US embassy cable - 05LIMA3337

UNCLAS SECTION 01 OF 04 LIMA 003337 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV, ECON, PREL, PHUM, PE 
SUBJECT: TOLEDO'S STATE OF THE NATION SPEECH 
 
 
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SUMMARY 
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1.  A confident President Alejandro Toledo delivered his 
annual State of the Nation speech on 7/28, in which he touted 
his administration's economic, political and social 
successes; emphasized that these accomplishments were 
achieved in conjunction with the Congress, political parties 
and the population; vowed to maintain fiscal discipline while 
expanding social assistance programs; rejected attempts by 
regional governments to enact their own coca legislation; 
called on all politicians and parties to conduct positive 
campaigns in the lead-up to the April 2006 elections; 
expressed support for electoral reform aimed at limiting the 
number of parties in the next Congress and strengthening 
parties' control over legislators; and challenged his 
potential successors to maintain and build upon his 
government's policies.  In contrast to the past 3 years, 
Toledo projected the air of a confident leader who is in 
control. Unfortunately, the length of Toledo's speech (2:20) 
watered down its positive message, and the seemingly endless 
barrage of statistics opened the door to nit-picking 
criticism by opposition leaders and commentators, which have 
dominated media coverage of the address.  End Summary. 
 
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ACCOMPLISHMENTS TO DATE 
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2.  The President divided his speech into three parts:  (1) a 
review of his government's accomplishments over the past four 
years; (2) a listing of its objectives and commitments for 
the coming year; and (3) a reflection on the 2006 election 
and the issues at stake.  He particularly stressed his 
administration's economic achievements:  47 consecutive 
months of sustained growth; 25 percent cumulative growth; 
inflation below 2 percent; 75 percent increase in 
international monetary reserves; reduction of the fiscal 
deficit from 3.4 percent to 1.1 percent; and the doubling of 
exports, powered by new non-traditional agricultural 
products. 
 
3.  Toledo cited numerous statistics to demonstrate that this 
growth is trickling down to the poorest sectors, with those 
living in extreme poverty falling from 24.1 to 19.2 percent 
of the population, those living in poverty decreasing from 
54.3 to 51.6 percent, and a 31 percent increase in food 
consumption by the poorest sectors over the past year alone. 
He also pointed out that much of this economic development is 
occurring outside of Lima, with 16 of 24 departments posting 
growth rates higher than the capital's and with rural poverty 
falling from 77.1 to 72.5 percent. 
 
4.  The President cited a wide array of social spending 
initiatives over the last four years that had brought 
benefits to many Peruvians.  These included: 
 
-The amount of paved roads has increased by 15 percent (a 
figure that will go up to 20 percent by the end of his term) 
thanks to an investment of approximately USD 130 million. 
 
-Public sector salaries have gone up, including an 87 percent 
increase for teachers. 
 
-Medical attention to the poor has doubled in rural areas. 
 
-Ninety-five thousand new houses constructed for poor 
Peruvians in the last 4 years, a figure that should reach 
110,000 by the end of Toledo's term. 
 
-Working with the municipalities, the GOP has given out 
346,000 land titles to Peruvians, including citizens in the 
Amazon, Cusco, and Madre de Dios regions. 
 
5.  Toledo mentioned several investment projects, some long 
awaited, that he considered cornerstones of his 
administration's export success.  These included: 
 
-The Camisea Gas Project, which had been in the planning 
stage for 22 years. 
 
-Mining concessions in Bayovar in Piura and Las Bambas in 
Apurimac, both projects that had been planned, but never 
acted on, for decades.  Together, the projects represented 
USD one billion in investment, the President said. 
 
6.  Toledo emphasized the administration's program of 
decentralization, including the imminent transfer, by means 
of a Presidential Decree, of 28 more Ministerial duties to 
Regional Governments. 
7.  The President stressed his achievements in foreign 
affairs, citing the following: 
 
-The recognition Peru received as recent President of the 
Andean Community and as President of the newly formed South 
American Community of Nations. 
 
-Peru's recent election to represent Latin America and the 
Caribbean in talks with the European Union. 
 
-The GOP's success in forging strategic and economic 
partnerships with Brazil (the Inter-Oceanic Highway), China 
(Peru's recent designation as a high priority tourist 
destination), and the United States.  In this last 
connection, the President mentioned the eleven negotiating 
rounds that Peru has undertaken with the U.S. on the FTA and 
acknowledged the important contribution ATPDEA has made to 
Peru's economic development and export diversification. 
 
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OBJECTIVES AND COMMITMENTS 
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8.  The President mentioned commitments and initiatives for 
his administration in his final year in office, including: 
 
-The creation of two new Ministries, dedicated to Tourism and 
Culture. 
 
-The establishment of Camisea II, an additional gas export 
project. 
 
-The construction of an inter-oceanic highway connecting Peru 
and Brazil, giving the latter country direct access to the 
Pacific through Peru. 
 
-The elaboration of a scheme of subsidies for the poorest 
Peruvians under the rubric of the plan &Together8 (Juntos), 
which would begin in September in the regions of Chuschi and 
Ayacucho.  This would include approximately USD 40 million 
for housing, health, computers, subsidized nutrition and a 
variety of other aid initiatives that will help 1,200 poor 
families. 
 
-The investment of USD 30 million in a program of collective 
reparations for the populations that suffered most from the 
violence of the 1980s and 1990s as well as a promise that the 
GOP would study the possibility of offering individual 
reparations for victims. 
 
9.  In addition, the President described a number of 
secondary initiatives, including: a new law for public school 
teachers that would emphasize meritocracy; additional road 
building projects, an initiative to commit ministries to 
create more decentralized, regional offices; natural gas 
projects for Junin and Ayacucho; the construction of a new 
National Library; a program to enable teachers, police and 
others to buy low-cost computers; and the elaboration of a 
National Plan for Human Rights. 
 
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AUTHORITY AND GOVERNABILITY 
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10.  Toledo made several announcements to reinforce the 
GOP,s authority and answer citizen concerns about security 
and corruption, including: 
 
-A promise that those who block roads will be punished. 
 
-A demand that regional governments respect the limits of 
their authority and not seek to legislate on national 
matters.  (Note: This was a clear reference to recent 
attempts by the Regional Governments of Cusco and Huanuco to 
legalize coca cultivation.  End Note.) 
 
-The creation of three new Anti-Corruption Courts in the 
Superior Court of Lima.  Toledo said that the GOP would 
finance the new courts, but that their effectiveness would 
depend upon the willingness of the Justice Sector to act more 
swiftly and decisively "prioritizing the most serious cases," 
including those involving financial crimes, human rights, 
arms and narcotics trafficking, and avoiding "both the 
dispersion of efforts and the creation of spectacles." 
 
-A project to guarantee Citizen Security that will see the 
construction of four new police training schools.  In 
addition, the President also mentioned the construction of 
two new, higher security prisons so that criminals can not 
use incarceration as a base from which to plan crimes. 
 
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SETTING THE AGENDA FOR THE FUTURE 
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11.  The President urged several measures to promote future 
stability upon his political audience.  In particular, he 
asked that: 
 
-the basic macroeconomic model based on fiscal responsibility 
not be changed.  Peru cannot &reinvent itself, every five 
years and expect to progress, the President explained, adding 
that both the next President and the next Congress must 
resist the temptations of short-term populism if sustainable 
growth is to continue. 
 
-in order to avoid political fragmentation in the next 
legislature, the Congress revise the electoral law to provide 
that only parties that obtain a minimum of five percent of 
the vote nationwide can elect a member of Congress.  The 
President also urged the Congress to eliminate the current 
system of preferential voting (which allows voters, rather 
than parties, to rank the candidates on party lists). 
 
-all political actors agree to run clean campaigns, free of 
calumny and excessively divisive rhetoric. 
 
-the next Congress be given constituent assembly powers to 
reform the constitution during its first year. 
 
-the next government commit to continuing the achievements of 
his administration, including further increases in exports, 
tourism, teachers salaries, a continued commitment to 
decentralization, and ongoing leadership in the South 
American Community of Nations. 
 
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WITH MALICE TOWARD NONE 
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12.  In mentioning all of the above, often in exhausting 
detail, Toledo's language was consistently generous and 
inclusive.  In a clear and repeated attempt to spread credit 
and promote civility, the President employed the refrain, "We 
have accomplished this together" as he cited the statistics 
that defined his administration's successes.  Unfortunately, 
this generous message seemed lost on the congressional 
audience, which included a few audible hecklers during the 
last quarter of the President's address. 
 
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THE OPPOSITION PILES ON 
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13.  Press and public figures were quick to criticize the 
President's speech.  Lima daily &La Republica8 ran a 
front-page headline that accused the president of 
&celebrating8 the fact that 50 percent of Peruvians were 
poor.  (The President mentioned repeatedly that the number of 
Peruvians in extreme poverty had dropped.)  Opposition APRA 
party leader Alan Garcia said that Toledo had cited positive 
overall national statistics, but had omitted other themes, 
including traditional agriculture and labor rights, and that 
the President's new initiatives threatened a spurt of 
irresponsible spending.  Toledo,s Vice President, David 
Waisman, joined in the critical chorus, stating that the 
President might have offered more of a mea culpa for problems 
in his administration.  He said the state should use its 
regulatory power to lower the costs of electricity, telephone 
and fuels, adding that he opposed the creation of new 
Ministries for Tourism and Culture. 
 
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Comment: 
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14.  Toledo,s confidence in touting his administration,s 
economic successes seemed to get under his opponents, 
collective skin.  The press largely ignored the President's 
attempts to share credit for macroeconomic stability and 
consequent growth and, along with opposition political 
figures, instead took him to task for excessive optimism as 
well as nit-picked on the validity of isolated 
growth/employment figures.  (This says a lot, unfortunately, 
about the state of the President's relations with the media.) 
 Despite the criticisms, Toledo,s speech emphasized what the 
vast majority of political actors recognize, that sound 
economic management combined with high raw materials prices 
and increased access to the U.S. market have given Peru 
almost four years of solid growth resulting in highly 
positive economic numbers for the GOP.  It is unlikely that 
any but the most extreme successors to the President would 
want to kill the goose that has laid this golden egg. 
STRUBLE