UNCLASSIFIED CONFIDENTIAL n a CONFIDENTIAL PAGE 01 ACTION EB-00 INFO LIMA 05344 01 OF 03 Page 1 PTQ8253 111815Z LOG-00 DODE-00 E-00 ITC-01 OIG-03 IRM-00 ECA-00 NP-00 AID-00 CEA-01 CIAE-00 CTME-00 DINT-00 DOEE-00 DOTE-00 WHA-00 SRPP-00 EAP-00 EXIM-01 FAAE-00 vc-oo· FRB-00 H-01 TEDE-00 INR-00 LAB-01 L-00 VCE-00 AC-01 NSAE-00 OES-01 OPIC-01 PM-00 OMB-01 PRS-00 ACE-00 SP-00 SSO-00 SS-00 STR-00 TRSE-00 USIE-00 EPAE-00 PMB-00 DRL-02 G-00 NFAT-00 SAS-00 014W ------------------F602C2 111815Z 38 0 111811Z OCT 02 RELEASED IN PART FM AMEMBASSY LIMA TO SECSTATE WASHDC IMMEDIATE 7841 B6 INFO AMEMBASSY BOGOTA AMEMBASSY CARACAS AMEMBASSY LA PAZ AMEMBASSY QUITO AMEMBASSY SANTIAGO USDOC WASHDC NSC WASHDC CONFIDENTIAL SECTION 01 OF 03 LIMA 005344 DEPT FOR EB ASSISTANT SECRETARY TONY WAYNE DEPT FOR EB ESC WHA AND WHA EPSC STATE PLEASE PASS TO OPIC EXIM CONFIDENT·IAL PAGE 02 LIMA 05344 01 OF 03 11181SZ DOC FOR 4000 WILLIAM LASH 4320 WALTER BASTIAN 4320 VALERIE DEES 3134 USFCS OIO WH DDEVITO E O 12958 DECL 10 08 07 TAGS ENRG EINV ECON ETRD PE SUBJECT PERUVIAN ENERGY AND MINES MINISTER SEEKS CAMISEA FINANCING CLASSIFIED BY CHARGE JOHN CAULFIELD FOR REASONS 1 5 B D 1 C SUMMARY IN AN OCTOBER 3 MEETING ON THE MARGINS OF THE USG-SPONSORED ANDEAN REGIONAL TRADE AND INVESTMENT CONFERENCE IN LIMA PERUVIAN ENERGY AND MINING MINISTER QUIJANDRIA SALMON TOLD VISITING EBA STONY WAYNE THAT THE GOP SEEKS HELP IN FINANCING ITS HUGE CAMISEA NAT URAL GAS n a CONFIDENTIAL UNITED STATES DEPARTMENT OF STATE REVIEW AUTHORITY NORMAN M BOUTON DATE CASE ID 27 JAN 2004 200302345 Pag» UNCLASSIFIED • • t ' • J 1 UNCLASSIFIED CONFIDENTIAL n a Page 2 PROJECT THE MINISTER STRESSED THE PROJECT'S IMPORTANCE TO PERU'S ECONOMY AND TO THE TOLEDO ADMINISTRATION A SWAYNE RAISED U S MINING COMPANY CONCERNS OVER DECLINING COMPETITIVENESS IN PERU BUT THE MINISTER EXPRESSED OPTIMISM OVER PERU'S MINING SECTOR PROSPECTS HE SAID PERU'S ELECTRICITY SECTOR IS MORE TROUBLED WITH PLANNED PRIVATIZATIONS FACING SUBSTANTIAL POLITICAL OPPOSITION END SUMMARY MINISTER OF ENERGY AND MINES SEEKS CAMISEA SUPPORT 2 SBU ASSISTANT SECRETARY OF STATE FOR ECONOMIC AND BUSINESS AFFAIRS ANTHONY WAYNE VISITED LIMA OCTOBER 1-3 ON THE OCCASION OF THE USG-SPONSORED ANDEAN REGIONAL TRADE AND CONFIDENTIAL PAGE 03 LIMA 05344 01 OF 03 111815Z INVESTMENT CONFERENCE AND HELD PRODUCTIVE MEETINGS WITH PRESIDENT TOLEDO AND SEVERAL PERUVIAN MINISTERS REPORTED IN SEP TELS A SWAYNE LSO HELD AN UNSCHEDULED MEETING WITH PERUVIAN ENERGY AND MINES MINISTER JAIME QUIJANDRIA SALMON WHO WAS ESCORTED BY AMCHAM PRESIDENT AND DUKE ENERGY PERU PRESIDENT MICKEY PETERS A SWAYNE WAS ACCOMPANIED AT THE MEETING BY CHARGE JOHN CAULFIELD WHA DESK OFFICER FOR PERU RICHARD MILES EB INVESTMENT AFFAIRS OFFICER MARY BRETT ROGERS AND ECON DEPUTY NOTETAKER 3 C MINISTER QUIJANDRIA SALMON TOLD A SWAYNE THAT THE GOP SEEKS UNSPECIFIED HELP IN FINANCING THE HUGE $1 4 BILLION CAMISEA NATURAL GAS PROJECT THE PROJECT CONSISTS OF THE DEVELOPMENT OF NATURAL GAS FIELDS LOCATED APPROXIMATELY 500 KILOMETERS EAST OF LIMA IN CUSCO DEPARTMENT AND THE CONSTRUCTION AND OPERATION OF TWO PIPELINES TO DELIVER NATURAL GAS PRODUCTS TO A PROCESSING PLANT ON THE COAST AND FURTHER DELIVERY OF LNG TO LIMA THE MINISTER SAID THAT THE $1 4 BILLION EFFORT IS THE LARGEST SINGLE PROJECT THAT WILL BE UNDERTAKEN BY THE TOLEDO ADMINISTRATION AND WILL ADD 1 5 PERCENT TO PERU'S GDP ANNUALLY FOR AT LEAST THE NEXT THREE YEARS 4 C QUIJANDRIA EMPHASIZED THAT THE PROJECT WILL HAVE A LONG-TERM IMPACT SINCE PERU HAS 50-100 YEARS OF CLEANER BURNING NATURAL GAS BUT ONLY FIVE OR SIX YEARS OF OIL RESERVES HE EXPLAINED THAT THE MULTINATIONAL CONSORTIUM BEHIND THE CAMISEA PROJECT rs LED BY AN ARGENTINE FIRM BUT INCLUDES U S COMPANY HUNT OIL AMONG SEVERAL OTHER INTERNATIONAL FIRMS THE MINISTER CLAIMED THAT THE CONSORTIUM HAS SECURED AROUND $300 MILLION IN· FUNDING FROM n a CONFIDENTIAL UNCLASSIFIED '_ __ _ Pag» UNCLASSIFIED CONFIDENTIAL n a Page 3 CONFIDENTIAL PAGE 04 LIMA 05344 01 OF 03 111815Z THE IADB AND ANDEAN FINANCE CORPORATION CAF BUT NEEDS ADDITIONAL SUPPORT HE SAID EXIM BANK IS CONSIDERING INVOLVEMENT IN A PORTION OF THE PROJECT NGOS HAVE RAISED ENVIRONMENTAL CONCERNS 5 C CHARGE JOHN CAULFIELD SAID HE HAS MET WITH SOME OF THE NGOS AND OTHER GROUPS WHICH HAVE EXPRESSED CONCERNS ABOUT POTENTIAL NEGATIVE ENVIRONMENT L EFFECTS OF CAMISEA THE MINISTER RESPONDED THAT THE GOP HAS INSTITUTIONS IN PLACE TO ASSESS SUCH IMPACTS AND THAT THE GOVERNMENT HAS A STRONG INTEREST IN AVOIDING ENVIRONMENTAL PROBLEMS CHARGE CAULFIELD CONCLUDED THAT THE GOP SHOULD TAKE CARE TO ENGAGE IN DIALOGUE WITH ALL INTERESTED PARTIES INCLUDING LOCAL CITY AND COMMUNITY REPS NGOS FISH MEAL PLANTS AND THE CONSORTIUM TO MINIMIZE POTENTIAL PROBLEMS WITH THE PROJECT MINING A CRITICAL SECTOR FOR PERU CONFIDENTIAL CONFIDENTIAL PAGE 01 ACTION EB-00 LIMA 05344 02 OF 03 PTQ8258 111815Z CIAE-00 CTME-00 AID-00 CEA-01 NP-00 SRPP-00 DODE-00 DOEE-0Q DOTE-00 WHA-00 FRB-00 E-00 FAAE-00 VC-00 H-01 L-00 VCE-00 AC-01 ITC-01 LAB-01 OPIC-01 PM-00 PRS-00 OIG-03 OMB-01 TRSE-00 USIE-00 SSO-00 SS-00 STR-00 014W DRL-02 NFAT-00 SAS-00 G-00 ------------------F602D5 111816Z 38 0 111811Z OCT 02 FM AMEMBASSY LIMA TO SECSTATE WASHDC IMMEDIATE 7842 INFO AMEMBASSY BOGOTA· AMEMBASSY CARACAS AMEMBASSY LA PAZ AMEMBASSY QUITO AMEMBASSY SANTIAGO INFO LOG-00 DINT-00 EXIM-01 INR-00 OES-01 SP-00 PMB-00 INL-00 EAP-00 TEDE-00 NSAE-00 ACE-00 EPAE-00 n a CONFIDENTIAL UNCLASSIFIED Pag» UNCLASSIFIED CONFIDENTIAL Page 4 n a USDOC WASHDC NSC WASHDC CONFIDENTIAL SECTION 02 OF 03 LIMA 005344 DEPT FOR EB ASSISTANT SECRETARY TONY WAYNE DEPT FOR EB ESC WHA AND WHA EPSC STATE PLEASE PASS TO OPIC EXIM CONFIDENTIAL PAGE 02 LIMA 05344 02 OF 03 111815Z DOC FOR 4000 WILLIAM LASH 4320 WALTER BASTIAN 4320 VALERIE DEES 3134 USFCS OIO WH DDEVITO E O 12958 DECL 10 08 07 TAGS ENRG EINV ECON ETRD PE SUBJECT PERUVIAN ENERGY AND MINES MINISTER SEEKS CAMISEA FINANCING 6 C A SWAYNE RELATED TO MINISTER QUIJANDRIA U S MINING COMPANIES 1 CONCERNS THAT LOW MINERALS PRICES AND DECLINING PERUVIAN COMPETITIVENESS PARTICULARLY VERSUS CHINESE OPERATIONS HARM THEIR OPERATIONS IN PERU A S WAYNE NOTED THAT U S FIRMS ARE PARTICULARLY CONCERNED THAT THE GOP MAY ADOPT INFLEXIBLE LAWS ON EMPLOYEE DISMISSALS WHICH WOULD HAMPER PROSPECTS FOR NEW AND EXISTING INVESTMENT THE EXAMPLE OF SPANISH-OWNED TELEFONICA HAVING TO REHIRE DISMISSED WORKERS WAS MENTIONED THE MINISTER SAID THAT PERUVIAN LEGISLATIVE ACTIVISM IN THE SECTOR rs NORMAL AS IT IS IN OTHER ECONOMIC SECTORS IN POST-FUJIMORI PERU AND DISCOUNTED ITS IMPACT ON GOP PLANS FOR THE MINING SECTOR 7 SBU THE MINISTER EMPHASIZED TOA SWAYNE THE KEY ROLE THAT MINING PLAYS IN THE ECONOMY EXPLAINING THAT THE SECTOR HAS GROWN EIGHT PERCENT ANNUALLY FOR A DECADE QUIJANDRIA SAID PERU HAS TREMENDOUS MINERAL PRODUCTION POTENTIAL ADDING THAT THE COUNTRY IS THE WORLD'S EIGHTHLARGEST GOLD PRODUCER HE NOTED THAT A 1992 MINING LAW IMPLEMENTED THE MOST THOROUGH REFORM IN ANY ECONOMIC SECTOR EXPLAINING THAT THE STATE ROLE IN MINING REGULATION AND OVERSIGHT IS QUITE LIMITED HE EXPECTS CONTINUED CONFIDENTIAL PAGE 03 LIMA 05344 02 OF 03 111815Z INVESTMENT ESPECIALLY FROM THE U S AND CANADA TO FLOW INTO THE SECTOR NOTABLY IN GOLD MINING n a CONFIDENTIAL Pag» UNCLASSIFIED -- -· - '- _· UNCLASSIFIED CONFIDENTIAL n a Page 5 ENERGY SECTOR MORE PROBLEMATIC 8 SBU THE MINISTER ALSO DISCUSSED THE SITUATION IN PERU'S ENERGY SECTOR WHICH HE CONSIDERS MORE DIFFICULT HE RELATED HOW ENERGY PRIVATIZATION STALLED UNDER FUJIMORI AFTER 1996 EXPLAINING THAT NOW REGIONS CONSIDER ·LOCAL ENERGY ASSETS THEIR PROPERTY AND ARE THUS RESISTANT TO ENERGY PRIVATIZATION EFFORTS NOTE THIS IS WHAT HAS HAPPENED IN THE EGASA AND EGESUR PRIVATIZATION EFFORT IN SOUTHERN PERU END NOTE THIS PROBLEM WILL LIKELY BE COMPOUNDED THE MINISTER CONTINUED AFTER NOVEMBER EDECTIONS ESTABLISH A LAYER OF REGIONAL GOVERNMENTS WHICH COULD PRESENT A NEW HURDLE TO PRIVATIZATION OPPOSITION HAS ARISEN IN SPITE OF A LAW DIRECTING THAT 50 PERCENT OF GOP PRIVATIZATION REVENUES SHOULD GO TO INFRASTRUCTURE SPENDING IN REGIONS CONTAINING PRIVATIZED ASSETS 9 SBU EVEN SO QUIJANDRIA CONTINUED THE NATIONAL GRID SHOULD CONTINUE TO EXPAND WITH THE CURRENT LEVEL OF COVERAGE OF 70 PERCENT OF NATIONAL TERRITORY EXPECTED TO RISE TO 95 PERCENT BY 2010 HE SAID THE NATIONAL GRID WILL SOON CONNECT TO ECUADOR AND CHILE AND THAT THE GOP HOPES TO SOON SELL EXCESS POWER TO BRAZIL 10 SBU - -- - - TOLD A S WAYNE THAT REGIONAL POPULATIONS HAVE CONFLATED THE IDEAS OF RESOURCE CONFIDENTIAL PAGE 04 LIMA 05344 02 OF 03 111815Z DISTRIBUTION AND CORRUPTION BASED ON THE UNHAPPY PAST HISTORY OF CORRUPT PRIVATIZATIONS UNDER FUJIMORI HE DESCRIBED HOW OPPOSITION PARTIES ARE RAISING THE SPECTER OF CORRUPTION IN OPPOSING NEW PRIVATIZATION DEALS AND STRESSED THAT THE GOP MUST EXPLAIN CLEARLY TO THE PERUVIAN PUBLIC THE BENEFITS OF PRIVATIZATION A SWAYNE RESPONDED THAT THIS WOULD BE HELPFUL IN RAISING TRANSPARENCY AND STRENGTHENING GOOD GOVERNMENT IN THIS AREA COMMENT 11 C MINISTER QUIJANDRIA CAME ACROSS AS A SINCERE SHARP INTERLOCUTOR WITH WHOM THE USG COULD ENGAGE EFFECTIVELY THE MINISTER SEEMED INTERESTED IN GAINING WIDER USG SUPPORT FOR THE PROJECT BEYOND THE ONGOING PROCESS WITH EXIM BANK WITH AN ADHERENCE TO INTERNATIONAL ENVIRONMENTAL STANDARDS CAMISEA IS AN EXAMPLE OF THE TYPE n a CONFIDENTIAL UNCLASSIFIED Pag» UNCLASSIFIED CONFIDENTIAL n a Page 6 OF PROJECT THE COUNTRY NEEDS TO TAKE ADVANTAGE OF ITS NATURAL RESOURCE BASE THE PROJECT ALSO OFFERS THE ENVIRONMENTAL ADVANTAGES OF A SHIFT FROM OIL TO CLEANERBURNING NATURAL GAS POST WILL FOLLOW UP TO SEEK MORE DETAILS OF WHAT QUIJANDRIA HAS IN MIND REGARDING U S CONFIDENTIAL CONFIDENTIAL PAGE 01 ACTION EB-o·o LIMA 05344 03 OF 03 PTQ8254 111815Z AID-00 NP-00 CEA-01 CIAE-00 CTME-00 DOEE-00 DOTE-00 WHA-00 SRPP-00 EAP-00 FAAE-00 VC-00 FRB-00 TEDE-00 H-01 LAB-01 L-00 VCE-00 AC-01 NSAE-00 OMB-01 OPIC-01 PM-00 PRS-00 ACE-00 880-00 SS-00 STR-00 TRSE-00 USIE-DO NFAT-00 SAS-00 DRL-02 PMB-00 G-00 ------------------F602DD 111815Z 38 0 111811Z OCT 02 FM AMEMBASSY LIMA TO SECSTATE WASHDC IMMEDIATE 7843 INFO AMEMBASSY BOGOTA AMEMBASSY CARACAS AMEMBASSY LA PAZ AMEMBASSY QUITO AMEMBASSY SANTIAGO USDOC WASHDC NSC WASHDC INFO LOG-00 DODE-00 E-00 ITC-01 OIG-03 IRM-00 ECA-00 DINT-00 EXIM-01 INR-00 OES-01 SP-00 EPAE-00 014W CONFIDENTIAL SECTION 03 OF 03 LIMA 005344 DEPT FOR EB ASSISTANT SECRETARY TONY WAYNE DEPT FOR EB ESC WHA AND WHA EPSC STATE PLEASE PASS TO OPIC EXIM CONFIDENTIAL PAGE 02 LIMA 05344 03·0F 03 111815Z DOC FOR 4000 WILLIAM LASH 4320 WALTER BASTIAN 4320 VALERIE DEES 3134 USFCS OIO WH DDEVITO E O 12958 DECL 10 08 07 TAGS ENRG E INV ECON -ETRD PE SUBJECT PERUVIAN ENERGY AND MINES MINISTER SEEKS CAMISEA FINANCING n a CONFIDENTIAL UNCLASSIFIED Pag» UNCLASSIFIED • Page 7 CONFIDENTIAL n a SUPPORT WHAT THE PROJECT NEEDS TO SUCCEED AND POTENTIAL ENVIRONMENTAL DOWNSIDES NOTE THIS CABLE HAS BEEN CLEARED BY A $ WAYNE END NOTE CAULFIELD CONFIDENTIAL END OF DOCUMENT n a CONFIDENTIAL Pag» UNCLASSIFIED '•' I nC _ i - £ it J '• • • • ' - • dJ i ' -- '• · -' -- -- _ '•