PRESIDENT'S POPULARITY UP DESPITE OBSTACLES

C O N F I D E N T I A L LIMA 000428

SIPDIS

E.O. 12958: DECL: 03/24/2019
TAGS: PGOV PREL PINR ECON SOCI PE
SUBJECT: PRESIDENT'S POPULARITY UP DESPITE OBSTACLES

REF: LIMA 146

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


1. (C) Summary: The international economic crisis
notwithstanding, President Garcia's approval ratings have
risen steadily since late 2008 (in that year as low as 19-22%
pct) and in February jumped by two points to 38% nationally,
according to recent polling. No single factor accounts for
Garcia's improved popular support, but falling inflation, his
administration's sound macro-economic and foreign policies
coupled with his own light brand of populism explain part of
it. The President continues to chip away at his primary
challenge (reftel) of expanding the state's reach and
representation and reducing political support for
anti-systemic elements. For the moment, Peru continues to
enjoy considerable stability and relative tranquillity under
Garcia. Much will depend on global economic trends in the
coming months. End Summary.

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Economy: Not as Good as Before, but Better than Others
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2. (SBU) President Alan Garcia's leadership remains solid,
despite swirling political scandals, tensions with Chile and
the ongoing global financial crisis. In 2006, Peru's Economy
grew by 7.6 pct, in 2007 by 8.9 pct and last year (2008) by a
stunning 9.84 pct. Even as the international economic crisis
has begun to take its toll, reducing growth forecasts to the
3-4% range, Peru remains relatively well situated. In a
speech earlier this month, Garcia said, "Let's not spread
panic. In the first 70 days of the year the Peruvian economy
has grown by 4 pct, while neighboring countries have dropped
to -1 pct. In 2009, the US. economy is projected to contract
to -2 pct and the EU to -2.5 pct. It is the same story with
countries fifty times bigger than we are. Small as we are,
with our faith, strength and daring, we will once more
continue to amaze the region."


3. (U) In response to the global downturn, the GOP has
introduced a $3.1 billion stimulus package and implemented
special policies to minimize job losses. Still, the
important export-driven mining and textile industries
continue to suffer the hardest. Countering the negative
social impacts of the crisis, inflation in January was
negative and fuel and food prices have fallen markedly. Many
observers believe these "daily life" factors, which affect
Peru's poorest classes the most, play a key roll in
explaining Garcia's improving poll numbers. (Note: Polling
done in 2008 -- when Garcia's numbers were plummeting --
indicated that rising food and fuel prices had a decisive
negative impact. End note.) The Peru Trade Preference
Agreement (PTPA) that entered into force last February is
also widely perceived as a major, positive accomplishment.

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Chile: Balancing Trade with a Maritime Dispute
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4. (SBU) Always mindful of the threat posed by
ultra-nationalists such as Ollanta Humala and General (ret.)
Edwin Donayre, Garcia has had to steer a careful course
between an expanded trade agreement with Chile and calming
the chauvinistic fervor generated by a dispute with that
country over a patch of the Pacific ocean. In both cases,
Garcia seems to have chosen the appropriate option: The
maritime dispute has been dispatched for resolution to the
International Court of Justice in The Hague (prudence,
resolve),while the trade agreement is moving ahead
(pragmatism) in line with the desires of 58.9 pct of
Peruvians as reflected in a recent survey.

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A bit of barnstorming never hurts
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5. (SBU) Over the last few months Garcia has traveled
extensively around the country (something he did not do
before),inaugurating development projects, appealing to
patriotism and railing against bureaucratic red tape. He has
also told his cabinet, regional leaders and mayors to act
urgently to create jobs and build infrastructure projects
with the royalty money ("canon") generated from mining
exports. Even as the prospect for high growth dims, public
coffers remain plentiful thanks to the past bonanza. In
somewhat populist measures, he has forgiven the debts of
victims of natural disasters to the Material and Agro banks
and strongly supported a recent law that approved land titles
for squatters who were occupying public or private land. A
group of young APRA Party activists recently described to us
how the APRA party has become much more active in grassroots
community development. Other supporters explained that the
government is now harvesting the benefits of a broad array of
social programs initiated at the outset of the administration.


6. (C) The President continues to chip away at his primary
challenge (reftel) of expanding the state's reach and
representation and reducing political support for
anti-systemic elements. Prime Minister Yehude Simon has been
indispensable to the GOP's growing proximity to the people
and a relatively calm social environment, with high-profile
conflicts fewer and farther between. Simon's premiership has
also helped to dispel earlier perceptions that Garcia had
moved too far right, was pandering to big business and not
paying enough attention to the plight of the poor. Simon has
stated that those who accuse the government of populist
measues are being unfair, since the GOP has already povided
relief and benefits to exporters and business sectors.

Comment: Tranquil, For Now
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7. (C) Since taking office in 2006 until the late October
2008 Cabinet change, Garcia's approval ratings marked a
continuous downward arc, despite Peru's spectacular GDP
growth figures. From that point, while Peru's GDP growth has
dropped as a result of the international economic crisis,
Garcia's popularity has steadily increased. This apparently
counterintuitive situation reflects a combination of adroit
leadership -- continued disciplined economic policies
combined with an increasing political focus on social issues
and socially under-served communities -- and a bit of luck.
According to one government insider, however, Garcia is
concerned that Peru will likely feel the political and social
effects of the international economic crisis more keenly over
the coming months, and has urged his Ministerial team to
redouble its efforts in preparing for the storm. Garcia's
public standing in the face of adversity is a significant
accomplishment, especially as Peru remains among the few
staunch partners we have in this turbulent region. End
Comment.
MCKINLEY