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Cablegate: Peru: President Garcia at 100 Plus Days

VZCZCXYZ0000
RR RUEHWEB

DE RUEHPE #4610/01 3411456
ZNR UUUUU ZZH
R 071456Z DEC 06
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 3251
INFO RUEHAC/AMEMBASSY ASUNCION 1566
RUEHBO/AMEMBASSY BOGOTA 4158
RUEHBR/AMEMBASSY BRASILIA 7119
RUEHBU/AMEMBASSY BUENOS AIRES 2700
RUEHCV/AMEMBASSY CARACAS 9989
RUEHLP/AMEMBASSY LA PAZ DEC QUITO 0874
RUEHSG/AMEMBASSY SANTIAGO 0988
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUMIAAA/CDR USCINCSO MIAMI FL

UNCLAS LIMA 004610

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV PINR PHUM PE
SUBJECT: PERU: PRESIDENT GARCIA AT 100 PLUS DAYS

REF: A. LIMA 4451
B. LIMA 4519

--------
Summary:
--------

1. (SBU) President Garcia's political skills have lent Peru
a stability that the country has not enjoyed for several
years. While the APRA lost badly in the 11/19 regional
elections, some argue that Garcia now can control a divided
field of regional presidents and use the results to stave off
patronage pressures from his own party. Others maintain that
Garcia will have to work with a mixed bag of regional
presidents, many of them anti-free market radicals. While
Garcia's nods to populism have worried some observers and his
government is not likely to pilot much-needed state reforms,
he is enjoying a longer honeymoon than most observers
expected. End Summary.

------------------
The Pros in Charge
------------------

2. (SBU) President Alan Garcia and his government have
passed the first key mark of their administration, the
country's November 19 regional and municipal elections.
Although his APRA party fared poorly, Garcia's position
remains strong. For the moment, there is no organized
opposition to the President. Though they have slipped in
recent weeks, his poll numbers remain in the high 50s (still
higher than his support in the second round of the election),
and his former rival, Ollanta Humala, has all but
disappeared. No solid anti-Garcia or anti-Government
Congressional bloc has emerged in the Congress. Instead,
the ruling APRA party has led different coalitions on an
issue-by-issue basis, which has helped the government manage
the legislature. All told, Peru under Garcia has enjoyed a
stability and relative tranquility that it hadn't seen during
years immediately prior.

-----------------------------
Regional Governments as Foil?
-----------------------------

3. (U) APRA's heavy losses in the 11/19 regional and
municipal elections -- the party went from controlling twelve
Regional Presidencies down to only three -- create a new
political panorama that presents both opportunities and
challenges to the GOP (ref A). While a manifest blow to the
party's national standing, there may be a silver lining.
Some have argued that APRA's loss is Garcia's gain, since the
party must now depend more than ever on the President.
Moreover, the drubbing APRA took may enable the President to
stave off patronage pressures from party regulars. Garcia
can argue that handing out government positions to
technically unqualified political supporters (as he did
during his first term as president) would be political
suicide in the face of a wary electorate.

4. (SBU) The President has already shown how he might use
regional governments as foils. In the context of the
government's accelerated decentralization program (ref B),
Garcia is seeking to shift both responsibility and
(importantly) blame for problems and shortcomings away from
the central government, and on to regional and municipal
governments. A recent high profile event on child
malnutrition is illustrative. In his public remarks,
President Garcia laid the blame for inadequate nutritional
programs squarely on regional governments, which he said had
a narrow "bricklayer" mentality, i.e. a tendency to invest in
(often poorly managed and slow starting) infrastructure
projects rather than in helping the country's poorest and
most needy. Garcia commented acidly that if children in the
regions could vote, regional governments would invest more to
improve their diets.

5. (SBU) Some disagree with the wisdom of this approach.
Former Interior Minister Fernando Rospigliosi told Polcouns
on 11/30 that while Humala himself had disappeared, the
sentiments that fueled his movement had not, and that many of
the new regional presidents and local mayors shared Humala's
radical values. The central government's push for rapid
decentralization, combined with inexperience and lack of
capacity at the regional and municipal government levels,
could generate and even exacerbate program failures.
Rospigliosi suggested that blame for such difficulties would
inevitably blow back on the GOP, aggravating social
conflicts, particularly in high-conflict zones like Ayacucho
and Puno, and strengthening popular pressures on the
government.

----------------
PTPA a Challenge
----------------

6. (SBU) Developments on the Peru Trade Promotion Agreement
(PTPA) front have also generated mounting pressures. The
decision not to seek formal approval for the agreement during
the U.S. congressional lame duck session has incited an early
round of finger pointing in Peru. Some observers have
accused the government of failing to push the agreement with
sufficient vigor in Washington, while some in the Garcia
Government have responded by blaming the Toledo
Administration for mishandling the initial strategy. Garcia
himself has generally remained positive about the
legislation's prospects, and even enlisted former President
Toledo to help, unthinkable several months ago. As the GOP
seeks to recalibrate its approach, many observers are
convinced the rejection of the PTPA would be (and be seen as)
a significant defeat for Garcia and a serious blow to the
economic and strategic interests of Peru and the U.S.

-----------------------------
On a Populist Slope? Not Yet
-----------------------------

7. (SBU) Garcia's Achilles Heel could be his penchant for
populism. Where President Toledo was a poor politician but a
good manager, Garcia's record suggests the exact opposite:
that he is a master political tactician prone to strategic
blunders and indifferent to everyday administration and
management. Critics have seized two recent issues to
illustrate Garcia's alleged turn to populism. The first was
the GOP's decision to forgive the debts of 27,000 small
borrowers from the government's Materials Bank (BANMAT). The
second was the proposal by an APRA representative in
Congress' Labor Commission to include in the draft labor law
a provision making it almost impossible to fire workers (ref
C). Following the public outcry, the government's response
on both issues -- that small debtors would have to pay 50
soles (USD 16) each for the amnesty and that the labor law
provision would be modified to give employers more discretion
in dismissing workers -- suggests that the populist path
itself will entail serious political costs for the
government.

---------------------------------------
Comment: Stability But No Great Reforms
---------------------------------------

8. (SBU) Many observers concede Garcia's gift for politics
and the likelihood he will resist the kinds of populist
impulses and pressures that led him, and Peru, down such a
disastrous path in 1985-90. Hope, mingled with the
government's mostly positive signals up to this point, have
kept the administration's honeymoon going for longer than
most analysts would have expected. At the same time, few are
convinced the Garcia government has the political will or
ability to embark on the kind of serious state reforms,
including of the judiciary, that Peru requires to climb to
the next level of political and economic development. Such a
project would have a high political cost, and would mean
taking on established interests, some of them embedded in the
state apparatus, the government and the APRA itself -- things
Garcia has generally sought to avoid.
POWERS

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