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Viewing cable 06LIMA2507, UNDERSTANDING GARCIA'S EXPORT PROMOTION PLAN

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Reference ID Created Released Classification Origin
06LIMA2507 2006-06-22 20:37 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Lima
VZCZCXYZ0000
RR RUEHWEB

DE RUEHPE #2507/01 1732037
ZNR UUUUU ZZH
R 222037Z JUN 06
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 1175
INFO RUEHBO/AMEMBASSY BOGOTA 3607
RUEHQT/AMEMBASSY QUITO 0497
RUEHLP/AMEMBASSY LA PAZ JUN SANTIAGO 0684
RUEHCV/AMEMBASSY CARACAS 9632
RUEHBU/AMEMBASSY BUENOS AIRES 2487
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
UNCLAS LIMA 002507 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA/AND, EB/TPP/BTA/ANA 
USTR FOR B. HARMAN 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
USDA/FAS/ITP/BERTSCH 
 
E.O. 12958: N/A 
TAGS: ETRD EAID ECON EAGR PE
SUBJECT: UNDERSTANDING GARCIA'S EXPORT PROMOTION PLAN 
 
1.  (SBU) Summary.  In an effort to promote economic growth 
in southern Peru and the highlands, President-elect Alan 
Garcia has made his Sierra Exportadora program a key 
priority of his incoming administration.  The five-year 
project will encourage farmers in the highlands to shift 
from the production of traditional agricultural products - 
corn and potatoes - to higher value export products, 
including artichokes, snow peas and peppers.  Garcia's plan 
includes the strengthening of the Agrarian Bank and building 
of infrastructure to connect the highlands with the rest of 
Peru.  APRA predicts the program, which should create 
300,000 new jobs, will cost the GOP approximately $150 
million over five years, with a heavy emphasis on attracting 
additional private investment.  End Summary. 
 
Promoting Exportable Agricultural Products 
------------------------------------------ 
 
2.  (SBU)  The Peruvian highlands are home to more than 
eight million Peruvians, of which 70 percent live in 
poverty.  The majority of Peruvians in this area are 
dependent upon agriculture for their livelihood, producing 
corn, potatoes and quinoa.  Small farmers produce food for 
their own consumption, and sell any extra in local markets. 
Farmers in the highlands produce 54 percent of Peru's 
agricultural products, although less than 4 percent of them 
are exported.  Many farmers are unable to get their products 
to the major national markets on the coast. 
 
3.  (SBU) President-elect Garcia's Sierra Exportadora plan, 
a top government priority, will encourage farmers in the 
highlands to shift their production away from traditional 
agricultural products to export-oriented products, including 
artichokes, peppers, snow peas and trout.  Citing coastal 
Peru as a model, Garcia's APRA party notes that farmers in 
the highlands need to adapt to market conditions in order to 
become more prosperous.  (Note:  the coast produces 40 
percent of Peru's agricultural products, accounting for more 
than 85 percent of Peru's agricultural exports, which have 
increased dramatically under ATPDEA.  End Note.) 
 
4.  (U) Garcia's plan is based on the belief that the 
highlands have the land, people and capacity to increase 
production of exportable products.  Under the Sierra 
Exportadora program, the next Government plans, over a five- 
year period, to convert 150,000 hectares (30,000 hectares 
annually) of farmland for the production of new products. 
Garcia's program will strengthen the stat-owned Agrarian 
Bank, which will provide revolving credit of $102 million to 
small farmers to help establish improved chains of 
production.  (Note: Under President Toledo, the role of the 
Agrarian Bank greatly diminished.  The Agrarian Bank 
currently provides loans to either small local banks and 
credit unions or to members of a production chain rather 
than to individual farmers.  The Agrarian Bank, which is 
under funded, lacks the staff necessary to conduct risk 
assessments for loans.  End Note.)   Only farmers and 
members of production chains that seek to produce export- 
oriented crops will be eligible for these loans. 
 
5.  (U)  The program also calls for the improvement of 
interconnectivity between the highlands and coast.  The 
Garcia Administration plans to build 28 roads over a five- 
year period, financed in part by the state and private 
concessionaires.  These roads, which will be smaller than 
the existing major highways, will better connect ten Andean 
departments to the coast, providing an improve access way 
for the export of products. 
 
And the Result Will Be... 
------------------------- 
 
6.  (SBU)  The Sierra Exportadora program, as depicted by 
APRA, will cost $150 million over five years:  $102 million 
will be provided to the Agrarian Bank for loans with the 
remaining money used for infrastructure improvements. 
Garcia will also promote increased private investment in the 
highlands, encouraging enhanced public-private partnerships. 
APRA officials predict that the Sierra Exportadora program 
will create 300,000 direct and indirect jobs in five years 
while reducing poverty levels.  With the production of 
export-oriented, high value crops, officials also believe 
that Peru's exports could increase by up to $1 billion. 
Farmers that participate in the program could see a tripling 
in their revenues and small farmers may be able to expand 
their production capacity as profits increase, according to 
APRA officials. 
 
Comment 
------- 
 
7.  (SBU) One of the Garcia Administration's economic goals 
is to create 350,000 new jobs annually.  The Sierra 
Exportadora program, which will encourage farmers to take 
advantage of the benefits created by the U.S.-Peru free 
trade agreement, will improve the capacity of farmers to 
produce high value products for export while creating new 
jobs.  Garcia will want to announce concrete short-term 
measures in his July 28 inauguration speech, with some 
tangible results by the November 30 regional elections.   We 
expect the incoming government to move quickly on this 
project, which will target the southern (and pro Humala) 
highlands in an effort to capture APRA votes.  There are 
several issues that the Garcia Administration should 
address, including the need to hire and train Agrarian Bank 
officials on risk assessment, the road concession process, 
and how to ensure the competitiveness of small farms, for 
the program to be a success. 
 
STRUBLE