US embassy cable - 05LIMA3555

UNCLAS SECTION 01 OF 02 LIMA 003555 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV, PINR, ECON, SCUL, PE 
SUBJECT: NAMING OF KUCZYNSKI CABINET CALMS POLITICAL 
TURBULENCE 
 
REF: A. LIMA 3549 
 
     B. LIMA 3548 
     C. LIMA 3489 
     D. LIMA 3476 
 
1.  SUMMARY:  President Alejandro Toledo's 8/16 swearing-in 
of a new Cabinet, headed by Prime Minister Pedro Pablo 
Kuczynski (PPK), received a warm welcome from politicians 
across the political spectrum, the business sector and the 
media; calmed the recent political turbulence; and should 
not/not face difficulties obtaining the required 
congressional ratification.  In fashioning his new Cabinet, 
Toledo opted for continuity in economic, social and foreign 
policy by promoting experienced technocrats from within the 
relevant ministries, while satisfying the patronage demands 
of his Peru Posible (PP) party by selecting party militants 
for the Defense and Interior portfolios.  Bios of the new 
ministers of Interior, Housing, and Justice and Finance will 
follow septels; bios of the other new ministers have been 
sent in Ref B.  END SUMMARY. 
 
2.  While PPK reportedly was not Toledo's first choice as 
Prime Minister (PP legislator and former Congress President 
Henry Pease reportedly was sounded out but discarded when he 
insisted on naming his own slate of ministers) but he has 
proved to be an immensely popular choice.  The principal 
political figures have saluted his management of the economy, 
crediting him with primary responsibility for the GOP's 
record of sustained growth, while also recognizing his 
personal qualities.  Opposition Unidad Nacional alliance 
leader Lourdes Flores praised his "moral and political 
solvency;" National Solidarity party Secretary General Marco 
Parra predicted that PPK would bring, "tranquility to the 
economic sector in this electoral year;" and opposition APRA 
party Co-Secretary Generals Jorge del Castillo and Mauricio 
Mulder spoke favorably of PPK's prior service as Finance 
Minister, although they did not/not commit their party's 
support for his Cabinet's ratification.  Even outgoing 
Foreign Minister Fernando Olivera, whose short-lived 
appointment sparked ex-Prime Minister Carlos Ferrero's 
resignation and the resultant political crisis, openly backed 
PPK's appointment, attending the Cabinet swearing-in ceremony 
and paying a courtesy call on the new Prime Minister at his 
residence. 
 
3.  The only sour notes came from the left, with labor 
leaders lamenting that PPK would maintain the GOP's economic 
policies.  Mario Huaman, President of Peru's largest labor 
central, the CGTP, complained that, "with this designation 
the country does not gain, only the political right wing and 
the business class win."  Caridad Montes, the Secretary 
General of the SUTEP teachers union, which is controlled by 
the Communist Party of Peru-Patria Roja, echoed this, stating 
that the new Cabinet is, "more of the same."  Business 
leaders, on the other hand, were effusive with their praise, 
with Jose Miguel Morales, President of the most important 
business association, CONFIEP, and Luis Vega, head of the 
exporters' association ADEX, enthusiastically proclaiming the 
positive effects that PPK's appointment will have on economic 
confidence and stability. 
 
4.  President Toledo took care during his presentation of the 
new Cabinet to attempt to mend the wounds and hurt feelings 
engendered by the previous week's political crisis.  Toledo 
gave Olivera an affectionate head-hug before the swearing-in 
ceremony and referred to him during his speech as a "friend 
and partner."  The President also recognized the 
contributions of former Prime Minister Ferrero and ex-Housing 
Minister Carlos Bruce, neither of whom chose to attend the 
event. 
 
5.  PPK, in his initial press interviews, emphasized that his 
priorities are maintaining the positive course on economic 
and financial policy, overseeing transparent elections, and 
turning over "a house in order" to the next government in 
July 2006.  He also stressed his intent to work with 
political leaders to achieve these objectives, noting that he 
had spoken with opposition leaders Lourdes Flores and Alan 
Garcia (APRA) on 8/15, to inform them of his pending 
appointment and obtain their views. 
 
5.  COMMENT:  The Kuczynski Cabinet has something for 
everyone.  There is continuity in the GOP's economic, social 
and foreign policies with PPK as Prime Minister; the new 
ministers of Finance, Justice, Foreign Affairs and Housing 
all being technocrats promoted from within; while the former 
ministers of Health, Labor, Transportation/Communications, 
Production, Foreign Trade, Energy & Mines, Agriculture, 
Womens Affairs and Education remain at their posts.  There is 
also increased participation by the "Hard Wing" of the 
President's Peru Posible party, with the appointments of 
Romulo Pizarro and Marciano Rengifo at the Interior and 
Defense Ministries.  Additionally, PPK, who personally is 
close to Olivera, seems to have helped smoothe over the bad 
blood resulting from the latter's preemptory ouster as 
Foreign Minister, thereby preserving the Peru Posible - 
Independent Moralizing Front coalition.  The new Cabinet 
should not/not face difficulties in obtaining Congress' 
approval (required within 90 days); the opposition APRA party 
may withhold its support, but it almost certainly will 
not/not try to block the ratification, particularly as APRA 
leader Alan Garcia was publicly engaged in a political 
flirtation with Kuczynski a mere week ago.  END COMMENT. 
STRUBLE