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Cablegate: Peruvian Congress Reaffirms Support For

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

UNCLAS LIMA 004867

SIPDIS

SENSITIVE

DEPT FOR WHA/AND, WHA/EPSC, EB/IFD/OFD, EB/CBA,
EB/IFD/OIA

TREASURY FOR OASIA/INL, DO/GCHRISTOPOLUS
COMMERCE FOR 4331/MAC/WH/MCAMERON
USTR FOR BHARMAN/DWEINER

E.O. 12958: N/A
TAGS: EINV EFIN ECON EPET KIDE PE
SUBJECT: PERUVIAN CONGRESS REAFFIRMS SUPPORT FOR
EXXON-MOBIL TAX LAW

REF: A) Lima 4370 B) Lima 3187 C) Lima 1660

1. (SBU) Summary. After a month of delay and renewed
Embassy advocacy, the Congressional Plenary voted on
November 10 to reaffirm its support a law granting Exxon-
Mobil a $15 million credit over the next three years. Under
Peruvian Congressional procedure, the law, which dealt with
economic issues, was subject to two rounds of Congressional
voting. We expect President Toledo to sign the bill when he
returns from his APEC Summit trip on November 22. End
Summary.

Delay in Second Round of Voting
-------------------------------

2. (SBU) The Congressional Plenary voted on October 6, 67-
10, in favor of a draft law that would resolve the Exxon-
Mobil dispute by granting the company a $15 million tax
credit over the next three years for VAT paid on
international fuel sales. (Note: The annual profits from
the Exxon-Mobil refueling operations total approximately
$500,000. The SUNAT retroactive reinterpretation of the law
which led to the $15 million tax liability would have forced
the operation to close its doors and walk away from one of
the few otherwise successful and well-run privatization-
related concessions held by a US company. End Note.) Under
Peruvian Congressional procedure, the law requires two
rounds of voting. The second vote should have taken place
within six working days after the first vote, or by October
14. The Junta de Portavoces (Board of political party
leaders) has the power to exempt a draft law from a second
vote; this exception is often a routine matter.

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3. (SBU) However, neither the second vote nor the exemption
request by the Junta de Portavoces occurred in the timeframe
dictated by law. Peter Hartmann, General Manager of Exxon-
Mobil Peru, informed us that the delay was due to
Congressman Rodrich's request for a reconsideration of the
law affecting Exxon-Mobil immediately after the first vote
on October 6. Rodrich took advantage of the reconsideration
request and presented to Congress his own draft law, which
included additional language requesting tax credits for fuel
bunkering operations.

MEF Tax Amendment Passes Again
------------------------------

4. (SBU) On November 8, following Embassy advocacy to the
Prime Minister, the Congressional Plenary discussed two
issues: the Rodrich request for reconsideration of the MEF
draft amendment and the second vote for the MEF draft
amendment. The Plenary voted 70-4-21 against the
reconsideration request. With the denial of
reconsideration, the Plenary refused to entertain a motion
on Rodrich's draft law. The Congressional Plenary then
moved for a second vote on the MEF draft amendment, voting
to uphold the MEF amendment 78-8.

5. (U) According to Peruvian law, the bill now must be sent
to President Toledo for his approval before becoming law.
Because President Toledo is in Korea attending the APEC
Summit, the President of Congress will send the bill to the
Executive for approval after President Toledo returns to
Peru on November 22. We expect President Toledo to sign the
bill immediately upon his return.

STRUBLE

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