Peru’s cabinet in turmoil over scandal

By Naomi Mapstone in Lima
Published: October 10 2008 00:18 | Last updated: October 10 2008 00:18

Peru’s entire cabinet offered their resignations on Thursday following a scandal that has linked president Alan Garcia’s party with the granting of oil concessions to a favoured bidder.

Jorge del Castillo, prime minister, made the promise as he left Congress, after members of the opposition walked out in protest. Mr del Castillo said he felt it necessary to make the offer to defend ”the honour of this Cabinet, which has worked with honesty, austerity and dedication”.

Garcia’s approval rating had dropped to 19 per cent even before a local television station aired audio-taped conversations allegedly between Alberto Quimper, Petroperu(acute) director, and a member of the ruling APRA political party, Romulo Leon in which they agreed to favour Norwegian company Discover Petroleum in the granting of gas and oil lots.

The president immediately suspended the lots, and sacked Mr Quimper and Petroperu president Cesar Gutierrez, who denied involvement. Mr Quimper has since been arrested and police are looking for Mr Leon.

Mr Garcia also accepted the resignation of Juan Valdivia, energy and mining minister, although Mr Valdivia was not named in the tapes and denied he had anything to do, ”directly or indirectly” with the scandal.

Although the full cabinet offer to resign is unlikely to be taken up, Mr Garcia is under pressure to reshuffle his cabinet. Corruption is a hot-button issue in Peru, where the president has faced protests by workers who say they are not reaping the benefits of the country’s strong economic growth in recent years.

Transcriptions of the alleged conversation between Mr Quimper and Mr Leon have been splashed across the pages of local press, revealing a discussion about the tax implications of payments into Mr Leon’s account.

”… This year I have received … a quantity of money , and with it we have been paying many expenses. That money goes directly to my current account. What does that mean in terms of taxes,” Mr Leon is alleged to have said.

”How much has it been, $100,000? $200,000?,” Mr Quimper is alleged to have replied.

”More or less $100,000 a year, monthly,” Mr Leon said.

Discover Petroleum denied it had paid bribes. It said in a statement it had hired a local law firm to pre-qualify to bid for the lots, and Mr Quimper, who they were told was ”the best tax lawyer in Peru”, had been subcontracted by the firm. Mr Leon had been hired as a consultant to assist with pre-qualification.

The company said it had paid $60,000 between May and October to the law firm that hired Mr Quimper and $63,750 to Mr Leo for the licence application process.

Peru’s Congress has now voted to investigate all concessions granted since 2006. Discover Petroleum’s five lots were among 17 auctioned off in September.