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Cablegate: Scenesetter for Codel Smith

This record is a partial extract of the original cable. The full text of the original cable is not available.




E.O. 12958: N/A

REF: STATE 204691

Welcome to Peru

1. Post warmly welcomes Congressman Smith's visit to Peru
and greatly appreciates his interest in both trafficking in
persons (TIP) and women's and children's health issues. Over
the last two years, the Peruvian Government has awakened to
the TIP problem and has taken serious steps to combat it. In
addition, the Toledo Administration has presided over four
years of economic growth, which has cut into the rates of
poverty, child poverty, and infant mortality.

Trafficking in Persons

2. Your visit will provide an opportunity to emphasize the
importance of trafficking in persons as a key element in our
bilateral human rights agenda. At the same time, it will
provide an opportunity for the Peruvians to discuss the
progress they have made in this area. In two short years,
Peru has gone from near total denial on TIP to effective
action. Among the measures the Peruvians have taken are:

-Formed a permanent, Ministerial-level Multi-Sectoral
Committee dedicated to TIP; the organization includes
representatives from government ministries, local and
international NGOs, and international organizations;

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-Increased police raids against clandestine brothels that
employ underage women;

-Arrested a notorious trafficker of Peruvians to Japan;

-Passed a law that significantly raised the penalties for
clients and pimps of underage prostitutes;

-Repatriated two Peruvian TIP victims from Japan;

-Undertaken, with U.S. assistance, three anti-TIP Programs,
including a key program to create a data collection system to
track TIP victims and identify traffickers.

3. Along with their government, Peruvian individuals and
institutions have stepped forward as hemispheric leaders on
TIP. The Catholic religious order, The Sisters of Adoration,
whose shelter for TIP victims you will visit, were cited as
"International Heroes" in the June 2005 TIP Report, the only
group in Latin America to be so recognized. In addition,
Peruvians Antonio Querol and Gonzalo Sarmiento are now
replicating a missing persons website that they originally
developed for Peru across Latin America with the help of Save
the Children, Switzerland.

4. This movement forward on TIP results from larger advances
that Peru has made in both the political and economic arenas.
Unfortunately, public perception lags behind real progress,
and public pessimism and political division at times threaten
to undermine this still-nascent democracy.

The Political Scene

5. Former President Fujimori's 11/16 arrest in neighboring
Chile has further muddied an already complex political scene.
President Toledo is already well into his last year in
office. While his popularity remains low, his government is
stable. All rivals have their eyes on the election and on
maintaining economic and political stability in the hope of
inheriting a steady ship next July 28.

6. Toledo's priorities for his remaining months in office
are: passage of a Free Trade Agreement (FTA) with the United
States, ensuring an orderly transition to a successor, and
securing enough seats for his Peru Possible party in the
coming Congress to retain political influence, block
retaliation against him, and lay a base for another Toledo
presidential campaign in 2011.

7. The Peruvian political scene is fragmented, with 29
parties registered to field presidential and congressional
candidates in the 4/4/06 elections. Peru's political
parties, with the exception of APRA, are not well
institutionalized. No candidate currently has registered
more than 27 percent support in the polls. Fujimori's
arrival in Chile adds to the existing uncertainty that
promises a volatile and unpredictable election campaign.

The Economy

8. Peru's economy is one of the most dynamic in Latin
America. GDP grew 5.1 percent in 2004, reaching $67 billion.
Growth was driven by exports, construction, mining,
investment, and domestic demand. Exports, propelled by high
mineral prices, ATPDEA benefits and the completion of the
Camisea gas project, surged above $12 billion in 2004, up 39
percent in dollar terms from 2003. U.S. exports to Peru
increased 27 percent during the same period, to $1.8 billion.
Peru,s $2.6 billion trade surplus drove the currency up 5.5
percent against the dollar over the year.

9. The economy has steamed ahead in 2005, with a growth rate
of 5.6 percent for the first half of the year. Exports are
up another 20 percent since last year, and reserves have hit
a record $14.1 billion. Inflation is 2.5 percent, and the
government is on track to meet its deficit target of one
percent of GDP for 2005. Revenues are up 11 percent since
last year.

10. Peru's major trading partners are the U.S., China, EU,
Chile and Japan. In 2004, 29 percent of exports went to the
U.S. and 20 percent of imports came from the U.S. Key
exports include gold, copper, fishmeal, textiles and apparel,
petroleum, zinc, asparagus and coffee. Imports include
machinery, vehicles, processed food, petroleum and steel.
Registered foreign direct investment (FDI) is $12.9 billion,
with the U.S., Spain and Britain the leading investors. FDI
is concentrated in mining, electricity, telecom and finance.

11. Despite Peru's macroeconomic success, huge challenges
remain. Peru must reduce poverty of 52 percent (under
$58/month) and extreme poverty of 24 percent (under
$32/month). Wealth and economic activity are overly
concentrated in Lima and other large cities. Unemployment
and underemployment levels total 56 percent nationwide, and
over 60 percent of the economy is informal. Growth is just
beginning to generate employment faster than new entrants
come into the labor force. The government lacks revenues for
adequate social investment. Boosting long-term growth and
reducing poverty will require strengthening the judiciary,
reducing corruption and completing other reforms to improve
the investment climate.

Peru as a Regional Partner

12. Peru is a solid U.S. ally. Opinion surveys show that
the United States is admired in Peru. Of all the Andean
Countries, after Colombia, Peru is our most reliable partner.

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