COCA TRADE BOOMING AGAIN IN PERU

U.S.-Sponsored Eradication Plans Spark Peasant Protests

SAN FRANCISCO, Peru -- The mountain slopes that rise around this town in
Peru's high eastern jungle were the site of a rare success story in the
U.S. war on drugs. But the resilient Andean drug industry is flowing back
into the Apurimac River Valley, testing a model partnership in Washington's
increasingly aggressive counter-drug campaign.

Once one of the world's largest sources of coca leaf, the valley was the
focus of a U.S.-backed effort to intercept planes shuttling the key raw
material in cocaine to processing laboratories in neighboring Colombia. Now
U.S. eradication efforts in Colombia are squeezing the trade back toward
Peru, causing deep social unrest, the threat of armed resistance to U.S.
drug policy and political risks for a fragile Peruvian government
responsible for implementing the most controversial elements of
Washington's strategy.

U.S.-sponsored aerial herbicide spraying in Colombia reduced the number of
acres devoted to coca cultivation there last year by 15 percent, according
to CIA measurements, and by 30 percent, according to the United Nations.
But in Peru the acreage devoted to coca jumped 8 percent.

Coca prices here are rising with demand again as Colombian drug
traffickers, who moved the industry north in the late 1990s, return to
create what U.S. officials call "a strategic reserve" in Peru's lawless
coca-producing valleys, where a peasant resistance to new U.S. eradication
efforts is emerging.

"If we frame the debate as only eradication, eradication, eradication
instead of as a way to make lives better, we are setting ourselves up for a
conflictive relationship with the Peruvian government, and for the Peruvian
government with their own people," said a U.S. official. "But there is a
criminal element here separate from the peasants."

The Andean drug industry offers high risks and high rewards for the 20,000
coca growers who work the slopes along the Apurimac, now muddy and swollen
with seasonal rains. Not since the mid-1990s has the opportunity to make
money been greater for peasant coca farmers, who are among Peru's poorest
people, nor have those crops been more threatened by U.S. eradication plans.

For the first time, the U.S. and Peruvian governments this year intend to
pull up coca crops by force in the Apurimac and Upper Huallaga river
valleys, unless peasants agree to eradicate their crops in return for
financial assistance. Until now, most forced eradication has been confined
to remote secondary producing regions safe from mass peasant mobilization.
The Apurimac and Upper Huallaga, by contrast, are the two primary sources
of Peruvian coca and historic redoubts of guerrilla insurgency.

Growing unrest in places like San Francisco, located about 230 miles
southeast of Lima, has put the Peruvian and U.S. governments at odds for
the first time over how best to combat rising coca cultivation, echoing
debates taking place in Colombia and Bolivia. The United States favors
forced eradication, conducted by trained Peruvian police units, while the
government wants to employ a mix of interdiction and financial incentives
to collapse the coca market.

Down from a peak of 396,000 acres in 1994, Peru now has at least 80,000
acres of coca, according to the most recent CIA measurements. The United
States intends to increase eradication this year, while trimming its
counter-narcotics aid package to Peru to $128 million, a 10 percent
reduction from 2002.

The issue poses a serious political challenge to President Alejandro
Toledo, who was elected in 2001 on a pledge to alleviate Peru's endemic
poverty. Hoping to avoid a direct confrontation with Peru's coca farmers at
a time when opinion polls show his approval ratings at 21 percent, Toledo
sent his prime minister, Luis Solari, to Washington this month to meet with
National Security Adviser Condoleezza Rice.

U.S. officials said Solari appealed for a "new, refocused aid package" that
would forgo forced eradication in the Apurimac and Upper Huallaga in favor
of increased financial incentives for farmers to give up coca. So far such
programs have failed to take root here.

Peru's coca farmers in this riverside town and in the Upper Huallaga to the
north have staged demonstrations since last August against impending
eradication programs. The marches and blockades are the stirrings of a
grass-roots peasant movement in favor of legalized coca production that
resembles one underway in neighboring Bolivia.

Last month, Peruvian police arrested Nelson Palomino, the president of a
national network of coca growers formed in January. Palomino, who worked a
scruffy three-acre parcel of coca near this town of 30,000 people, was
imprisoned in Ayacucho, 50 miles southwest of here, on charges of inciting
terrorism and kidnapping. He has become a kind of martyr with national
political ambitions in the 2006 presidential elections.

The communities along the Apurimac River were savaged in the mid-1980s
during Peru's war against the Maoist guerrilla movement known as the
Shining Path. Farmers protected themselves by organizing self-defense
groups, financing their guns and ammunition with coca proceeds.

The self-defense groups still remain, along with groups of women who fought
alongside the men and now organize food and transportation for the
demonstrations.

Like many of his neighbors, Palomino has a certificate signed by the
region's commanding military officer declaring that he participated in what
peasants call "the pacification," which political analysts say was the most
important counter-insurgency development after the 1992 arrest of Shining
Path leader Abimael Guzman.

Palomino's brother, Zosimo, disappeared during the war. His uncle was killed.

Palomino's arrest came a month after he was named president of the National
Confederation of Agricultural Producers of Peru's Coca Basins. Organizers
say the new network comprises 500,000 small farmers, many of whom view coca
as part of Peru's "cultural patrimony" in light of its traditional uses as
tea, medicine and as a hunger suppressant.

U.S. officials say 95 percent of Peru's coca is destined for drugs, and
complain that Peruvians seldom connect coca and the brutal cocaine industry.

"My arrest was fundamentally political," said Palomino, 40, in a prison
interview conducted through his attorney. "The government thinks that by
imprisoning me it will cut off and paralyze the farmers."

Since his arrest, thousands of farmers from the Apurimac Valley have made
the 10-hour journey by dirt road to Ayacucho where they have occupied the
municipal sports complex. The protesters want Palomino released, and also
have a list of demands for new development programs in the region.

It is hard to locate any development, alternative or otherwise, along the
pockmarked highway that descends from Ayacucho's high plain into this
valley. Houses are made of thin tree trunks and topped with palm-thatched
roofs. Naked children bathe in roadside waterfalls. A cobblestone road,
paid for by U.S. alternative development money, is already washing away in
places. Coca leaves dry on large green tarps, next to cacao and coffee,
which sell for considerably less than coca.

"We were the pacifiers of this place and have the widows, orphans and
invalids to prove it," said Carlos Morales, a coca farmer in the town of
Llochegua who lost the lower half of his right leg in combat. "No one in
the Peruvian or U.S. governments remembers these sacrifices.

"The only thing feeding us and our children right now is coca," he
continued. "We are very well organized. So what will happen if the
government comes for our coca? Will we sit with our arms crossed and watch?
No. We will rise up."