF: LIMA 1081

Classified By: Amb. P Michael McKinley for reasons 1.b and d.


1. (C) Summary: Ambassador McKinley met with opposition
Peruvian Nationalist Party (PNP) leader Ollanta Humala and
his wife (and advisor) Nadine Heredia June 18 for a cordial
two-hour discussion. Humala argued that the Garcia
government is neglecting Peru's mounting social concerns and
needs to find pragmatic solutions to prevent the spread of
conflict. He said the recent protests in Moquegua over the
allocation of mining royalties (canon) broke out after the
government first ignored the problem and then lost control.
Humala called for "pragmatic" solutions to mounting social
conflicts in the mining sector and proposed to increase taxes
on mining profits and to improve mining canon distribution
among regions. Asked about the possible impact on juridical
security and investment, Ollanta said companies have no
security if social conflicts can shut down production.
Humala claimed to favor free trade but lamented the irony
that the US Congress had done more to protect Peru's labor
and environmental norms in the FTA framework than had Peru's
own Congress. Turning to constitutional reform, Ollanta said
the 1993 Constitution was illegitimate and called for the
return of the 1979 Constitution. Ambassador McKinley closed
the conversation by addressing Humala's concerns about the
New Horizons military-humanitarian mission currently in
progress in Ayacucho. On June 25th, the Ambassador saw
Humala again at a diplomatic function, and Humala endorsed
the Ambassador's upcoming trip to Ayacucho to explain New
Horizons to a skeptical audience, although he made clear that
he stuck to his concerns. End Summary.

Cordial Atmospherics
--------------

2. (C) Ambassador McKinley received opposition Peruvian
Nationalist Party (PNP) leader Ollanta Humala and his wife
Nadine Heredia at his residence on June 18th for a cordial
and broad-ranging two-hour conversation. Ollanta sat relaxed
and attentive throughout, making his points in a calm,
non-confrontational tone. Nadine -- the PNP's Secretary for
International Relations and effectively Ollanta's "Chief of
Staff" and principal political advisor -- sat on the edge of
her seat with a serious and guarded facial expression at
first, intermittently joining the discussion to clarify
Ollanta's comments. She let down her guard and warmed as the
discussion drew to a close.

Humala: I Can Save Peru From Radicalism
--------------

3. (C) Humala argued throughout the conversation that Alan
Garcia's government is neglecting Peru's mounting social
concerns and that, absent pragmatic solutions, regional
conflicts like the recent violent protests in Moquegua region
would spread. Ollanta expressed concern about this prospect
and warned that dangerous, anti-systemic radicals could
ultimately threaten the stability of the state. Declaring
himself "a nationalist, not a leftist", Humala said that he
represents the pragmatic change that Peru needs. (Comment:
Humala did not mention credible reports that he often seeks
to stir up, for political gain, the very social conflict he
told us he wants to prevent. End Comment.)

Conflict in Moquegua Region
--------------

4. (C) Humala cited the recent conflict in Moquegua over
regional mining canon allocations to underscore his general
thesis on the government's neglect of social problems.
Moquegua's leadership, he said, had repeatedly presented
their complaints to the government during the previous year
but received no response. The government finally paid
attention after the first week of protests when roadblocks
began to cause shortages in neighboring Tacna region. He
warned that Moquegua's elected leaders had lost credibility
with the local populace because of their inability to win
concessions from Lima, leading to the emergence of more
radical "informal" leaders. This complicated negotiating a
definitive end to the conflict because it was unclear with
whom the GOP could successfully negotiate, creating a messy
situation that could replicate itself in other regions.
(Note: The GOP eventually resolved the Moquegua conflict by

offering concessions to the protestors. End Note)

Raise Mining Profit Taxes
--------------

5. (C) Humala said the best way to avert conflict was to
increase mandatory profit sharing (utilidades) by mining
companies that are making bundles right now with mineral
prices sky high and to spread the benefits of the windfall
widely -- to workers, communities, the regions and the whole
country. Recent congressional negotiations on a bill that
would raise the cap on mining profits taken by mine workers
did not resolve the underlying structural problem, he said.
It rewarded only a narrow band of full-time formal mining
workers, not the majority subcontracted workers and others,
and therefore exacerbated the differences between them.
Moreover, in rewarding full-time mining employees, it took
money away from the regions. Mining companies agreed with
this solution because they care narrowly about their own
workers, he said, but the government needed to concern itself
with the broader interests of all. In this sense, the
government would need to mediate among the competing
interests of the workers, the mining regions, and the
Peruvian people, which he repeated would require raising the
profit taxes on these companies. (Comment: In this and other
instances, Humala cast himself in the role of impartial
statesman rather than rabble-rousing opposition leader. End
Comment.)

Juridical Security, Foreign Investment, Free Trade
-------------- --------------

6. (C) The Ambassador responded to Ollanta's mining sector
proposals by emphasizing the importance of juridical security
to attract foreign investment. Humala acknowledged the
importance of juridical security and foreign investment, and
raised the example of the Melia Hotel chain in Cuba. He said
he once asked the chain's Cuba manager why they had so many
hotels on the island, and the manager responded that they
felt safe because they knew that Cuba's laws never change.
(Note: We shared a laugh at the irony. End Note.) Humala
then argued that companies in Peru today only enjoy juridical
security on paper. What good are legal norms if social
conflicts halt production? He insisted that if the
government followed his model, juridical security would in
fact be more sustainable.


7. (C) Ambassador McKinley raised the importance of free
trade to Peru's future. Countries throughout the world are
competing for investment and markets in a process that cannot
be stopped and that far transcends commercial relations
between Peru and the U.S., he said. Peru can either stand
aside and watch or jump in and benefit. Arguing that he is
not a leftist, Humala accepted the importance of trade but
said it more important that it be "equitable" than free. As
far as the bilateral free trade agreement went, he said that
Peru would never be able compete with the U.S. in a host of
areas and feared that Peru's potential to develop critical
national industries would be undermined as a result. Both
agreed to disagree on this issue. Humala continued by
pointing out that FTA conventions on labor and the
environment, which were generally positive, had been inserted
thanks to pressure by the US Congress. It was ironic, he
noted, that the U.S. congress had done more to represent the
interests of Peruvian workers and the environment in this
case than had Peru's own congress or government.

Constitutional Reform
--------------

8. (C) Turning to constitutional reform -- a topic recently
debated in Congress (Ref A) -- Ollanta claimed that the 1993
Constitution lacked legitimacy because it was written by
Fujimori-era criminals and approved in a referendum marked by
fraud. Humala said the piecemeal reforms proposed and
rejected in Congress last week will not suffice and that his
party proposed returning to the 1979 Constitution. He said
he was calling for a referendum on the 1979 Constitution
because the public supports such a change, and observed that
the debate over the constitution had caused serious fractures
in Congress and within the ruling APRA party itself. Humala
said he will continue pushing the issue and accused the
President of reneging on his campaign promise to return to
the 1979 document. (Note: According the recent polls, fewer

than 20% of Peruvians favor a return to the 1979
Constitution. End Note.)

New Horizons
--------------

9. (C) The Ambassador and Humala closed with an in depth
discussion of the New Horizons bilateral
military-humanitarian mission currently underway in Ayacucho
region. (Note: The Humala-funded La Primera newpaper and
several PNP Congresspeople have been harshly critical of the
project and have accused the USG of planning to establish a
military base to replace the Manta FOL. End Note) The
Ambassador explained that the three-month mission would has
primarily humanitarian goals -- performing surgeries,
building schools, digging wells -- and that at the end, US
troops will all return home. He emphasized that it was a
bilateral exercise, that everything had been closely
coordinated with and vetted by the GOP, and that the Peruvian
military and police had lead responsibility for force
protection and security. Contrary to some inflammatory media
reports, he said, US weapons were being warehoused under lock
and key.


10. (C) Humala then asked a series of pointed questions about
the exercise: Why did participating doctors and engineers
have to be uniformed military rather than civilians? The
Ambassador responded that the mission was also intended to
support the training of Peruvian and U.S. military personnel
to deal with natural and other disasters, a capability which
other organizations lacked. Why was the mission located on
the edge of a narcotics-producing region in a sensitive zone
of historical conflict -- and what would the US do if an
American soldier or a Peruvian civilian was accidentally
injured or killed? The Ambassador responded that we believed
in the Peruvian government's ability to provide security and
were working carefully to ensure the safety of Americans and
Peruvians alike. Humala then noted the imminent closing of
the Manta FOL in Ecuador (claiming that President Correa had
told him the decision was definitive),and asked about U.S.
intentions to establish a successor to Manta somewhere in
Peru. Citing historical examples, the Ambassador noted that
the potential closing of the Manta FOL does not mean we
necessarily must open a new base in some other country, and
reiterated that the U.S. has no intention to establish a base
in Peru.

Comment: A Positive Meeting
--------------

11. (C) Although we probably did not change Humala's opinions
on the key issues, the dialogue was cordial and a level of
trust was built. In comments to the press while traveling in
Ayacucho later that week that faithfully reflected the spirit
and content of the exchange, Humala stated that, although
there was reason for concern about New Horizons, the U.S.
Ambassador had promised him that US troops were in Ayacucho
temporarily and would return to the U.S. when the exercise
ended. Ambassador McKinley saw Humala again at a diplomatic
function on June 25th, and in a friendly conversation Humala
endorsed the Ambassador's upcoming trip to Ayacucho to
explain New Horizons to a skeptical public. Humala also
mentioned that he had met and posed for photographs with an
independent American missionary/medical team in the area.
Humala added that one focus of protests in Ayacucho on July
8th - 9th --part of a broader national strike -- would be the
presence of US troops. (Note: We have asked New Horizons to
stand down on July 8-9 as a precaution. End Note.)
MCKINLEY

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