US embassy cable - 05LIMA3289

UNCLAS SECTION 01 OF 03 LIMA 003289 
 
SIPDIS 
 
DEPT FOR WHA/AND, EB/IPE SWILSON 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
DOC FOR J. BOGER 
USPTO FOR J. URBAN 
LOC FOR S. TEPP 
USTR FOR J. CHOE-GROVES 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, KIPR, PE 
SUBJECT: PERUVIAN GOVERNMENT STRENGTHENS ANTI-PIRACY EFFORTS 
 
 
1. (SBU) Summary.  The GOP, recognizing that intellectual 
property violations have escalated in recent years, is 
making a concerted effort to improve its anti-piracy 
efforts.  Indecopi, Peru's IPR administrator, continues to 
work closely with the tax agency SUNAT and the police and 
has conducted 14 raids this year, confiscating almost $1 
million worth of pirated goods.  The latest major raid on 
July 20 netted more than 8 tons of merchandise worth 
approximately $300,000.  The GOP is also working to improve 
anti-piracy efforts at Lima's Port of Callao, and has co- 
located an Indecopi official at Customs to help prevent 
pirated goods from entering Peru.  While Indecopi and SUNAT 
have yet to establish a registry of imported blank optical 
discs, officials are soliciting advice from the private 
sector and foreign government officials.  Several illegal 
vendors have recently approached Indecopi to ask for special 
incentives in return for legitimatizing their business.  End 
Summary. 
 
Actions Against IPR Violators 
----------------------------- 
 
2.  (SBU) During the first half of 2005, Indecopi, the local 
tax and customs agency SUNAT and the Peruvian National 
Police (PNP) conducted 18 raids on known locations in Lima, 
confiscating $950,000 worth of pirated goods.  To date, 
Indecopi and the police have seized 43,191 VCDs and 34,339 
DVDs.  The agencies are also investigating several local 
distributors, looking for any links between the distributors 
and the importers of blank optical discs. 
 
3.  (U) Indecopi, SUNAT, and police officials, working from 
information provided by the Anti-Piracy Crusade, raided El 
Hueco, one of Peru's largest informal markets, in downtown 
Lima on July 20.  Over 400 police and customs officers, as 
well as 30 prosecutors, raided more than 250 storefronts and 
stalls in El Hueco at six in the morning.  During the raid, 
officers confiscated more than 8 tons of merchandise, 
including DVDs, worth approximately $300,000. 
 
Improved GOP Coordination 
------------------------- 
 
4.  (SBU) Over the past six months, Indecopi and SUNAT 
officials have met with members of the Anti-Piracy Crusade 
in an effort to not only improve coordination but also to 
establish new ideas on how to counter piracy.  On June 15, 
SUNAT Director Nahil Hirsh authorized Indecopi to place an 
overseer at the Customs premises at the Port of Callao. 
(Note:  Callao is Peru's largest port with over 80 percent 
of all container traffic.  End Note.)  The Indecopi 
official, working with Customs, reviews the shipping 
manifests of all imported optical disks deliveries to ensure 
that no pirated materials enter Peru.  If Indecopi finds 
pirated materials in any of the shipments, it now has the 
right to seize them, even before the shipment is cleared by 
Customs. 
 
5.  (SBU) The Indecopi official will also coordinate with 
SUNAT and Customs on the best way to deal with imports of 
blank optical disks.  According to Hernan Viviano, General 
Manager of Warner Brothers and a member of the Anti-Piracy 
Crusade, Indecopi and SUNAT plan to pinpoint importers for 
future investigations.  While the GOP agencies have yet to 
fully establish a registry of imported blank optical discs, 
officials from SUNAT and Indecopi have been in contact with 
officials from Paraguay about their program. 
 
6. (SBU) The Anti-Piracy Crusade is also working with 
Indecopi and SUNAT to establish a new regulation that would 
mandate all importers to pay VAT tax on blank optical discs 
at the port of entry.  Importers would then recoup their VAT 
by deducting it from future legitimate sales of blank 
optical discs.  According to Martin Moscoso, head of 
Indecopi's copyright office, the proposed regulation would 
target importers that sell their discs to pirates, who do 
not pay taxes on their products.  These importers would thus 
be unable to recover their losses, making piracy less 
profitable.  Indecopi, SUNAT and the Anti-Piracy Crusade are 
currently putting together a working group, made up of 
government and public sector representatives, which will 
determine the VAT amount to be paid by each importer.  Once 
the draft regulation is finalized, members of the Anti- 
Piracy Crusade members will meet with importers to lobby for 
their support of the bill. 
 
Missing Link: the Lima Government 
--------------------------------- 
 
7.  (SBU) Although GOP officials are improving coordination, 
Moscoso points out that they need help from local 
governments, particularly the Municipality of Lima.  In 
October 2004, the Lima Government approved Municipal 
Ordinance 717, which established as a priority the fight 
against intellectual property rights violations.  Under the 
law, the Lima Government is allowed to sanction, close and 
decommission any shops that violate their permits by 
distributing, selling or producing pirated goods.  According 
to Moscoso, the local government has failed to uphold this 
law and instead allows shops to sell "blatantly illegally 
produced products."  The Lima Government, in retaliation, 
claims that it does not have the tools to determine whether 
goods are real or fake and that Indecopi should work more 
closely with local police. 
 
8.  (SBU) The Ambassador met with Lima Mayor Luis Casteneda 
in early June to discuss this issue.  Casteneda informed the 
Ambassador that he has met with members of the Anti-Piracy 
Crusade and has encouraged them to work with the local 
police to conduct more raids.  He noted, however, that the 
Lima Government is unable to counter piracy through the 
permit process because the permits are too general. 
 
Illegal Vendors Want Legitimacy 
------------------------------- 
 
9.  (SBU) During a meeting with Indecopi's Martin Moscoso on 
July 26, he noted that raids are only effective to a point. 
While the GOP has conducted over 15 raids in 2005, he 
argued, to be successful, officials would have to conduct 
raids on a daily basis, which under current budget 
restrictions is unlikely.  Additionally, Moscoso pointed out 
that many police are corrupt and turn a blind eye to IPR 
violations in exchange for a bribe.  Many of the local 
illegal distributors are fed up, as the bribes are becoming 
too costly.  A Commission of sellers from El Hueco met with 
officials from Indecopi, Video Andes (which controls 70 
percent of the legal DVD market) and Sony in mid-July to 
discuss the possibility of formalizing its sales of pirated 
discs.  The commission noted that it would be willing to pay 
taxes and copyright fees, under special agreements. 
According to Moscoso, legal distributors would have to 
approve any type of special commercial agreement.  He 
mentioned that this type of deal occurred in Guadalajara, 
Mexico and could perhaps serve as a model for Peru. 
 
Comment 
------- 
 
10.  (SBU)  The GOP's recent ant-piracy actions are an 
indication that IPR is becoming a higher priority. 
Unfortunately, Indecopi, SUNAT and the police all lack the 
financial resources to stamp out IPR violations.  Indecopi 
officials have acknowledged privately that raids only do so 
much, as many of the stalls and shops reopen the following 
day with more pirated goods.  The GOP must get to the root 
of the problem and prevent the illegal reproduction of 
goods.  Vendors wanting to become more legitimate is a step 
in that direction. 
 
11.  (SBU)  One thing remains clear:  the GOP needs to 
institute a registry to track the 120 million blank optical 
discs that enter Peru annually.  It would be helpful if 
officials from the Patent and Trade Office, as well as U.S. 
Customs, could help deliver this message during the proposed 
IPR training seminar in late October. 
 
STRUBLE