US embassy cable - 05LIMA4797

UNCLAS SECTION 01 OF 02 LIMA 004797 
 
SIPDIS 
 
WHA FOR MONSERRATE 
G/TIP FOR LINDA BROWN, RACHEL OWEN 
STATE PLEASE PASS TO OAS PHIL LINDERMAN 
 
E.O. 12958: N/A 
TAGS: PGOV, PHUM, PREL, PE 
SUBJECT: SCENESETTER FOR CODEL SMITH 
 
REF: STATE 204691 
 
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Welcome to Peru 
--------------- 
 
1.  Post warmly welcomes Congressman Smith's visit to Peru 
and greatly appreciates his interest in both trafficking in 
persons (TIP) and women's and children's health issues.  Over 
the last two years, the Peruvian Government has awakened to 
the TIP problem and has taken serious steps to combat it.  In 
addition, the Toledo Administration has presided over four 
years of economic growth, which has cut into the rates of 
poverty, child poverty, and infant mortality. 
 
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Trafficking in Persons 
---------------------- 
 
2.  Your visit will provide an opportunity to emphasize the 
importance of trafficking in persons as a key element in our 
bilateral human rights agenda.  At the same time, it will 
provide an opportunity for the Peruvians to discuss the 
progress they have made in this area.  In two short years, 
Peru has gone from near total denial on TIP to effective 
action.  Among the measures the Peruvians have taken are: 
 
-Formed a permanent, Ministerial-level Multi-Sectoral 
Committee dedicated to TIP; the organization includes 
representatives from government ministries, local and 
international NGOs, and international organizations; 
 
-Increased police raids against clandestine brothels that 
employ underage women; 
 
-Arrested a notorious trafficker of Peruvians to Japan; 
 
-Passed a law that significantly raised the penalties for 
clients and pimps of underage prostitutes; 
 
-Repatriated two Peruvian TIP victims from Japan; 
 
-Undertaken, with U.S. assistance, three anti-TIP Programs, 
including a key program to create a data collection system to 
track TIP victims and identify traffickers. 
 
3.  Along with their government, Peruvian individuals and 
institutions have stepped forward as hemispheric leaders on 
TIP.  The Catholic religious order, The Sisters of Adoration, 
whose shelter for TIP victims you will visit, were cited as 
"International Heroes" in the June 2005 TIP Report, the only 
group in Latin America to be so recognized.  In addition, 
Peruvians Antonio Querol and Gonzalo Sarmiento are now 
replicating a missing persons website that they originally 
developed for Peru across Latin America with the help of Save 
the Children, Switzerland. 
 
4.  This movement forward on TIP results from larger advances 
that Peru has made in both the political and economic arenas. 
 Unfortunately, public perception lags behind real progress, 
and public pessimism and political division at times threaten 
to undermine this still-nascent democracy. 
 
------------------- 
The Political Scene 
------------------- 
 
5.  Former President Fujimori's 11/16 arrest in neighboring 
Chile has further muddied an already complex political scene. 
 President Toledo is already well into his last year in 
office.  While his popularity remains low, his government is 
stable.  All rivals have their eyes on the election and on 
maintaining economic and political stability in the hope of 
inheriting a steady ship next July 28. 
 
6.  Toledo's priorities for his remaining months in office 
are: passage of a Free Trade Agreement (FTA) with the United 
States, ensuring an orderly transition to a successor, and 
securing enough seats for his Peru Possible party in the 
coming Congress to retain political influence, block 
retaliation against him, and lay a base for another Toledo 
presidential campaign in 2011. 
 
7.  The Peruvian political scene is fragmented, with 29 
parties registered to field presidential and congressional 
candidates in the 4/4/06 elections.  Peru's political 
parties, with the exception of APRA, are not well 
institutionalized.  No candidate currently has registered 
more than 27 percent support in the polls.  Fujimori's 
arrival in Chile adds to the existing uncertainty that 
promises a volatile and unpredictable election campaign. 
 
----------- 
The Economy 
----------- 
 
8.  Peru's economy is one of the most dynamic in Latin 
America.  GDP grew 5.1 percent in 2004, reaching $67 billion. 
 Growth was driven by exports, construction, mining, 
investment, and domestic demand.  Exports, propelled by high 
mineral prices, ATPDEA benefits and the completion of the 
Camisea gas project, surged above $12 billion in 2004, up 39 
percent in dollar terms from 2003.  U.S. exports to Peru 
increased 27 percent during the same period, to $1.8 billion. 
 Peru,s $2.6 billion trade surplus drove the currency up 5.5 
percent against the dollar over the year. 
 
9.  The economy has steamed ahead in 2005, with a growth rate 
of 5.6 percent for the first half of the year.   Exports are 
up another 20 percent since last year, and reserves have hit 
a record $14.1 billion.  Inflation is 2.5 percent, and the 
government is on track to meet its deficit target of one 
percent of GDP for 2005.  Revenues are up 11 percent since 
last year. 
 
10.  Peru's major trading partners are the U.S., China, EU, 
Chile and Japan.  In 2004, 29 percent of exports went to the 
U.S. and 20 percent of imports came from the U.S.  Key 
exports include gold, copper, fishmeal, textiles and apparel, 
petroleum, zinc, asparagus and coffee.  Imports include 
machinery, vehicles, processed food, petroleum and steel. 
Registered foreign direct investment (FDI) is $12.9 billion, 
with the U.S., Spain and Britain the leading investors.  FDI 
is concentrated in mining, electricity, telecom and finance. 
 
11.  Despite Peru's macroeconomic success, huge challenges 
remain.  Peru must reduce poverty of 52 percent (under 
$58/month) and extreme poverty of 24 percent (under 
$32/month).  Wealth and economic activity are overly 
concentrated in Lima and other large cities.  Unemployment 
and underemployment levels total 56 percent nationwide, and 
over 60 percent of the economy is informal.  Growth is just 
beginning to generate employment faster than new entrants 
come into the labor force.  The government lacks revenues for 
adequate social investment.  Boosting long-term growth and 
reducing poverty will require strengthening the judiciary, 
reducing corruption and completing other reforms to improve 
the investment climate. 
 
-------------------------- 
Peru as a Regional Partner 
-------------------------- 
 
12.  Peru is a solid U.S. ally.  Opinion surveys show that 
the United States is admired in Peru.  Of all the Andean 
Countries, after Colombia, Peru is our most reliable partner. 
STRUBLE