US embassy cable - 05LIMA3888

UNCLAS SECTION 01 OF 03 LIMA 003888 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR WHA/AND, EB/TPP 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
USTR FOR RVARGO AND BHARMAN 
 
E.O. 12958: N/A 
TAGS: ETRD, ECON, EINV, PGOV, PREL, PE 
SUBJECT: THE TOLEDO-URIBE MEETING AND PERU'S GAME PLAN FOR 
U.S.-ANDEAN FTA 
 
REF: BOGOTA 8415 
 
1. (SBU) Summary:  In separate meetings with the Ambassador 
the Ministers of Trade, Foreign Relations and Production 
described Toledo's one-day trip to Colombia as productive. 
The GOP believes Uribe was not previously aware of how much 
Colombia's FTA team is out of sync with Peru's.  Peruvian 
business representatives who accompanied Toledo expressed 
dismay over the negative attitudes and unrealistic 
expectations of their Colombian counterparts; Some Peruvian 
commercial reps wonder whether Colombia's lead negotiator 
intentionally put them up against anti-FTA counterparts in 
the hopes of reining in Peruvian enthusiasm.  Peruvian 
participants perceived a change of tone once Uribe staked 
out a strong position in favor of wrapping up negotiations 
in October, but remain cautious about whether this will 
happen.  Toledo and Uribe reportedly agreed to visit 
Washington together in mid-October to meet with US officials 
regarding the FTA.  Trade Minister Ferrero told us that 
wrapping up the FTA in concert with Colombia remains plan A, 
but the GOP is weighing a Plan B: concluding an agreement 
with the U.S. first in the expectation it would force 
Colombia's hand.  End Summary. 
 
Got Uribe's Attention 
--------------------- 
 
2. (SBU) The Ambassador and Econcouns met with Trade 
Minister Alfredo Ferrero on September 7 to review President 
Toledo's recent visit to Colombia (reftel) and Peru's plans 
for the U.S.-Andean Free Trade Agreement (FTA).  Ferrero 
said Toledo performed well, describing the September 5 
meeting with Colombian President Uribe as productive, 
resulting in a public commitment by both presidents to 
conclude the FTA negotiations in October.  While President 
Uribe appears sincere in his desire to finish negotiations 
next month, Ferrero was skeptical Colombia could achieve 
this. 
 
3. (SBU) Ferrero noted that Uribe realized that his FTA team 
is moving at a different pace than Peru.  Ferrero also 
noticed disunity among the Colombian Ministers and FTA 
negotiators, making it unclear who is in charge or makes the 
decisions.  In response to Colombian complaints that they 
are tired of presenting proposal that receive no U.S. 
response, Ferrero said he encouraged the Colombians to make 
more realistic proposals and not waste time on dead-end 
issues.  For example, he told them they should assume U.S. 
exclusion for sugar, and propose something to get in return. 
Ferrero said he urged the Colombian team to take risks, 
noting that in the end, nothing is final until the whole 
package is accepted. 
 
GOP Strategy: Negotiate Peru First 
---------------------------------- 
 
4. (SBU) Ferrero described two scenarios, either of which 
President Toledo is prepared to pursue.  Plan A is to 
negotiate the FTA alongside Colombia; under this scenario 
Ecuador would follow afterwards.  Plan B is for Peru to 
negotiate the FTA with the U.S. by itself, without Colombia 
and Ecuador.  The two Andeans would join later when ready. 
 
5. (SBU) Ferrero emphasized that Peru previously pulled the 
Andean trade cart during negotiations with Mercosur.  Once 
Peru concluded that deal by itself, the other Andeans 
followed suit, signing a similar deal with the Mercosur 
countries six months later.  Ferrero expected a similar 
result in the U.S.-Andean FTA: the two Andean partners would 
feel left out and disadvantaged under a Peru-first FTA 
scenario.  Consequently, Colombia and perhaps Ecuador would 
return to the negotiating table with more realistic 
expectations and positions to close the deal. 
 
6. (SBU) The Trade Ministers' only reservation about going 
it alone is that Colombia might later negotiate a better 
deal than Peru's.  The Peruvian trade negotiators received 
considerable criticism at home when Colombia and the other 
Andeans signed what was perceived by some to be an improved 
deal with Mercosur.  Ferrero stated that Peru could guard 
itself against such a hypothetical (and deflect potential 
criticism of its strategy) by stipulating in the FTA text 
that Peru could equalize any arrangements negotiated in 
subsequent Andean FTA deals. 
 
Concerns About U.S. Ally 
------------------------ 
 
7. (SBU) Ferrero noted that Plan B -- Peru leading the way - 
- would only work if USTR were willing to conclude with Peru 
first.  Without a U.S. commitment to test this approach, 
Ferrero fears that an Andean FTA would slip away, 
particularly given the upcoming Andean electoral campaigns. 
Ferrero indicated that he will accompany President Toledo to 
Washington in mid-September to bolster support for the 
Andean FTA in Congress and within the executive. 
 
8. (SBU) The Trade Minister noted that a good portion of the 
discussion in Bogota focused on Andean concerns with USTR. 
They lament that the Andean FTA is not on the U.S. political 
agenda.  Ferrero added that Hurricane Katrina might further 
shift the U.S. Congress' attention to other priorities.  He 
also revealed Andean disappointed with changes of some U.S. 
negotiators. 
Other Ministerial Perspectives 
 
Other Ministerial Perspectives 
------------------------------ 
 
9. (SBU) In a separate meeting, Foreign Minister Maurtua 
told the Ambassador that Uribe agreed to accompany Toledo to 
Washington on or about October 11 to meet with US officials 
regarding the FTA.  The Foreign Minister expected the two 
leaders to seek an appointment with President Bush. 
Production Minister Lemor gave the Ambassador an account of 
the Bogota meeting that was consistent with Ferrero's, but 
he was even less convinced that Uribe's marching orders to 
finish in October would stick.  Lemor noted that the 
Colombians had not advanced as far as Peru in discussing 
internal compensation, domestic opposition to an FTA is 
greater there, and the politics of early closure play out 
quite differently for Uribe. 
 
Peru's Private Sector View 
-------------------------- 
 
10. (SBU) Peru's Exporter Association (ADEX) President Luis 
Vega, who accompanied President Toledo to Bogota, told the 
Ambassador on September 7 that his Colombian business 
interlocutors demonstrated an unrealistic appreciation of 
the situation.  Some Colombian commercial leaders argued 
that ATPDEA could be extended.  Also worrisome, the 
Colombian timeline for FTA closure was much longer, Vega 
lamented.  On the positive side, When President Uribe 
announced the October goal, Vega noted that the head of the 
Colombian business group adjusted his comments accordingly. 
Vega opined that the Colombian Government had done a poor 
job preparing its private sector, failing to develop (as had 
the Toledo administration) compensation mechanisms for the 
most sensitive agricultural products. 
 
11. (SBU) The Executive Director of AmCham, another Peruvian 
private sector participant, expressed similar disappointment 
with Colombia's private sector leaders.  He expressed dismay 
that some of them argued Colombia would be worse off with a 
U.S.-Andean FTA.  Several Peruvian business representatives 
found it perplexing that the Colombian Government did not 
present its most supportive private sector FTA advocates. 
Both they and the Minister of Production wondered whether 
Colombia's lead FTA negotiator had convoked FTA skeptics in 
order to put the brakes on the process. 
 
Toledo Engages on Issues 
------------------------ 
 
12. (SBU) Peru's Chief FTA Negotiator Pablo de la Flor told 
us that President Toledo's September 2 meeting with select 
ministers and his FTA negotiators sparked the decision to 
travel to Colombia.  President Toledo spent four hours 
reviewing options on difficult issues necessary to close the 
deal with USTR.  Describing it as the most substantive 
meeting yet with Toledo, De la Flor stated that Peru's 
agriculture package should now fall into place. 
 
13. (SBU) De la Flor argues that it is critical to reach the 
"handshake" with the United States by October.  The 
subsequent signing of the accord could be determined later, 
decided by political considerations (e.g., electoral 
calendars, resolution of commercial disputes, Colombia 
joining the deal).  With the new cabinet led by Pedro Pablo 
Kuczynski, de la Flor believes that Peru is in the best 
position to conclude the FTA negotiations (non-FTA 
supporters such as former Prime Minister Carlos Ferrero and 
Foreign Minister Rodriguez left the government). 
 
Comment: Now is the Time 
------------------------ 
 
14. (SBU) It remains to be seen whether the GOP will be as 
flexible and determined in the upcoming FTA round as our 
interlocutors have claimed.  What is not in question is that 
as we approach Peru's national elections in April 2006, 
Toledo's ability to wrap up the trade accord with the 
current broad consensus in Congress and among the public 
will probably diminish.  The President realizes that his 
window to finish the FTA is closing, and he appears ready to 
cut a deal, with or without Colombia.  Peruvian exporters 
also are increasingly concerned that without a permanent 
substitute for ATPDEA in place by next May-June, U.S. buyers 
and manufacturers will look elsewhere for alternatives to 
Peru. 
 
STRUBLE