US embassy cable - 05LIMA4867

UNCLAS LIMA 004867 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR WHA/AND, WHA/EPSC, EB/IFD/OFD, EB/CBA, 
EB/IFD/OIA 
 
TREASURY FOR OASIA/INL, DO/GCHRISTOPOLUS 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
USTR FOR BHARMAN/DWEINER 
 
E.O. 12958: N/A 
TAGS: EINV, EFIN, ECON, EPET, KIDE, PE 
SUBJECT: PERUVIAN CONGRESS REAFFIRMS SUPPORT FOR 
EXXON-MOBIL TAX LAW 
 
REF: A) Lima 4370   B) Lima 3187   C) Lima 1660 
 
1.  (SBU) Summary.  After a month of delay and renewed 
Embassy advocacy, the Congressional Plenary voted on 
November 10 to reaffirm its support a law granting Exxon- 
Mobil a $15 million credit over the next three years.  Under 
Peruvian Congressional procedure, the law, which dealt with 
economic issues, was subject to two rounds of Congressional 
voting.  We expect President Toledo to sign the bill when he 
returns from his APEC Summit trip on November 22.  End 
Summary. 
 
Delay in Second Round of Voting 
------------------------------- 
 
2.  (SBU) The Congressional Plenary voted on October 6, 67- 
10, in favor of a draft law that would resolve the Exxon- 
Mobil dispute by granting the company a $15 million tax 
credit over the next three years for VAT paid on 
international fuel sales.  (Note: The annual profits from 
the Exxon-Mobil refueling operations total approximately 
$500,000.  The SUNAT retroactive reinterpretation of the law 
which led to the $15 million tax liability would have forced 
the operation to close its doors and walk away from one of 
the few otherwise successful and well-run privatization- 
related concessions held by a US company.  End Note.)  Under 
Peruvian Congressional procedure, the law requires two 
rounds of voting.  The second vote should have taken place 
within six working days after the first vote, or by October 
14.  The Junta de Portavoces (Board of political party 
leaders) has the power to exempt a draft law from a second 
vote; this exception is often a routine matter. 
 
3.  (SBU) However, neither the second vote nor the exemption 
request by the Junta de Portavoces occurred in the timeframe 
dictated by law.  Peter Hartmann, General Manager of Exxon- 
Mobil Peru, informed us that the delay was due to 
Congressman Rodrich's request for a reconsideration of the 
law affecting Exxon-Mobil immediately after the first vote 
on October 6.  Rodrich took advantage of the reconsideration 
request and presented to Congress his own draft law, which 
included additional language requesting tax credits for fuel 
bunkering operations. 
 
MEF Tax Amendment Passes Again 
------------------------------ 
 
4.  (SBU)  On November 8, following Embassy advocacy to the 
Prime Minister, the Congressional Plenary discussed two 
issues:  the Rodrich request for reconsideration of the MEF 
draft amendment and the second vote for the MEF draft 
amendment.  The Plenary voted 70-4-21 against the 
reconsideration request.  With the denial of 
reconsideration, the Plenary refused to entertain a motion 
on Rodrich's draft law.  The Congressional Plenary then 
moved for a second vote on the MEF draft amendment, voting 
to uphold the MEF amendment 78-8. 
 
5.  (U) According to Peruvian law, the bill now must be sent 
to President Toledo for his approval before becoming law. 
Because President Toledo is in Korea attending the APEC 
Summit, the President of Congress will send the bill to the 
Executive for approval after President Toledo returns to 
Peru on November 22.  We expect President Toledo to sign the 
bill immediately upon his return. 
 
STRUBLE