- The Washington Times - Monday, January 6, 2003

SANTIAGO, Chile, Jan. 6 (UPI) — Relations between Chile and Peru were tense following the closure by Peruvian authorities of a plant owned by the Chilean Lucchetti food company.

Peru says the plant was built on environmentally protected land, but Lucchetti has taken the matter to the World Bank's International Center for Settlement of Investment Disputes.

Trying to calm the situation, Peruvian Prime Minister Luis Solari de la Fuente said a diplomatic solution was possible, Peru's newspaper La Republica reported Monday. He said he discussed the issue Saturday with President Alejandro Toledo, Foreign Minister Allan Wagner and Peru's ambassadors to Chile and the United States.

"It is a situation that is being examined and the foreign ministry will make a statement when a decision is made," Solari said.

The flap is the latest in the countries' troubled relationship that originates in boundary disputes dating to the 19th century.

The $150-million Lucchetti factory was built in 1998 in the Pantanos de Villa area, situated in the southern Lima district of Chorrillos. The area, an ecologically protected zone, is a green island in the industrial city and serves as a migratory bird reserve.

Lucchetti's Dec. 23 complaint before ICSID is based on an investment protection agreement signed between both nations in August 2001 and came six days after Lima's municipal council ordered the factory closed on the grounds its production processes hurt the environment.

In a three-page letter to ICSID, Roberto Danino, Peru's ambassador to the United States, said his country did not recognize its jurisdiction in the case. They said 2001 agreement with Chile calls for the resolution of such conflicts through diplomatic means.

The treaty calls for a 6-month consultation process and, should the dispute not be settled by then, the formation of a three-member committee to resolve the dispute. The committee would act independently from ICSID or any related organization.

Both Lucchetti executives and Peruvian authorities have expressed reservations about the municipal council's decision, however.

Lima Councilman Martin de Acevedo, who voted against ordering the factory's closure, has pointed out that other companies are freely operating in area, among them the U.S.-based firms 3M Co., and Kimberly-Clark Corp.

"There is something here that has led (the different companies) to be measured with a different stick," he said.

The Chilean government has gone all out to defend Lucchetti. The Luksic financial group, which owns Lucchetti, plays a pivotal role in Chile's economy and has interests in mining, food, telecommunications, banking and other sectors.

The Peruvian decision was "discriminatory against Lucchetti in relation to companies with U.S. capital operating in the same area," Chilean government spokesman Heraldo Munoz said.

Previously, Chilean President Ricardo Lagos called for "clear international norms under which (Chile's) trade and investments are protected."

Both Lima Mayor Luis Castaneda and his predecessor, Alberto Andrade, have called for a boycott against Lucchetti's products. Castaneda, upon assuming the post last Friday, said the decision to shut the plant will "not be reviewed."

Lucchetti's fate was hastened in June 2001 when Peruvian police made public a videotape of a secret meeting between Lucchetti executives and former Peruvian national intelligence chief Vladimiro Montesinos, who is now in prison for corruption and influence peddling during his tenure.

The tape featured Lucchetti executives asking Montesinos to intervene in the case against the plant. Montesinos later told Peruvian Congress the executives offered him $3 million for help in obtaining building permits.

The tape triggered an investigation by Peru's Anti-corruption Court, which brought influence-peddling charges against Lucchetti board members Gonzalo Menendez, Fernando Pacheco and Andronico Luksic, the founder of the financial group.

Luksic, whose fortune was estimated at $1.4 billion by Forbes magazine in 2002, was eventually acquitted of the charges by the court last August.

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