US embassy cable - 05LIMA4706

UNCLAS LIMA 004706 
 
SIPDIS 
 
FOR STATE WHA/EPSC:VPOLISAR; EB/TPP/ATT/ATP:PKUDAK; 
STATE ALSO FOR WHA/AND 
FOR USDA EC/ CHAMBLISS, TILSWORTH, CROUSHHORN, TWEDT 
 
E.O. 12958: N/A 
TAGS: EAGR, EAID, PE 
SUBJECT:  REQUEST FOR PL-480, TITLE I PROGRAM FOR PERU 
 
REF:  USDA FAS 
 
1. Post requests a USD 10 million PL-480, Title I program 
for Peru in FY 2006.  The program could consist entirely of 
soybean meal or crude soybean oil, or a mix of both 
depending on global market conditions.  Peru has experience 
importing these two commodities. 
 
2. Funds generated from resale of the soybean products 
purchased by the Government of Peru would be used to support 
agricultural development and trade capacity building that 
enhance Peru's effective participation in the Doha Round and 
the U.S.-Andean Free Trade Agreement currently under 
negotiation.  Funds would also be used to support 
complementary agricultural development through training and 
technical assistance with respect to agricultural 
sanitary/phytosanitary conditions, production research and 
extension, and rural infrastructure. 
 
3. A PL-480, Title I program with Peru will send a strong 
message of the USG's desire to assist the democratically 
elected government to continue to reduce illicit drug 
production and increase market reforms, both of which are 
being seriously challenged by regional and international 
economic and political pressures.  The activities supported 
by this agreement also would demonstrate the USG's 
commitment to assist Peru with capacity building critical to 
agricultural development. 
 
5. There was no program in 2005 due to disinterest by wheat 
millers (wheat rather than soybeans were the principal 
product in the past) and mixed signals from the Ministry of 
Economy.  After discussions with the Minister of Agriculture 
and the Vice Minister of Economy, Post has concluded that 
Peru is again interested in participating in the PL-480 
program.  It will be important to have funds available to 
implement trade capacity building programs to assist Peru in 
implementing the U.S.-Andean FTA. 
 
6. This year we request monetization of soybean products 
instead of wheat.  The U.S. market share in those products 
is small due to fierce competition from Argentina and 
Bolivia.  Given the expected tariff advantage the U.S. will 
receive in those products in an FTA, it will be beneficial 
to introduce U.S. products under the PL-480 program. 
 
7. Peru produces virtually no soybean meal and oil; 
therefore, imports of these commodities would not pose a 
disincentive to local production.  Peru imported $152 
million worth of soybean meal (581,117 MT) in CY2004 and 
$131 million worth of crude soybean oil (212,148 MT).  The 
proposed program is also well within Usual Marketing 
Requirement (UMR) limits for these commodities for Peru. 
STRUBLE