Peru’s presidential election in April will come at a time when voters across Latin America are expressing a desire for change.
In November, for the first time since democracy was reintroduced there, a right-wing candidate, Mauricio Macri, was elected president in Argentina. December saw the Venezuelan Socialist Party lose its majority in the National Assembly after sixteen years in power. Dilma Roussef, Brazil’s president and leader of the left-wing Workers’ Party, is under threat of impeachment with approval ratings at an all-time low.
Voters in Peru are no less keen on a break even though their president, Ollanta Humala, has turned out to be far less radical in his populism than his 2011 campaign rhetoric and media coverage may have led them to believe.
Instead, his presidency has been characterized by vacillation, both in terms of policy and personnel — but with no great departure from the liberal economic path trodden by Humala’s predecessors. Read more
Peru’s Government Struggles to Confront Economic Reality
A reluctance to devalue the sol, a collapse in world commodity prices and protests at the deregulation of extractive industries promise an uncomfortable year for Peru’s president, Ollanta Humala, before the election in 2016.
After more than decade as one the highest-growing economies in the world, Peru’s expansion weakened last year. Falling commodity prices, particularly a 25 percent price reduction in copper in the last six months, have hit Peru hard.
The Central Reserve Bank’s desire to proceed with “business as usual,” forecasting growth for 2015 between 4.5 and 5 percent, can only exacerbate Peru’s predicament.
Peru has a dollarized economy. The strong and stable American currency is frequently used by local companies for business purposes. While many of Peru’s Latin American neighbors have tried to stimulate their economies and halt deflation by devaluing their currencies in accordance with market forces, Peru’s sol has been revalued against the dollar to stave off another period of inflation.
The more pressing concern now is recession. An excessively strong currency will reduce export demand. At the same time, the government’s plans to increase copper production now that prices are low carries the risk of Peru selling its natural resources short.
Claims that growth can be nourished by deregulating the mining industry seem unrealistic in the light of the cancelations of the Tia Maria copper mining project worth $1 billion and the Pluspetrol gas project amid the deaths of environmental protesters. The Conga mining project, the largest in Peruvian history, worth an estimated $4.7 billion, has been suspended since 2011.
Political stability is far from a given as the Humala government is on its sixth prime minister and sixth interior minister since 2011.
With a presidential election due next year, Humala may want to avoid facing economic reality and persist with optimistic predictions of growth. However, the central bank’s estimated $66 billion reserves may not be enough to keep up the charade until next summer.
Climate Talks Highlight That Money Still Talks in Peru
Last month’s United Nations Climate Change Conference in Peru brought new attention to a long-standing conflict between those seeking to develop the South American country’s economy and those trying to protect its environment.
Consecutive Peruvian governments have been accused of disregarding the effects of extractive activities on the environment and on its indigenous peoples. A general desire to cash in on Peru’s natural resources is seen as a threat in the north of the country while drug traffickers, illegal miners and loggers have helped contribute to the ransacking of the jungle areas of the east.
Yale University’s Environmental Performance Index ranks Peru 110 out of 178 countries worldwide. In the region, only El Salvador and Paraguay do worse.
Peru’s economy has boomed in recent years in large part because of an increase in copper, gold and silver production. The mining industry accounts for 60 percent of exports and was forecast to reach $14 billion last year.
Foreign investment plays a crucial role. Thanks to an attractive legislative and fiscal framework, $70 billion in investment is expected over the next five years, including $42 billion in mining alone.
Under the last government of President Alan García, land disputes and particularly the issue of foreign exploitation of natural resources led to almost two hundred demonstrators being killed in clashes with security forces from 2006 to 2011. During that time, García oversaw legislation that criminalized social unrest.
The northern city of Cajamarca is the site of an ongoing dispute involving the proposed Conga Gold Mining Project. Valued at $4.7 billion, the largest foreign investment project in Peruvian history is sponsored by the Newmont Mining Corporation of Colorado and passed an environmental impact assessment in 2010. Yet in November the following year, it was suspended amid local protests against a feared contamination of the water supply.
Incumbent president Ollanta Humala made an election promise to end such social conflicts through a “prior consultation law” which would guarantee dialogue and agreements between indigenous communities and companies before any action is taken.
Instead, Humala gave the armed forces extraordinary powers, including the right to make arrests without warrant, for a period of sixty days. Several of his ministers resigned in protest and soldiers still patrol the streets of Cajamarca to stop demonstrators, who are now labeled “extremists,” returning.
Late last year, Humala completed his environmental U-turn when a new ruling on hydrocarbons was approved. This removed the need for environmental impact assessments in areas outside the rainforest and exempted petroleum companies from such procedures. Mining minister Eleodoro Mayorga said the ruling would “contribute to the development of Peru, because these industries represent almost two-thirds of the country’s exports and their investment projects are essential for reactivating the economy.”
Although the November ruling retained protection of the rainforest, the Interethnic Association for the Development of the Peruvian Rainforest, an indigenous rights organization, recently claimed economic integration and agricultural development in the Amazon comes at the expense of the rainforest.
The group said informal extractive activities, including illegal gold mining and logging, most common in the east, have a major impact. One fifth of gold mining in Peru is done illegally and this alone is worth $3 billion per year. 80 percent of timber exports are harvested illegally.
The association pointed out that illegal gold mining was responsible for an estimated 20 percent of Peru’s deforestation last year in the southeastern Madre de Dios region and caused widespread mercury pollution.
The government has tried to regulate the activities of “informal miners” but this has met fierce resistance. More than 15,000 miners took to the streets in protest in May.
Beyond the environmental damage illegal mining is causing, it also chips away at state income and undermines investor confidence.
The global scrutiny that came with the United Nations talks underlined that Peru has yet to find a balance between economic development and environmental protection.
After years of prioritizing growth, there are some signs the country is moving toward a more balanced approach. The Ministry of Environment is in the process of setting up specialized courts for the energy, fishing and mining industries in order to expedite cases of alleged environmental abuse. It has also fined more companies for excessive emissions. Peru’s high commissioner for the fight against illegal logging announced measures earlier this week for those operating within the “informal” sector.
But with President Humala reversing his earlier pledges, the indigenous people of Peru, who are most affected by environmental degradation, can hardly be blamed for wondering if the changes will amount to much.
Keiko in Father’s Footsteps: Peru’s Next President?
The next Peruvian presidential election will take place in less than two years. In many ways this signifies the country’s progress, as it will be the first time in Peru’s history that a fourth consecutive democratic election is held.
As things stand, it is Keiko Fujimori of the conservative Fuerza Popular who has captured the public’s attention. Recent polls put her way ahead of the pack with a 32 percent approval rating. The liberal Pedro Pablo Kuczynski is lagging behind with 11.6 percent.
Fujimori is a familiar name in Peru. It is one that divides public opinion and gave birth to a political ideology, Fujimorism. This all results from the often controversial and never dull presidency of Keiko’s father, Alberto.
His supporters say that his is a legacy of having quelled the threat of Maoist insurgents and of rebuilding the economy. His “Fujishock” free-market reforms started a cycle of economic prosperity that is only now beginning to slow down.
Critics say Fujimori’s means of achieving this were not justified by the results. They believe he has been rightfully incarcerated for gross human rights abuses (when tackling the terrorist threat), for his unlawful presidential coup in 1992, for mass corruption through embezzlement of state funds (to the tune of $15 million) and for browbeating political opposition through his control of the media — all undertaken by his national intelligence chief, Vladimiro Montesinos.
During Fujimori’s second and third terms, from 1995 to 2000, Keiko served as Peru’s youngest ever first lady, following the acrimonious divorce of her parents. By treading the same political path, in seeking the presidency, she bears the burden of her father’s past. 2016 will be the second election she contests, after failing to beat the incumbent, Ollanta Humala, in 2011.
The same poll that now puts Keiko Fujimori ahead of her competitors asked voters, “which political party is the most corrupt?” The results were revealing. With all parties subject to chequered pasts, it appears Peru’s electorate has quite a short memory. Alan García’s Partido Aprista Peruano was deemed most corrupt, with 41.4 percent. García was Peru’s previous leader and is under investigation by a “megacomission” for his alleged involvement in “narco pardons” — where it is claimed he took bribes for pardoning drug traffickers. Should he be found guilty, he will fall victim to new legislation, banning “narco candidates” from running for office at any level.
Second in the survey, with 15.4 percent, was the party of García’s predecessor, Alejandro Toledo. Toledo also faces allegations of illicit activities in the infamous Ecoteva case. He is accused of money laundering and criminal conspiracy, using his company, the Ecoteva Consulting Group, as a front.
Fujimori’s Fuerza Popular came in third with 11.9 percent, her credibility seemingly tarred with the brush that has condemned her father.
The poll shows a clear trend: time and again, the outgoing president, no longer protected by his position, is held accountable by opponents for alleged abuses and so trial by tabloid takes a more serious turn. Humala’s ruling nationalist party only received 3.4 percent of the votes in the poll. However, as one political analyst stated, “out of power, in these conditions, is a life of strain and investigation.” Ollanta Humala, beware.
Allegations and accusations fly around the political media on a daily basis, both as part of the unpalatable makeup of Peruvian politics and the unfortunate amount of corruption that goes on under a “presidential prerogative.”
According to Transparency International, Peru is eighty-third in their corruption perception standings, whereas neighbor Chile comes in twenty-second.
In this context, having suffered from defamatory press, Keiko, like her father before her, has not been afraid to trade blows and get her hands dirty.
In the run-up to this year’s local election, Daniel Urresti, the interior minister, announced that one of Fuerza Popular‘s candidates was found with half a ton of cocaine, only for it later to be discovered that it was plaster. Fujimori intimated that the government’s “black hand” had been involved and went on to highlight the investigation into Urresti’s past involvement with the fight against Maoist insurgents, in which he is alleged to have been involved in the 1988 murder of a journalist, Hector Bustios.
Away from all the mudslinging, there is a curious void of political identity among Peruvian politicians. Almost one in twenty members of Congress are independents. Through mining and gas royalties, they have access to large amounts of public funds. Parties are based more on individuals than policies. Consecutive governments have campaigned and been elected on leftist promises only to enact free-market economic policies that, according to political scientist Julio Cotler, “no longer defend national interests but only private ones.” The Peruvian population has followed suit, with 75 percent participating in an informal economy that in June experienced it weakest growth in five years.
Keiko was asked by Perú.21, a daily, where she would be found on the political spectrum — to which she answered, incredibly, “center-left.”
Yet 31 percent of Peruvians want an authoritarian right-wing government and 23 percent of them are in the Fujimori camp. It would appear that Fujimori knows that she has their ear through thick and thin, based on Fujimorism tenets of old: a free-market economy, law and order. She says that she wants her party to be more than just a surname and so is battling with the other parties as she tries to expand her voting demographic to the leftist ground.
Keiko is seen as a reliable option — Fuerza Popular has lost just one of its 37 members of Congress since 2011, whereas the ruling coalition has lost eleven out of 47. She is believed to represent a political ideology that can reestablish a sense of direction for Peru, renew institutional strength, formalize the economy and, somewhat ironically, bring a no nonsense approach to corruption.
If pollsters are proven right and Keiko wins the 2016 election, the celebration of democracy in Peru will be somewhat bittersweet. The legacy of Keiko’s father may have given her the political weight to succeed but it was Alberto Fujimori, with his self coup, who interrupted the democratic process.
Whoever wins, celebrations will be short lived if the current political malaise and economic stagnation continue.
As Growth Slows, Humala Resorts to Populist Tactics
Peru’s former minister for women’s affairs and social development, Ana Jara Velasquez, was sworn in as President Ollanta Humala’s sixth prime minister last month. But only on Wednesday, by one vote, did her appointment receive congressional ratification.
When asked about his fifth prime ministerial resignation in three years, President Humala, never a man for hyperbole, said “ministerial postings always come with a limited lifespan.”
The role of the prime minister in Peru is to be a spokesperson for the government, to manage the cabinet and act as a shield for the president. In this final function, it would appear that many have fallen on their own sword.
Humala’s first two prime ministers, Salomón Lerner Ghitis and Oscar Valdés, fell victim to the crisis precipitated by mining protests, after it was discovered that the Conga Gold Mining project would have serious repercussions for the local water supply. Three more prime ministers came and went, following disregard of escalating crime, internal cabinet squabbling and political scandal, respectively.
In an interview with the German newspaper Die Welt, Humala spoke of his surprise at the pragmatism required of a president, stating, “You do what you have to do, not what you want to.”
He has certainly been pragmatic with his prime ministers. But how does this revolving door approach to the head of his cabinet reflect on him?
A lack of confidence in the president’s decisionmaking abilities now seems to be spreading. For the second time, Congress — where Humala’s ruling party does not have a majority — refused to quickly ratify a prime ministerial appointment. Last time out, when René Cornejo was put forward, the government was three votes away from collapsing. This time, however, the conservative block, which bailed the government out in February, claimed it would not do so again without legislative and other ministerial changes, on the grounds that “the government in general does not give us confidence.”
Ana Jara was voted in with 55 votes in favor, 54 against and nine abstentions — and with political opponents still calling for ministerial resignations.
With Humala’s political credibility declining even among lawmakers, his saving grace is a six month high approval rating of 32 percent. His outgoing prime minister, René Cornejo, leaves office with a tarnished reputation, Humala has taken the opportunity to appoint the first member of the leftist Gana Peru, his ruling party, to be head of the Council of Ministers. Ana Jara Velasquez is widely regarded as the favouite to be the party’s 2016 presidential candidate and someone who accordingly will until then tow the party line.
She is also known to be a close friend of the president’s wife, Nadine Heredia. In fact, her appointment should go a long way to quell the rumors that (despite constitutional constraints) Heredia would run for president in 2016. Should Ana Jara win, however, it would mean that Heredia could retain her already noticeable influence as co-founder and president of Gana Peru.
Humala was elected in 2011 on the back of a promise to spread more broadly the benefits of Peru’s robust economic growth. Since then, the number of people living below the poverty line has been reduced from 27.8 to 23.9 percent. It is apparent that the current slowdown in growth has taken its toll on the alleviation of poverty. Between 2004 and 2011, the government managed to reduce this percentage from 59.1 to 27.8 percent. The economy’s performance has been materially affected by falling metal prices (the mining sector is worth 15 percent of economic output) and a fishing industry that took a 31 percent hit in June, due to the effects of El Niño.
Amid the political infighting and economic deceleration, Humala has decided go on a public investment offensive. While seen by the electorate as finally coming good on his election promises, this has been dismissed by critics as merely a populist measure.
The highlights of Humala’s cited public investment program are: the second metro in Lima, a refinery upgrade in Talara, highway connections in mountainous regions and a new southern gas pipeline which make up almost 30 percent of nationwide investment.
He has also approved public-sector pay increases and bonuses and renewed investment in health and education. This comes at a time when the economy, heavily dependent on the natural resource sectors, grew by a disappointing .3 percent in June, as opposed to 5.2 percent a year earlier. These figures represent the weakest growth in five years and have led the Peruvian Central Bank to revise its forecast for economic growth this year, as it predicts a drop from 4.4 to 4 percent.
Humala, by way of rebuttal, has said that such actions are aimed at boosting economic output, that this signifies a much needed diversification of the economy, a move away from an overreliance on exportation of mining sector goods and that Peru can sustain such public expenditure, as it boasts a relatively low national debt — now less than 18 percent of gross domestic product.
Humala’s assertion in a recent interview that “you can’t feed people with speeches” is undoubtedly true. With the economic picture beginning to look less colorful and a glut of new public investment initiatives, it appears that the Peruvian president is returning to his populist instincts. With a Gana Peru representative installed as prime minister and prospective presidential candidate — given that the Constitution prevents him from seeking reelection — he is gearing up his party to form the next government. The 2016 campaign has begun.
Indecisive Drug Policy Symptom of Humala’s Evasiveness
Peru’s newly appointed anti-drug chief, Antonio Otarola, claims that his agency, Devida, is on course to meet its coca plantation eradication targets for 2014. Unfortunately, this is part of a rather worrisome picture.
Otarola, a former defense minister, says that in the fight against the growing narcotics trade, his agency is set to reach 30,000 hectares of coca plantation eradication per year, triple the levels managed under the previous government.
Those figures sound impressive and are in keeping with the notion that the war on drugs is a priority for President Ollanta Humala but, as ever, the realities of Peruvian politics are rarely what they seem.
Humala’s treatment of the largest drugs trade in the world has shown no signs of any deeply considered consistent policy. Indeed, it is the lack of consistency that has been an enduring aspect of an, at times, ill considered populist term in office.
Peru’s now plateauing economic success disguises what has been a far from stable stewardship under Humala’s government. He is on his fifth prime minister since July 2011, the appointment of whom led to nineteen ministers offering their resignation. Numerous other cabinet reshuffles have displayed a discontent arising from unfulfilled policy promises and fears of corruption and crime. The most damning indictment against the president must be the fall in public approval ratings which this month reached a new low of 21 percent.
Otarola finds himself as the third head of Devida in as many years, trying to give direction to a hitherto incoherent and indecisive policy on how to tackle a thriving drugs trade. The initial incumbent, the progressive academic Ricardo Soberón, was removed after just six months, following his decision to halt a coca eradication plantation program, supported by $100 million of funding from the United States. Soberón had sought to reevaluate the effectiveness of these measures, with a view to implementing crop substitution.
His successor, Carmen Masías, chose instead to accelerate and increase the eradication program by 14,000 hectares per year by the end of 2013. She was relieved of her duties for fear of reprisals from the undaunted Quispe Palomino terrorist splinter cells — remnants of the Shining Path terrorist organization that was so prominent in the last two decades of the twentieth century. They are based in the southern Huallaga Valley region where they protect and profit from farmers who are responsible for 54 percent of Peru’s cocaine production.
While Otarola says new plantation eradication targets are met, these relate to areas where Quispe Palomino are not active. Where they are, Otarola has reverted to a policy of crop substitution. This appears to be a U-turn in returning to Soberón’s earlier policy.
Nevertheless, the government continues to avoid the prime issue, that where there is a terrorist presence, this will continue to allow local farmers to enjoy the more lucrative coca harvest.
In spite of Humala’s perceived no-nonsense approach toward the Quispe Palomino clan — 24 arrests being made just a few months ago — the region in southern Peru where it is most active remains a terrorist stronghold. Unsurprisingly, the Peruvian public still regards the government’s counternarcotics efforts with suspicion.
Humala’s political history shows a predisposition for changing his ideals to secure the easy vote. He campaigned in 2006 as a leftist with pan-American ideals. He was then reelected in 2011 as a centrist looking to tackle inequality through economic growth. To date, Humala has shied away from a concerted attack on the terrorist element in southern Peru. Yet however many anti-drug policies he engages in, he is almost certain to fail unless he faces up to the terrorist involvement in the coca trade.