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Cablegate: Peru's Congress Approves Amendments to Free Trade

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E.O. 12958: N/A
TAGS: ETRD ECON PGOV PE
SUBJECT: PERU'S CONGRESS APPROVES AMENDMENTS TO FREE TRADE
AGREEMENT

1. (SBU) Summary: Almost a year to the day after passing
the U.S.-Peru Trade Promotion Agreement (PTPA), the Peruvian
Congress approved the agreement's subsequent amendments June
27 by vote of 70 to 38, with one abstention. Following two
hours of spirited debate, the three major political blocs, as
announced, supported the bill. Nationalist parties (UPP and
PNP) voted against, and used the debate to criticize the
government. Business groups received the news positively. A
victory for President Alan Garcia, the GOP now only awaits
action on the PTPA by the U.S. Congress, which the GOP hopes
will approve the agreement with amendments before the August
recess. End Summary.

2. (U) Trade Minister Mercedes Araoz, who had jubilantly
signed the amendments Monday June 23 in a widely publicized
event, outlined the documents to the Congress on the
afternoon of June 26. Accompanied by Prime Minister Jorge
del Castillo and the rest of the cabinet, Araoz, in top form,
explained how the amendments were clearly in the country's
interest. She asked legislators how could any of them vote
against better health, better enforcement of core labor
rights, and more resources to fight illegal logging? Citing
Chilean and Mexican experts at a well-timed conference
earlier this week (sponsored by the Congress), Araoz pointed
to the successes of US free trade agreements with those
countries.

THE "INTERNAL" FTA
------------------
3. (U) Araoz described the PTPA as necessary for the Garcia
government's policies, i.e. implementing an FTA "hacia
adentro," an "internal" FTA agenda that would enable more
Peruvians to take advantage of free trade agreements, as well
as other antipoverty programs that seek to decrease poverty
by 10% by 2011, lower child malnutrition, eliminate forced
and child labor, and improve infrastructure and government
services.

4. (SBU) Several congresspersons stressed the need for
internal reforms to properly implement and take advantage of
the PTPA, such as increasing formalization and improving
infrastructure. One curious absence in the past weeks has
been economist and Presidential envoy Hernando de Soto, who
had been replaced in January 2007 as the GOP's chief lobbyist
in Washington by former Production Minister David Lemor. De
Soto's absence was even noted in the debate. Nevertheless,
both FTA opponents and supporters echoed de Soto's idea of an
FTA "hacia adentro," i.e. an effort to enable Peruvians to
take fuller advantage of a trade agreement.

SUPPORTERS POINT TO ATPA, BIOFUELS
----------------------------------
5. (U) Among the government's allies, the Fujimoristas
(Alianza para el Futuro) said they supported continuing
progress along the economic reform / trade opening lines that
former President Alberto Fujimori initiated in the early
1990s. Others, from the pro-business Unidad Nacional (UN)
party, cited the need to continue the success of the one-way
Andean Trade Preferences Act (ATPA). Rafael Yamashiro, a UN
Congressman from Ica, the seat of the asparagus industry,
described how the growth of the agro-export industry in his
region through ATPA and ATPDEA had reduced poverty and
created full employment and a substantial higher quality of
life in the last 10 years. The PTPA, he said, was necessary
to give that chance to other egions in Peru.

6. (U) A number of Members expressed with satisfaction that
Peruvian ethanol would now enter the US duty-free and exempt
from internal US taxes as a result of the PTPA. Peru, which
will likely be self-sufficient in energy, notably gas, by
2011, is attracting new investment in biofuels. Several
Members expressed hope that the amendments would improve
labor and environmental enforcement in Peru. Others thanked
U.S. Democrats for improving Peru's access to generic
medicines.

OPPONENTS: "GENUFLECTING" BEFORE THE U.S.
-----------------------------------------

7. (SBU) The debate included vocal (and often abusive)
complaints from anti-FTA Members: criticizing the Garcia
Administration for signing the amendments without thoroughly
consulting the Congress, that they were only given the text
the day before, and that they were only allowed a couple of
hours of floor debate without review by the relevant
committees (a motion to send to committees was defeated
38-70). PNP Member Isaac Mekler, representing Callao, asked
how Peru could accept that the U.S., the "world's worst
environmental offender" could monitor Peru's forests. He
criticized pro-trade advocates, saying that while they might
believe that "rising tides lifted all boats," in reality,
"only the yachts" would be lifted. Anti-FTA groups had
organized a protest in front of the Congress the night before
the vote, but only 30-40 people participated.

8. (U) Opposition Members also complained that the
amendments were entirely imposed by the USG, with no
amendments by the GOP (such as more protection for Peru's
farmers). Several Members referred to U.S. imperialism or
Peru "genuflecting" before the U.S. They also criticized
President Garcia for flip-flopping on his early campaign
promises to renegotiate the PTPA to make it more favorable to
Peru's farmers.

9. (U) Peru's principal business groups reacted positively to
the vote. Jaime Caceres, president of CONFIEP, Peru's most
important business association, expressed his hope that this
vote would lead to the U.S. Congress' s approval of the
agreement. Jose Luis Silva, president of Peru's exporters
association(ADEX) congratulated the Congress for supporting
jobs and economic integration, and urged his countrymen to
work together on the "internal agenda".

COMMENT: BALL IN WASHINGTON'S COURT
------------------------------------
10. (SBU) Despite the sharp comments in the debate, the
Congressional discussion over the PTPA amendments actually
had an almost palpable air of inevitability. In fact, most
Peruvians do agree that the PTPA is essential for the
country's continued economic growth and for the government's
plans to significantly reduce poverty. The latest polls
(CPI, 2007) actually show public support for the trade
agreement increasing from 55% in May 2006 to 59% in May 2007.
With the Peruvian legislature expeditiously approving the
amendments requested by the U.S. Democratic congressional
majority, all eyes are now on the U.S. Congress. Peruvians
most earnestly hope the U.S. Congress will take up and
approve the amended PTPA before the August recess now that
Peru has completed its side of the bargain.
STRUBLE

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