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Cablegate: Peruvians Want Quick Congressional Vote On U.S.

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 005333

SIPDIS

SENSITIVE

USTR FOR AUSTR VARGO AND BHARMAN

E.O. 12958: N/A
TAGS: ETRD ECON EINV EFIN KIPR PGOV PREL PE
SUBJECT: PERUVIANS WANT QUICK CONGRESSIONAL VOTE ON U.S.
TRADE AGREEMENT

REF: LIMA 4777 AND PREVIOUS

1. (SBU) Summary: The GOP and supporters of the Peru Trade
Promotion Agreement believe it is imperative that the
current Peruvian Congress vote on the agreement before the
new Congress and President are inaugurated in July 2006.
The current Congressional Members are familiar with and are
favorably disposed toward the trade accord. Many well-
informed observers believe it critical that the trade
agreement commitments be in place by the time the new
government takes charge on July 28. Public commentary about
the free trade agreement, concluded December 7, has been
largely positive. While GOP negotiators have become
regulars on radio and TV talk shows promoting the trade
deal, opponents appear desperate to find arguments against
the trade accord. End Summary.

Congressional Approval: The Sooner, The Better
--------------------------------------------- -

2. (SBU) Supporters of the free trade agreement want the
present Congress to vote on the accord before the July 28,
2006 inauguration of the next President and Congress.
Former Trade Vice Minister and now consultant Jaime Garcia
noted that this Congress is familiar with the details,
having participated at negotiating rounds over the past 19
months. Moreover, agreement supporters do not want to start
from scratch to educate Members of the new Congress, which
may not be as favorable on the trade deal as the current
Congress.

3. (U) Trade Minister Ferrero and others have stated that a
trade vote between the April 9 election and the May 7
Presidential run-off (in case no candidate receives more
than 50 percent during the first round) would be ideal. By
waiting to approve the free trade agreement until after the
April 9 election, Members of Congress could vote their
conscience on the trade accord without any consequence to
their electoral bids.

4. (SBU) There are some in Congress, such as APRA party
Congressman Mauricio Mulder, who advocate that the next
Congress (inaugurated on July 28) vote on the U.S. trade
deal -- not the current Congress. (Comment: APRA does not
want the trade agreement to become an electoral issue, as
this could fuel the campaign of ultra-nationalist Ollanta
Humala. The party would probably agree to Congressional
consideration after the May 7 run-off. End Comment.)

5. (U) Business daily Gestion on December 15 quoted Prime
Minister Kuczynski as favoring congressional handling of the
agreement as early as possible. The Prime Minister argued
that Peruvian exporters, such as clothing manufacturers,
have to consider orders that will be placed by June 2006.
If the agreement is not approved by then, Peruvian exporters
could begin to lose business. Kuczynski also stressed that
the debate for approval of the agreement will have to
counter a "mercantilist current" of certain Peruvian
businesses such as sugar producers.

Humala Factor
-------------

6. (SBU) The meteoric rise of Presidential aspirant and
former military commander Ollanta Humala in a recent Apoyo
poll -- second place showing with 22 percent behind poll
leader Lourdes Flores -- has added urgency to several trade
deal supporters. Patricia Teullet, export/import
association Executive Director and a former Finance Ministry
Vice Minister, told us it is important to have Peruvian
Congressional approval of the trade deal before the April 9
national elections. Teullet and others believe that it is
critical to lock in the trade agreement commitments before
the potential election of pro-Humala Members of Congress.

President Toledo's Legacy: A U.S. Trade Deal
--------------------------------------------

7. (U) President Toledo proudly broadcast two nation-wide
press events on December 7 and 9 to highlight the Peru Trade
Promotion Agreement. The President invited the Ambassador
to attend the latter conference with the entire GOP
negotiating team. Toledo assured Peruvians that
compensation would be available for those that are
negatively impacted by the free trade agreement. Citing a
trade association study, Toledo claimed that the accord
would generate 6 million jobs over 10 years. (Note: the
study estimated 5.7 million new formal jobs -- of that 2.7
million are informal jobs that would become part of the
formal economy.) The President added that the agreement
expands ATPA benefits by providing duty-free access to about
40 percent more products.

Positive Public Reaction
------------------------

8. (U) Press accounts of the Peru trade agreement have been
largely positive. Leading newspapers, such as "El
Comercio," "Peru 21," and "Expreso," have published
favorable editorials about the trade accord complementing
President Toledo for pursuing the deal with the United
States. A poll cited in "Expreso" indicated that 92 percent
of 240 business leaders consulted support the U.S. trade
deal. A poll in "El Comercio" on December 11 noted that 58
percent of those contacted believe the FTA is beneficial to
Peru. Thirty-one percent expressed disapproval.

Getting the Word Out
--------------------

9. (U) Trade Minister Alfredo Ferrero, Chief Trade
Negotiator Pablo de la Flor, Agriculture Minister Manuel
Manrique, and the Prime Minister's Chief of Staff Cecilia
Blume have been active on the radio and television program
circuit. Each has said that the FTA on balance is very
positive for Peru, consolidating ATPDEA benefits for
asparagus and other key exports. Ferrero highlighted that
the deal expands beyond ATPA benefits; for example, Peruvian
textiles would enter the United States duty-free once the
agreement is in force, in addition to apparel products.

10. (U) When questioned about U.S. market access to Peru's
sensitive agriculture products, De la Flor noted the long
tariff phase out periods and emphasized that the quotas are
small, representing only a small percentage of Peru's total
production. Health Minister Pilar Mazzetti indicated that
the health sector has been protected. She highlighted that
second-use patents are not part of the agreement and that
she helped secure an exemption from data protection in case
of a national medical emergency. Mazzetti added that she
would defend the trade deal when it is debated in Congress.
The GOP team all claim victory on maintaining the ban on the
importation of used clothing.

11. (U) Think tanks and private banks have issued reports
indicating that the trade accord should help Peru combat
poverty and improve the country's investment climate.

Critics Hurting for Arguments
-----------------------------

12. (U) Trade deal critics appear desperate for arguments
and recently have focused on the absence of a public text,
accusing the government of hiding something. The GOP first
announced that the text would be ready in 15 days -- it now
states three weeks. The government began issuing brief
chapter summaries of the accord on December 12.

13. (U) To the critics' relief, the Trade Ministry has
stopped its radio and television ads promoting the free
trade agreement pursuant to a law that prohibits paid
government commercials during the electoral campaign. In
a December 14 radio interview, Trade Minister Ferrero said
that, "it's now up to those who will benefit most from the
agreement to defend it, the private sector, small and medium
enterprises and the farmers."

14. (U) Trade agreement critic Congressman Javier Diez
Canseco (uncle of Trade Minsiter Ferrero) claims that Peru
has disadvantaged its Andean partners -- Ecuador and
Colombia -- by going it alone. He also argues that through
this deal, Peru will relinquish its sovereignty and restrict
its economic policy making ability. Diez Canseco argues
that the agreement would alter the Constitution; therefore
two consecutive Congresses need to approve the necessary
Constitutional Amendments. (Note: Informed observers tell
us that the accord will require revisions of laws, but no
change to Peru's constitution.)

15. (U) The sugar association asserts that the trade
agreement will bankrupt their industry, blaming U.S.
imported, duty-free high fructose corn syrup. Prime
Minister Kuczynski effectively debunked this claim in press
remarks reported December 15 when he stressed that despite
the fact that fructose currently has a low 4 percent duty in
Peru, only $54,000 worth was imported into Peru in 2004.

16. (U) The small farmers association, CONVEAGRO, claims
that the treaty affects 99.9 percent of Peru's agriculture
sector and that the government went beyond its self-imposed
red lines. This is an argument that has been repeated by
other trade deal opponents. CONVEAGRO repeatedly argues
that the agreement, which maintains U.S. agricultural
subsidies, provides unfair advantages to the United States.
Chief Trade Negotiator De la Flor explained that WTO
negotiations on agricultural supports and subsidies are
ongoing and will be dealt with in the WTO forum. There are
fiscal constraints and pressures within the United States to
eliminate this aid to U.S. farmers, De la Flor emphasized on
a talk show.

Comment: Time Constraint for Toledo
-----------------------------------

17. (SBU) The GOP is eager for the U.S. executive to notify
Congress of its intention to sign the trade pact. An early
notification has advantages, including increasing pressure
for the GOP to resolve pending commercial disputes, notably
Engelhard. Moreover, an early signature by the parties
would permit time to secure the Peruvian Congressional
approval before the next government assumes power in late
July. Members of Congress undoubtedly would prefer to vote
on the trade deal after the May 7 Presidential run-off.
This would give them sufficient time to approve the
agreement before they leave office. This timetable would
also enable the GOP to renew FTA-related paid publicity, as
the prohibition on government advertising during the
campaign would have ended.

STRUBLE

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