PERU'S TOLEDO SEES DRUGS KEY ISSUE IN TIES WITH U.S.

LIMA, Peru (Reuters) - President-elect Alejandro Toledo sees the fight
against drugs as one of the lynchpins of Peru's relationship with the
United States, and does not rule out appointing a drugs Czar to the
cabinet.

``This is a central issue in relations with the United States. We have
talked and we have set aside some more days to talk some more. I am
going to Washington and we'll bring the subject up again,'' Toledo
told reporters late on Wednesday.

Toledo, who won a weekend presidential runoff vote, plans to visit the
United States before taking office on July 28. He said he hoped
Washington would not just show more interest in the drugs question but
also stump up more cash.

Peru is the world's No. 2 cocaine producing nation -- it passed the
dubious mantle of cocaine capital to neighboring Colombia in 1998
after slashing production of coca leaf, the drug's raw material.

Toledo believes producing nations -- also including Bolivia and
Ecuador -- should work out common strategies and work together with
consuming countries in the drugs fight. The United States is the
world's biggest drugs consuming nation.

Toledo has denied allegations of drugs use and says that charges he
tested positive for cocaine in 1998 after reportedly being seen in a
low-life hotel with three women related to an incident in which he was
kidnapped and doped.

He said he believed alternative crops -- typically coffee, cocoa,
cotton, rice, bananas and papaya -- were the way forward in the fight
against coca leaf production.

Nevertheless, Peruvian farmers complain that alternative crops are
less lucrative as the U.S.-backed war on cocaine production in
Colombia pushes up the price of coca leaf here.

``I believe in crop substitution that generates work. That means
pulling up coca leaf. People will be paid to pull it up. And then, in
a second phase, come other crops,'' Toledo said.

``As well as creating work, this prevents the use of insecticides or
any chemicals for eradication. I have talked about this to (Colombian
President Andres) Pastrana and I think that's the way,'' he added.

Toledo's chief campaign pledge was ``more work'' for this Andean
nation, half of whose 26 million people are poor.

Pastrana favors a twin-pronged approach to coca leaf eradication,
offering incentives to small farmers to pull out their crop while
earmarking large plantations deemed to be producing coca leaf on an
industrial scale for spraying. In practice, small farms are also often
sprayed, analysts say.

``Let's hope there could be a 'haven' price for substitute crops and
that the United States not only supplies interest but also a bit more
in the way of resources,'' Toledo said.

Toledo, who is working on his government line-up, said he had not yet
designated a ``drugs Czar'', but asked whether such a figure could
have a cabinet role, he said: ``Could be.''