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UNCLAS LIMA 001534 
 
SIPDIS 
 
DEPT FOR WHA/AND, EPSC AND OES/ETC,ENV 
BRASILIA FOR ESTH HUB - J STORY 
USAID FOR LAC, EGAT 
USTR FOR B HARMANN, M BURR 
COMMERCE FOR M CAMERON 
USDA/AS/FAA/BAILLEY AND USDA/FAS/ITP/FSTSD/BREHM 
 
SENSITIVE 
SIPDIS 
...

id: 61359
date: 4/21/2006 14:51
refid: 06LIMA1534
origin: Embassy Lima
classification: UNCLASSIFIED//FOR OFFICIAL USE ONLY
destination: 06LIMA2444
header:
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DE RUEHPE #1534/01 1111451
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FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 9925
INFO RUEHBO/AMEMBASSY BOGOTA 3287
RUEHBR/AMEMBASSY BRASILIA 6688
RUEHBU/AMEMBASSY BUENOS AIRES 2346
RUEHCV/AMEMBASSY CARACAS 9334
RUEHLP/AMEMBASSY LA PAZ APR QUITO 0260
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RUEHRC/USDA FAS WASHDC//USD 1440
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC


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UNCLAS LIMA 001534 

SIPDIS 

DEPT FOR WHA/AND, EPSC AND OES/ETC,ENV 
BRASILIA FOR ESTH HUB - J STORY 
USAID FOR LAC, EGAT 
USTR FOR B HARMANN, M BURR 
COMMERCE FOR M CAMERON 
USDA/AS/FAA/BAILLEY AND USDA/FAS/ITP/FSTSD/BREHM 

SENSITIVE 
SIPDIS 

E.O. 12958:  N/A 
TAGS: SENV ETRD EINV EAID ECON PGOV SNAR PE
SUBJECT:  ILLEGAL LOGGING THRIVES IN PERU 

REF: LIMA 2444 

¶1.  (SBU) SUMMARY: Peru exports the most broad leaf mahogany 
in the world, a majority of it to the U.S.   Much of the 
exports are likely from illegal logging, violating Peruvian 
law and the CITES international convention against 
trafficking in endangered species.  The GOP, NGO community 
and Peruvian logging industry agree that illegal logging is 
a problem.  Post has identified serious deficiencies in GOP 
regulator INRENA's ability to police the logging industry, 
formal and informal.  The formal forest products industry, 
concerned about legal challenges to mahogany exports, 
appears interested in working to reduce illegal logging. 
Post is exploring options such as applying for OES-I Qoject 
funds and realigning USAID programming.  END SUMMARY. 

DIRE MAHOGANY SITUATION 
----------------------- 
¶2.  (U) Peru now is the world's largest exporter of broad 
leaf mahogany, according to thQatest report of the 
International Tropical Timber Organization (ITTO).  Brazil 
reportedly no longer allows legal export of broad leaf 
mahogany, and the Bolivian government is reducing legal 
exports due to its declining stocks.  Legal exports of 
Peruvian mahogany have declined steadily since, according to 
the 2005 report of the GOP's natural resources monitoring 
and enforcement agency, INRENA.  Since 2002, the agency's 
estimate of illicit exported mahogany has been 60,000 cubic 
meters per year.  Broad leaf mahogany continues as an 
endangered species under Appendix II of the International 
Convention against Trafficking in Endangered Species 
(CITES).  The high selective extraction of reproducing 
trees, the slow reproduction rate of wild mahogany, and the 
inability so far of silviculturalists to develop healthy 
mahogany plantations have combined to cause a steady decline 
in mahogany stocks. 

PROBLEMS WITH MAHOGANY BUYERS AND SELLERS 
----------------------------------------- 
¶3.  (U) Ten firms with INRENA permits account for over 85 
percent of Peru's mahogany exports.  The United States 
continues to be by far the largest importer of mahogany 
importing 88 percent of Peru's total 2005 mahogany exports. 
Unofficial INRENA estimates indicate that 70-90 percent of 
all mahogany exported in 2005 originated from illegal 
sources. 

¶4.  (SBU) INRENA's current verification process, implemented 
as a result of USAID support, is confirming that mahogany is 
being harvested not from the commercial concessions but from 
protected areas (where commercial extraction is prohibited) 
and from areas in indigenous territories different than 
those specified in INRENA-approved logging plans.  INRENA 
must approve all logging plans to extract mahogany legally 
from commercial forestry concessions, indigenous community 
lands, and agricultural land with remnant forests. 

¶5.  (SBU) Reliable INRENA sources and civil society groups 
report that mahogany loggers exploit indigenous communities 
by paying below-market prices.  The loggers also are 
involved in forced labor, according to the International 
Labor Organization (ILO). Moreover, commercial timber 
extraction from forested remnants of agricultural land is 
considered the most common system to launder illegal timber. 
There is a long history of extracting mahogany from remnant 
forests and the origin of the cut timber is hard to trace. 

PERU SETS QUOTAS AT LAST 
------------------------ 
¶6.  (SBU) Despite domestic political pressure against the 
measure, INRENA (with USG support) set in May 2005 Peru's 
first mahogany export quota.  INRENA established the quota 
for 2005 at 23,621 cubic meters (m3).  INRENA concluded that 
an export quota was the most cost-effective and 
scientifically defensible way to manage the resource and 
fulfill CITES requirements after it verified, with direct 
USAID support, 52 concessions.  The verification process 
showed that 60 percent of these concessions presented 
serious infractions, including document falsification, 
timber extraction outside the concession boundaries and 
links to bribes.  The other 40 percent showed they were 
complying with the minimal management standards per Peruvian 
law, but still required corrections.  None of the 
concessions verified showed high management standards.  As a 
result, INRENA set a mahogany quota, suspended the granting 
of new concessions and requested USAID-targeted support to 
correct the identified weaknesses. 

¶7.  (U) INRENA officials said that a quota allowed official 
exports to be controlled while better methods were developed 
to farm mahogany in plantations or foster regeneration of 
wild stocks, and until a reliable supervision system could 
be put in place.  INRENA set a quota for 2006 at 23,239 m3. 
As of March 2006, Peru has exported 5,698.57 m3, most of 
which has gone to the United States. (Note: Given the 
acknowledged problem with illegal logging, we were surprised 
that INRENA reduced the quota by only 394 m3 for 2006.  End 
Note.) 

¶8.  (SBU) INRENA based the 2005-06 quota on various 
criteria.  This included:  historical exports; requirements 
for non-detrimental legal exports under Appendix II of 
CITES; and INRENA projections of available commercial timber 
volume for the harvest seasons.  INRENA considered as well 
NGO and ITTO data on the continuing reduction of mahogany 
populations in Latin America.  The National Agrarian 
University (UNALM) is the CITES scientific authority for 
"non-detriment" in Peru.  The University has been unable to 
produce a definitive census or other reliable monitoring 
system of mahogany stocks; UNALM finally delivered to 
ESTHoff on April 3 a promised preliminary census.  UNALM's 
report states that Peru's mahogany population has declined 
dramatically, from 768,220 trees (224,733 in protected 
natural areas) to 304,630 trees (87,888 in protected natural 
areas). 

MISPLACED SUPPORT FROM CITES AUTHORITIES... 

¶9.  (SBU) At the last international CITES meeting, in 
October 2005, INRENA presented a series of accomplishments 
it claimed had been made in the fight against the illegal 
cutting of mahogany.  When the CITIES Commission lauded 
Peru's gains in the management of forest resources and 
environmental governance, it also noted the fragility of 
these gains.  Highlighting future challenges, the Commission 
identified the "increased powers" of an illicit forest 
management cartel; the cartel's strengthened linkages to 
what it called the Coca Cartel; and the continued crisis in 
institutional capacity.  (Comment: Post does not believe 
that there is either a single illicit logging cartel nor a 
single coca cartel.  End Comment.) 

¶10.  (SBU) At the CITES meeting, the GOP cited as an 
accomplishment its computerized system to track mahogany 
harvest, a system developed with USAID funding.  Reliable 
information indicates that data has consistently been mis- 
entered or later altered at field locations, allowing 
concessionaires to cut more lumber than they are legally 
permitted.  Post has suspected corruption for many months 
and has consistently informed INRENA of these concerns.  A 
few weeks ago, when the story appeared in the media, INRENA 
claimed it would address this situation.  Nothing has 
changed to date. 

¶11.  (SBU) INRENA at the last CITES meeting announced that 
it was re-structuring itself to ensure greater "separation 
of powers" among INRENA's management, forest supervision 
department (OSINFOR), and its departments for protected 
areas and species.  More than five months since the meeting, 
the new structure has yet to be implemented.  Post now has 
reason to believe that the gains the GOP claimed last 
October were simply not true.  (Comment: Ironically, the GOP 
has agreed to host in Lima the next CITES meeting.  GOP lead 
host agency, INRENA, has asked USAID for funding support. 
Peru's lack of CITES compliance could become an issue.  End 
Comment.) 

GROWING NEXUS BETWEEN ILLEGAL LOGGING AND NARCOTRAFFICKING 
--------------------------------------------- -------------- 
¶12.  (SBU) The narcotrafficking presence on the eastern 
slopes of the Andes puts even more pressure on mahogany and 
cedar populations.  Narcotraffickers with established 
networks for moving coca paste and opium latex appear to be 
getting involved in transport of illegal timber, for both 
its profitability and its utility as concealment.  For 
example, GOP officials and mining developers familiar with 
mine exploration activities at the northern border with 
Ecuador told Econoff in July that a local Mayor has been 
involved in both illegal logging and opium poppy production. 

¶13. (SBU) Police in Loreto Department told Econoff in June 
and September that they continue to find coca paste packages 
hidden in mahogany and cedar shipments.  The transported 
mahogany trunks, or stacked loads of sawn lumber, are so 
huge, and the number of shipments so massive that police 
catch only a tiny fraction of the coca that they estimate is 
transported from the Andes downriver to Brazil.  DEA's Lima 
Country Office -- which actively assists GOP law enforcement 
in eliminating the concealment of illicit drugs in wood 
shipments, believes that suspected shipments are large. 

USAID RESPONSE 
-------------- 
¶14.  (U) Consistent with its overall objective of assisting 
GOP institutions to take the lead and become accountable for 
sustainable natural resources management and conservation of 
biodiversity, USAID continues to support transformational 
development interventions.  USAID funds and advises INRENA 
on issues related to sustainable natural resources 
management, management of protected areas, institutional 
capacity strengthening, and policy and legal controls. 
USAID decided recently to discontinue support for the 
computer registration program because of the credible 
allegations of corruption and the lack of INRENA action to 
address the situation. 

¶15.  (U) USAID is pursuing the most effective way of 
combating illegal logging, through legal forest management. 
USAID is working with INRENA to achieve international 
certification of forests and the lumber export chain, 
limiting participation in programs to operators whom USAID 
can certify.  Working with a small group of private 
concessionaires and 10 different indigenous communities, the 
objective is to certify approximately 200,000 hectares by 
December 2006.  The initial results are promising, but the 
task is daunting. 

PRIVATE SECTOR CONCERNED ABOUT ESA LITIGATION 
--------------------------------------------- 
¶16.  (SBU) In late March and early April meetings with 
Econoff and USAID Environmental officer, Peruvian 
Association of Exporters (ADEX) representatives expressed 
their concern about what misrepresentations of fact in the 
copy of Notice to Sue, written by NGO Natural Resources 
Defense Council (NRDC) under the Endangered Species Act 
(ESA).  During the meeting ADEX representatives admitted 
that the problem was great, but that there existed a core 
group of exporters interested in "doing this right."  ADEX 
members are particularly concerned about current lumber 
shipments soon to depart Peru bound for the U.S. 

PARTNERSHIP WITH THE PRIVATE SECTOR 
----------------------------------- 
¶17.  (SBU) While Peru's forested land accounts for over 64 
percent of the country's surface, forestry accounts for only 
one percent of GDP.  One of the most compelling issues 
identified towards the achievement of forest and 
biodiversity sustainability and promotion of licit 
livelihoods is to promote international standards for 
certification and chain of custody.  The forest products 
firms in Peru appear to want to change that.  ADEX recently 
acknowledged in a public presentation the problem of illegal 
logging, the opportunity to increase exports and GDP and 
some suggestions for reforming GOP oversight of the forest 
products industry (Reftel). 

COMMENT: MUCH TO BE DONE 
------------------------ 
¶18.  (SBU) Peru's forest management has been trouble for 
years, and its legitimate mahogany exports for the important 
U.S. market are in jeopardy.  Peru risks violating not only 
CITES, but also the recently-signed free trade agreement 
with the United States, which will require Peru to enforce 
its local and international obligations.  If the GOP does 
not maintain its quota in the face of continuing illegal 
harvest, it risks suspension of imports by the European 
Union, destruction of an endangered species and a defeat of 
the rule of law.  U.S. wood importers need to join the 
effort by investing in the system's improvement. 

¶19.  (U) The U.S-Peru free trade agreement may provide an 
additional tool to move Peru along a path of compliance and 
conservation, promoting legal trade with the United States. 
Post will continue discussions with industry representatives 
on how to promote greater industry compliance with 
international standards.  The International Wood Products 
Association has also expressed interest in helping to assure 
legal U.S. imports.  Logging/export certification, if 
properly funded, could fit into a Post trade capacity 
building program for implementation of the U.S. trade deal. 
Post is applying for an OES-I project grant for this 
purpose. 

¶20.  (U) Embassy will raise with appropriate GOP officials 
the need to maintain a credible approach to mahogany exports 
and adhere to international forest and chain of custody 
certification standards.  USAID will continue to work with 
INRENA, the private sector and indigenous populations to 
ensure that INRENA acquires the needed capacity to be held 
accountable for the proper and sustainable management of 
natural resources in Peru.  Advancing the responsible 
promotion of the forest sector is the best alternative to 
the illicit livelihoods that sustain many in the current 
forest sector. 

¶21.  (U) This cable was co-drafted with USAID Lima. 

STRUBLE 

=======================CABLE ENDS============================