VZCZCXYZ0002
RR RUEHWEB

DE RUEHPE #1725/01 1341509
ZNR UUUUU ZZH
R 141509Z MAY 07
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 5436
INFO RUEHBO/AMEMBASSY BOGOTA 4656
RUEHBR/AMEMBASSY BRASILIA 7341
RUEHCV/AMEMBASSY CARACAS 0375
RUEHLP/AMEMBASSY LA PAZ MAY QUITO 1212
RUEHSG/AMEMBASSY SANTIAGO 1276
RUMIAAA/CDR USCINCSO MIAMI FL

UNCLAS LIMA 001725 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PINR PHUM VE PE
SUBJECT: NEGROPONTE VISIT: CIVIL SOCIETY GROUPS SAY 
SPREADING PROSPERITY, STRENGTHENING INSTITUTIONS, PASSING 
PTPA KEY 
 
 
-------- 
Summary: 
-------- 
 
¶1.  (SBU) Deputy Secretary Negroponte met with civil society 
representatives at the Ambassador's Residence on May 10. 
They discussed the challenges in converting Peru's economic 
growth into generalized prosperity; the strengths and 
weaknesses of the Peruvian state and Garcia's governing 
style; Peru's continued vulnerability to radicalism, 
including Hugo Chavez' influence; and the importance of the 
Peru Trade Promotion Agreement (PTPA).  The diverse group 
agreed that Peru has moved a long way down the path to 
democracy and development, that the state's lack of capacity 
is the country's Achilles Heel, and that the PTPA is 
essential to sustaining the momentum of the country's 
modernization.  End Summary. 
 
¶2.  (U) D/S Negroponte met with a variety of civil society 
representatives at the Ambassador's Residence on May 10.  In 
attendance were: businessman Jose Miguel Morales; National 
Ombudsman and former Toledo Government Prime Minister Beatriz 
Merino; President of the National Educational Council 
Patricia Salas; cosultant Jaime Garcia; leader of the 
pro-transparency activist Beatriz Boza; and Catholic 
University Rector Salomon Lerner. 
 
--------------------------------- 
Converting Growth into Prosperity 
--------------------------------- 
 
¶3.  (SBU) All participants agreed Peru must now convert 
economic growth into more generalized prosperity.  Jose 
Miguel Morales said the country is reaping benefits from 
fifteen years of relative macroeconomic stability through the 
Fujimori, Paniagua, Toledo and now the Garcia Presidencies. 
Morales drew a distinction between the Fujimori dictatorship 
and his democratic successors, but noted the macroeconomic 
constants all had maintained.  As a consequence, the internal 
market has grown, tax revenues are running strong, and both 
national and regional government coffers are fuller than they 
have been in decades.  The poor, however, particularly those 
in rural areas, are not perceiving benefits quickly enough. 
 
--------------------------------------------- 
The GOP Has Strengths But Also Key Weaknesses 
--------------------------------------------- 
 
¶4.  (U) Participants ascribed the gap between growth and 
perceived benefits to the weaknesses of the Peruvian state. 
Some parts of the central government, such as the tax 
collection agency (SUNAT), Customs, the Central Bank, work 
well.  Others utterly lack capacity, particularly in their 
ability to provide needed infrastructure -- roads, schools, 
health clinics, police protection -- to needy populations. 
The same applies to regional governments, they said.  There 
is a severe shortage of trained technocrats who can implement 
the visible, concrete infrastructure projects the population 
craves. 
 
------------------------------------------ 
The Pluses and Minuses of the Garcia Style 
------------------------------------------ 
 
¶5.  (SBU) All recognized that the Garcia administration was 
maintaining the country's macroeconomic balance and its 
democracy.  Nonetheless, they criticized certain aspects of 
the President's leadership.  Several noted that Garcia and 
his Prime Minister, Jorge del Castillo, too often play the 
role of "firemen," i.e. they use central government resources 
to respond to day-to-day crises and to local demands.  In the 
short term, they look like problem-solvers.  Over the long 
term, this kind of presidentialism/centralism is not 
sustainable.  Peru needs to develop mediating institutions -- 
stronger political parties, more capable regional and local 
governments -- that can enable regions and localities to 
solve their own problems without summoning a Minister from 
Lima, usually by means of a violent protest. 
 
¶6.  (SBU) Other Garcia administration practices can be 
problematic.  Several participants maintained that one of the 
President's popular austerity measures -- cutting government 
salaries across the board -- have driven talented technocrats 
 
 
from government.  Moreover, the state needs to grow its 
presence in underserved regions.  To do that, the GOP should 
work with local NGOs and other civil society organizations. 
Instead, Salomon Lerner lamented, the GOP has "demonized" the 
NGOs.  (Note: Lerner referred to a recent NGO law that many 
in civil society regard as hostile to their organizations. 
End Note.) 
 
--------------------------------------------- - 
Despite Growth, the Radical Temptation Remains 
--------------------------------------------- - 
 
¶7.  (SBU) Radical elements stand ready to reap advantage from 
the gap between economic growth and generalized prosperity. 
Morales alleged that the Regional President (state governor) 
of Puno has received USD 4 million from Venezuela's Hugo 
Chavez to spend on schools and infrastructure.  Chavez' money 
can be put right to work.  In contrast, regional authorities 
have to get GOP approval for GOP-financed projects, an 
essential measure to ensure quality control but that also 
creates delays that Chavez can exploit. 
 
¶8.  (SBU) Analyst Jaime Garcia noted that remnants of Sendero 
Luminoso have fused with the narcotraffickers, creating a 
narco-terrorist nexus.  Possibly even worse, narcotics 
production has become woven into the economies of some of the 
country's poorest regions.  Jaime Garcia maintained that in 
Ayacucho, for example, narcotrafficking accounts for almost 
half of the region's agricultural economy. 
 
¶9.  (U) Fragmented local political and social movements also 
constitute a problem.  Beatriz Merino remarked that the 
Ombudsman tracks scores of social conflicts throughout the 
country, the majority of them led by provincial interests 
that protest in short-term, self-destructive ways.  Striking 
teachers in Loreto, for example, have closed down the 
airport, cutting off local tourism.  Morales remarked that 
Peru needs to build more dams to even out its water supply, 
which oscillates between summer droughts and winter floods, 
but that highland residents have so little trust in outside 
interests that they won't consent to the projects. 
 
----------- 
PTPA is Key 
----------- 
 
¶10.  (U) The diverse group agreed that the Peru Trade 
Promotion Agreement (PTPA) would provide essential 
reinforcement for the positive trends that have moved Peru 
forward.  Morales noted how the high labor standards 
maintained by importers in countries like the U.S. help 
Peruvian workers.  Several interlocutors said access to 
foreign markets would bring more prosperity to the country's 
interior.  They added that, despite the state's limited 
capacities, thanks to booming exports -- which the PTPA would 
sustain -- the GOP has resources to direct at social problems. 
 
-------- 
Comment: 
-------- 
 
¶11.  (U) The most striking thing about his diverse group -- 
which ranged from business figures to human rights activists 
-- was their strong consensus.  All agreed that Peru has 
moved a long way down the path to democracy and development, 
that the state's lack of capacity is the country's Achilles 
Heel, and that PTPA is essential to sustaining the momentum 
of the country's modernization. 
STRUBLE