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Cablegate: Peruvian Government Strengthens Anti-Piracy Efforts

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 003289

SIPDIS

DEPT FOR WHA/AND, EB/IPE SWILSON
COMMERCE FOR 4331/MAC/WH/MCAMERON
DOC FOR J. BOGER
USPTO FOR J. URBAN
LOC FOR S. TEPP
USTR FOR J. CHOE-GROVES

SENSITIVE

E.O. 12958: N/A
TAGS: ECON ETRD KIPR PE
SUBJECT: PERUVIAN GOVERNMENT STRENGTHENS ANTI-PIRACY EFFORTS


1. (SBU) Summary. The GOP, recognizing that intellectual
property violations have escalated in recent years, is
making a concerted effort to improve its anti-piracy
efforts. Indecopi, Peru's IPR administrator, continues to
work closely with the tax agency SUNAT and the police and
has conducted 14 raids this year, confiscating almost $1
million worth of pirated goods. The latest major raid on
July 20 netted more than 8 tons of merchandise worth
approximately $300,000. The GOP is also working to improve
anti-piracy efforts at Lima's Port of Callao, and has co-
located an Indecopi official at Customs to help prevent
pirated goods from entering Peru. While Indecopi and SUNAT
have yet to establish a registry of imported blank optical
discs, officials are soliciting advice from the private
sector and foreign government officials. Several illegal
vendors have recently approached Indecopi to ask for special
incentives in return for legitimatizing their business. End
Summary.

Actions Against IPR Violators
-----------------------------

2. (SBU) During the first half of 2005, Indecopi, the local
tax and customs agency SUNAT and the Peruvian National
Police (PNP) conducted 18 raids on known locations in Lima,
confiscating $950,000 worth of pirated goods. To date,
Indecopi and the police have seized 43,191 VCDs and 34,339
DVDs. The agencies are also investigating several local
distributors, looking for any links between the distributors
and the importers of blank optical discs.

3. (U) Indecopi, SUNAT, and police officials, working from
information provided by the Anti-Piracy Crusade, raided El
Hueco, one of Peru's largest informal markets, in downtown
Lima on July 20. Over 400 police and customs officers, as
well as 30 prosecutors, raided more than 250 storefronts and
stalls in El Hueco at six in the morning. During the raid,
officers confiscated more than 8 tons of merchandise,
including DVDs, worth approximately $300,000.

Improved GOP Coordination
-------------------------

4. (SBU) Over the past six months, Indecopi and SUNAT
officials have met with members of the Anti-Piracy Crusade
in an effort to not only improve coordination but also to
establish new ideas on how to counter piracy. On June 15,
SUNAT Director Nahil Hirsh authorized Indecopi to place an
overseer at the Customs premises at the Port of Callao.
(Note: Callao is Peru's largest port with over 80 percent
of all container traffic. End Note.) The Indecopi
official, working with Customs, reviews the shipping
manifests of all imported optical disks deliveries to ensure
that no pirated materials enter Peru. If Indecopi finds
pirated materials in any of the shipments, it now has the
right to seize them, even before the shipment is cleared by
Customs.

5. (SBU) The Indecopi official will also coordinate with
SUNAT and Customs on the best way to deal with imports of
blank optical disks. According to Hernan Viviano, General
Manager of Warner Brothers and a member of the Anti-Piracy
Crusade, Indecopi and SUNAT plan to pinpoint importers for
future investigations. While the GOP agencies have yet to
fully establish a registry of imported blank optical discs,
officials from SUNAT and Indecopi have been in contact with
officials from Paraguay about their program.

6. (SBU) The Anti-Piracy Crusade is also working with
Indecopi and SUNAT to establish a new regulation that would
mandate all importers to pay VAT tax on blank optical discs
at the port of entry. Importers would then recoup their VAT
by deducting it from future legitimate sales of blank
optical discs. According to Martin Moscoso, head of
Indecopi's copyright office, the proposed regulation would
target importers that sell their discs to pirates, who do
not pay taxes on their products. These importers would thus
be unable to recover their losses, making piracy less
profitable. Indecopi, SUNAT and the Anti-Piracy Crusade are
currently putting together a working group, made up of
government and public sector representatives, which will
determine the VAT amount to be paid by each importer. Once
the draft regulation is finalized, members of the Anti-
Piracy Crusade members will meet with importers to lobby for
their support of the bill.

Missing Link: the Lima Government
---------------------------------

7. (SBU) Although GOP officials are improving coordination,
Moscoso points out that they need help from local
governments, particularly the Municipality of Lima. In
October 2004, the Lima Government approved Municipal
Ordinance 717, which established as a priority the fight
against intellectual property rights violations. Under the
law, the Lima Government is allowed to sanction, close and
decommission any shops that violate their permits by
distributing, selling or producing pirated goods. According
to Moscoso, the local government has failed to uphold this
law and instead allows shops to sell "blatantly illegally
produced products." The Lima Government, in retaliation,
claims that it does not have the tools to determine whether
goods are real or fake and that Indecopi should work more
closely with local police.

8. (SBU) The Ambassador met with Lima Mayor Luis Casteneda
in early June to discuss this issue. Casteneda informed the
Ambassador that he has met with members of the Anti-Piracy
Crusade and has encouraged them to work with the local
police to conduct more raids. He noted, however, that the
Lima Government is unable to counter piracy through the
permit process because the permits are too general.

Illegal Vendors Want Legitimacy
-------------------------------

9. (SBU) During a meeting with Indecopi's Martin Moscoso on
July 26, he noted that raids are only effective to a point.
While the GOP has conducted over 15 raids in 2005, he
argued, to be successful, officials would have to conduct
raids on a daily basis, which under current budget
restrictions is unlikely. Additionally, Moscoso pointed out
that many police are corrupt and turn a blind eye to IPR
violations in exchange for a bribe. Many of the local
illegal distributors are fed up, as the bribes are becoming
too costly. A Commission of sellers from El Hueco met with
officials from Indecopi, Video Andes (which controls 70
percent of the legal DVD market) and Sony in mid-July to
discuss the possibility of formalizing its sales of pirated
discs. The commission noted that it would be willing to pay
taxes and copyright fees, under special agreements.
According to Moscoso, legal distributors would have to
approve any type of special commercial agreement. He
mentioned that this type of deal occurred in Guadalajara,
Mexico and could perhaps serve as a model for Peru.

Comment
-------

10. (SBU) The GOP's recent ant-piracy actions are an
indication that IPR is becoming a higher priority.
Unfortunately, Indecopi, SUNAT and the police all lack the
financial resources to stamp out IPR violations. Indecopi
officials have acknowledged privately that raids only do so
much, as many of the stalls and shops reopen the following
day with more pirated goods. The GOP must get to the root
of the problem and prevent the illegal reproduction of
goods. Vendors wanting to become more legitimate is a step
in that direction.

11. (SBU) One thing remains clear: the GOP needs to
institute a registry to track the 120 million blank optical
discs that enter Peru annually. It would be helpful if
officials from the Patent and Trade Office, as well as U.S.
Customs, could help deliver this message during the proposed
IPR training seminar in late October.

STRUBLE

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