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Viewing cable 05LIMA5333, PERUVIANS WANT QUICK CONGRESSIONAL VOTE ON U.S.

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Reference ID Created Released Classification Origin
05LIMA5333 2005-12-16 18:19 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Lima
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 03 LIMA 005333 
 
SIPDIS 
 
SENSITIVE 
 
USTR FOR AUSTR VARGO AND BHARMAN 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EINV EFIN KIPR PGOV PREL PE
SUBJECT: PERUVIANS WANT QUICK CONGRESSIONAL VOTE ON U.S. 
TRADE AGREEMENT 
 
REF: LIMA 4777 AND PREVIOUS 
 
1. (SBU) Summary:  The GOP and supporters of the Peru Trade 
Promotion Agreement believe it is imperative that the 
current Peruvian Congress vote on the agreement before the 
new Congress and President are inaugurated in July 2006. 
The current Congressional Members are familiar with and are 
favorably disposed toward the trade accord.  Many well- 
informed observers believe it critical that the trade 
agreement commitments be in place by the time the new 
government takes charge on July 28.  Public commentary about 
the free trade agreement, concluded December 7, has been 
largely positive.  While GOP negotiators have become 
regulars on radio and TV talk shows promoting the trade 
deal, opponents appear desperate to find arguments against 
the trade accord.  End Summary. 
 
Congressional Approval: The Sooner, The Better 
--------------------------------------------- - 
 
2. (SBU) Supporters of the free trade agreement want the 
present Congress to vote on the accord before the July 28, 
2006 inauguration of the next President and Congress. 
Former Trade Vice Minister and now consultant Jaime Garcia 
noted that this Congress is familiar with the details, 
having participated at negotiating rounds over the past 19 
months.  Moreover, agreement supporters do not want to start 
from scratch to educate Members of the new Congress, which 
may not be as favorable on the trade deal as the current 
Congress. 
 
3. (U) Trade Minister Ferrero and others have stated that a 
trade vote between the April 9 election and the May 7 
Presidential run-off (in case no candidate receives more 
than 50 percent during the first round) would be ideal.  By 
waiting to approve the free trade agreement until after the 
April 9 election, Members of Congress could vote their 
conscience on the trade accord without any consequence to 
their electoral bids. 
 
4. (SBU) There are some in Congress, such as APRA party 
Congressman Mauricio Mulder, who advocate that the next 
Congress (inaugurated on July 28) vote on the U.S. trade 
deal -- not the current Congress.  (Comment: APRA does not 
want the trade agreement to become an electoral issue, as 
this could fuel the campaign of ultra-nationalist Ollanta 
Humala.  The party would probably agree to Congressional 
consideration after the May 7 run-off.  End Comment.) 
 
5. (U) Business daily Gestion on December 15 quoted Prime 
Minister Kuczynski as favoring congressional handling of the 
agreement as early as possible.  The Prime Minister argued 
that Peruvian exporters, such as clothing manufacturers, 
have to consider orders that will be placed by June 2006. 
If the agreement is not approved by then, Peruvian exporters 
could begin to lose business.  Kuczynski also stressed that 
the debate for approval of the agreement will have to 
counter a "mercantilist current" of certain Peruvian 
businesses such as sugar producers. 
 
Humala Factor 
------------- 
 
6. (SBU) The meteoric rise of Presidential aspirant and 
former military commander Ollanta Humala in a recent Apoyo 
poll -- second place showing with 22 percent behind poll 
leader Lourdes Flores -- has added urgency to several trade 
deal supporters.  Patricia Teullet, export/import 
association Executive Director and a former Finance Ministry 
Vice Minister, told us it is important to have Peruvian 
Congressional approval of the trade deal before the April 9 
national elections.  Teullet and others believe that it is 
critical to lock in the trade agreement commitments before 
the potential election of pro-Humala Members of Congress. 
 
President Toledo's Legacy: A U.S. Trade Deal 
-------------------------------------------- 
 
7. (U) President Toledo proudly broadcast two nation-wide 
press events on December 7 and 9 to highlight the Peru Trade 
Promotion Agreement.  The President invited the Ambassador 
to attend the latter conference with the entire GOP 
negotiating team.  Toledo assured Peruvians that 
compensation would be available for those that are 
negatively impacted by the free trade agreement.  Citing a 
trade association study, Toledo claimed that the accord 
would generate 6 million jobs over 10 years.  (Note: the 
study estimated 5.7 million new formal jobs -- of that 2.7 
million are informal jobs that would become part of the 
formal economy.)  The President added that the agreement 
expands ATPA benefits by providing duty-free access to about 
40 percent more products. 
 
Positive Public Reaction 
------------------------ 
 
8. (U) Press accounts of the Peru trade agreement have been 
largely positive.  Leading newspapers, such as "El 
Comercio," "Peru 21," and "Expreso," have published 
favorable editorials about the trade accord complementing 
President Toledo for pursuing the deal with the United 
States.  A poll cited in "Expreso" indicated that 92 percent 
of 240 business leaders consulted support the U.S. trade 
deal.  A poll in "El Comercio" on December 11 noted that 58 
percent of those contacted believe the FTA is beneficial to 
Peru.  Thirty-one percent expressed disapproval. 
 
Getting the Word Out 
-------------------- 
 
9. (U) Trade Minister Alfredo Ferrero, Chief Trade 
Negotiator Pablo de la Flor, Agriculture Minister Manuel 
Manrique, and the Prime Minister's Chief of Staff Cecilia 
Blume have been active on the radio and television program 
circuit.  Each has said that the FTA on balance is very 
positive for Peru, consolidating ATPDEA benefits for 
asparagus and other key exports.  Ferrero highlighted that 
the deal expands beyond ATPA benefits; for example, Peruvian 
textiles would enter the United States duty-free once the 
agreement is in force, in addition to apparel products. 
 
10. (U) When questioned about U.S. market access to Peru's 
sensitive agriculture products, De la Flor noted the long 
tariff phase out periods and emphasized that the quotas are 
small, representing only a small percentage of Peru's total 
production.  Health Minister Pilar Mazzetti indicated that 
the health sector has been protected.  She highlighted that 
second-use patents are not part of the agreement and that 
she helped secure an exemption from data protection in case 
of a national medical emergency.  Mazzetti added that she 
would defend the trade deal when it is debated in Congress. 
The GOP team all claim victory on maintaining the ban on the 
importation of used clothing. 
 
11. (U) Think tanks and private banks have issued reports 
indicating that the trade accord should help Peru combat 
poverty and improve the country's investment climate. 
 
Critics Hurting for Arguments 
----------------------------- 
 
12. (U) Trade deal critics appear desperate for arguments 
and recently have focused on the absence of a public text, 
accusing the government of hiding something.  The GOP first 
announced that the text would be ready in 15 days -- it now 
states three weeks.  The government began issuing brief 
chapter summaries of the accord on December 12. 
 
13. (U) To the critics' relief, the Trade Ministry has 
stopped its radio and television ads promoting the free 
trade agreement pursuant to a law that prohibits paid 
government commercials during the electoral campaign.  In 
a December 14 radio interview, Trade Minister Ferrero said 
that, "it's now up to those who will benefit most from the 
agreement to defend it, the private sector, small and medium 
enterprises and the farmers." 
 
14. (U) Trade agreement critic Congressman Javier Diez 
Canseco (uncle of Trade Minsiter Ferrero) claims that Peru 
has disadvantaged its Andean partners -- Ecuador and 
Colombia -- by going it alone.  He also argues that through 
this deal, Peru will relinquish its sovereignty and restrict 
its economic policy making ability.  Diez Canseco argues 
that the agreement would alter the Constitution; therefore 
two consecutive Congresses need to approve the necessary 
Constitutional Amendments.  (Note: Informed observers tell 
us that the accord will require revisions of laws, but no 
change to Peru's constitution.) 
 
15. (U) The sugar association asserts that the trade 
agreement will bankrupt their industry, blaming U.S. 
imported, duty-free high fructose corn syrup.  Prime 
Minister Kuczynski effectively debunked this claim in press 
remarks reported December 15 when he stressed that despite 
the fact that fructose currently has a low 4 percent duty in 
Peru, only $54,000 worth was imported into Peru in 2004. 
 
16. (U) The small farmers association, CONVEAGRO, claims 
that the treaty affects 99.9 percent of Peru's agriculture 
sector and that the government went beyond its self-imposed 
red lines.  This is an argument that has been repeated by 
other trade deal opponents.  CONVEAGRO repeatedly argues 
that the agreement, which maintains U.S. agricultural 
subsidies, provides unfair advantages to the United States. 
Chief Trade Negotiator De la Flor explained that WTO 
negotiations on agricultural supports and subsidies are 
ongoing and will be dealt with in the WTO forum.  There are 
fiscal constraints and pressures within the United States to 
eliminate this aid to U.S. farmers, De la Flor emphasized on 
a talk show. 
 
Comment: Time Constraint for Toledo 
----------------------------------- 
 
17. (SBU) The GOP is eager for the U.S. executive to notify 
Congress of its intention to sign the trade pact.  An early 
notification has advantages, including increasing pressure 
for the GOP to resolve pending commercial disputes, notably 
Engelhard.  Moreover, an early signature by the parties 
would permit time to secure the Peruvian Congressional 
approval before the next government assumes power in late 
July.  Members of Congress undoubtedly would prefer to vote 
on the trade deal after the May 7 Presidential run-off. 
This would give them sufficient time to approve the 
agreement before they leave office.  This timetable would 
also enable the GOP to renew FTA-related paid publicity, as 
the prohibition on government advertising during the 
campaign would have ended. 
 
STRUBLE