US embassy cable - 05LIMA3489

C O N F I D E N T I A L SECTION 01 OF 02 LIMA 003489 
 
SIPDIS 
 
E.O. 12958: DECL: 08/12/2015 
TAGS: PGOV, PREL, MARR, PINR, PE 
SUBJECT: CABINET CRISIS AN INTERGOVERNMENTAL AFFAIR FOR 
NOW, BUT FUTURE CONSEQUENCES  REMAIN UNCLEAR 
 
REF: LIMA 3476 
 
Classified By: A/DCM Alexander Margulies.  Reason:  1.4(d). 
 
1.  (C)  SUMMARY:  The 8/11 resignation of Prime Minister 
Carlos Ferrero, in response to the appointment of Fernando 
Olivera as Foreign Minister, forced the resignation of the 
entire Cabinet and resulted in a serious political dilemma 
for President Alejandro Toledo.  It remains an 
intergovernmental affair for the moment, however, without 
noticeable social or economic consequences.  It should 
not/not adversely affect the planned visits of SECDEF or 
SOUTHCOM Commander Gen. Craddock.  Defense Minister Roberto 
Chiabra is expected to remain in office; he continues to work 
and is engaged in planning for both visits.  Meanwhile, 
President Toledo is scrambling to recruit a new Prime 
Minister and construct a Cabinet that can obtain 
congressional ratification (required within 30 days of 
appointment), as well as calm dissent within his Peru Posible 
party (most of whose members distrust and despise Olivera). 
Whether he will succeed in either endeavor remains to be 
seen.  The opposition is taking a bemused approach, viewing 
developments as yet another example of the President's 
political ineptitude, but could well adopt an obstructionist 
approach should Olivera remain in office.  END SUMMARY. 
 
2.  (U)  President Toledo, after his efforts to get Prime 
Minister Ferrero to retract his resignation failed (Reftel), 
tried to put the best political spin on developments.  The 
President announced at a press conference that he had 
requested the entire Cabinet to submit their resignations, as 
this would clear the way for those with aspirations for 
elective office to pursue that objective.  (COMMENT: 
Toledo's declaration was widely ridiculed as an attempt to 
pretend that the Cabinet change was undertaken at his 
initiative; the President did not/not note that Article 133 
of the Constitution requires the entire Cabinet to hand in 
their resignations should the Prime Minister do so.  Toledo's 
comments were also interpreted as an effort to deprecate the 
resignations by Ferrero, Housing Minister Carlos Bruce, 
Health Minister Pilar Mazzetti, and Justice Minister Eduardo 
Salhuana in response to Olivera's elevation.  The 
Constitution requires ministers to leave office at least six 
months before elections in order to maintain their 
eligibility for congressional office.  Ferrero and the other 
three ministers who resigned were all expected to run for 
Congress next year, and to leave the Cabinet in any case by 
the 10/9/05 cut-off date.  END COMMENT.) 
 
3.  (U)  Olivera formally took over at the Foreign Ministry 
on 8/12 (Septel).  Meanwhile, Toledo is faced with several 
daunting tasks.  First, he needs to find a new Prime 
Minister.  The leading candidates seem to be Finance Minister 
Pedro Pablo Kuczynski and Labor Minister Juan Sheput. 
Second, he needs to find replacements for the ministers who 
have made it clear they cannot work with Olivera, as well as 
those intending to run for Congress next year.  Whether he 
will seek to recruit from within his own party in an effort 
to use patronage to rally the troops behind his decision to 
promote Olivera, or look for technocrats to increase the 
likelihood that the new Cabinet will be acceptable to the 
opposition, is an unanswered question.  Third, the President 
is faced with open dissent within Peru Posible, with close 
Ferrero allies like party Co-Secretary General (and 
Congressman) Jesus Alvarado calling for Olivera to resign. 
 
4.  (U)  So far the problem remains an intergovernmental 
affair.  Central Bank President Raimundo Morales stressed on 
8/12 that it has had no/no adverse effects on the economy. 
While the media has been brutal in its treatment of the 
President and Olivera, there have been no/no protests or hint 
of social unrest in response.  The public as a whole appears 
to share the bemusement of opposition leaders, who thus far 
are treating the entire affair as yet another example of 
Toledo's political ineptitude.  Unidad Nacional leader 
Lourdes Flores, for example, commented that Peruvians should 
not waste their time, "lamenting the presidential blunder." 
Those seeking to constitute the next government, she 
continued, should continue to collaborate to ensure political 
and social peace through the elections.  Flores predicted 
three possible ways to resolve the current crisis:  (1) 
Olivera to resign of his own accord, (2) Toledo to demand 
Olivera's departure, or (3) the appointment of a sufficiently 
strong Prime Minister to counter-act Olivera's perceived 
influence over the President. 
5.  (C)  COMMENT:  The ongoing Cabinet shuffle should not/not 
affect the planned visits of SECDEF or of SOUTHCOM Commander 
Gen. Craddock.  Defense Ministry contacts report that Defense 
Minister Chiabra expects to remain in the new Cabinet, 
continues to work in his office (his resignation has not/not 
been accepted by Toledo) and is engaged in planning for both 
visits.  President Toledo announced on 8/11 (without 
specifying a date) that the SECDEF would be visiting Peru, 
and a postponement of that visit at this time could well be 
interpreted here as an indication that the USG considers the 
Cabinet contretemps to be a serious political crisis. 
 
6.  (C)  COMMENT (continued):  The fall of the Ferrero 
Cabinet, to borrow a phrase used by Garcia Marquez, was a 
chronicle of a political disaster foretold.  Several 
presidential advisors have told us that Toledo had received 
near-unanimous counsel from within his Cabinet and from 
members of his Peru Posible party not/not to raise Olivera to 
the Cabinet.  Ferrero reportedly let the President know in 
advance that he would resign should the appointment be made. 
This was corroborated by a Chilean Embassy contact, who told 
D/Polcouns that Toledo phoned Peru Posible Congressman Henry 
Pease on the evening of 8/10, when Pease was dining with the 
Chilean Ambassador, to offer him the Prime Ministership; 
Pease was overheard responding that he would not accept if 
Olivera was in the Cabinet.  Despite these warnings, the 
President went ahead with the appointment and is now reaping 
the consequences. 
 
7.  (C)  COMMENT (continued):  There is widespread 
speculation as to why Olivera has such influence over the 
President as to trump the appeals of his advisors, ministers 
and party.  Some say that he has evidence of Toledo's 
misbehavior; others that the two have business dealings 
together; others that Olivera has earned the President's 
gratitude and trust for his steadfast political support over 
the past four years.  In fact, however, no one but Toledo and 
Olivera know, and neither is telling. 
 
8.  (C)  COMMENT (continued):  While Toledo will try to 
engineer a solution that leaves Olivera in the Cabinet, the 
odds are that he will not/not achieve this.  Olivera is one 
of Peru's most detested politicians, with a popularity rating 
of 1-2 percent in the polls and a fervent hate-hate 
relationship with the national press.  He has made a career 
out of attacking opposition APRA party leader Alan Garcia, 
and APRA can be expected to vehemently oppose the 
ratification of any Cabinet that includes him (the 
Constitution requires a new Prime Minister to obtain 
Congress' ratification within 30 days of taking office). 
Other political parties have little more affection for 
Olivera than does APRA.  Many legislators of Toledo's Peru 
Posible party expressed their distrust and detestation of the 
leader of their coalition partner (Olivera heads the pro-GOP 
Independent Moralizing Front (FIM) party) long before the 
current political fracas developed. 
 
9.  (C)  COMMENT (continued):  The President has made a habit 
of shooting himself in the foot politically just when his own 
prospects are brightening:  the January 2003 ejection of six 
legislators from Peru Posible followed by a series of 
scandals halved his poll ratings just as they approached 30 
percent; the December 2003 firing of popular Prime Minister 
Beatriz Merino (instigated by Olivera) sent his approval 
rating plunging towards single digits; and now the Ferrero 
resignation, which the President instigated just when his 
popularity in one poll passed 20 percent, his party had 
regained control over congressional leadership positions, and 
the opposition was focusing on the 2006 elections.  We can 
expect the President's approval rating to plummet and his 
Peru Posible party to become even more unruly than before. 
Whether the opposition will become re-energized and 
obstructionist likely will depend on how long Toledo sticks 
by Olivera's appointment.  In sum, while the current 
political difficulties do not threaten Toledo serving out his 
full term, they could well complicate the remainder of his 
mandate.  END COMMENT. 
STRUBLE