As Growth Slows, Humala Resorts to Populist Tactics

Eying the next election, Peru’s president appoints a loyalist as prime minister and raises public spending.

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.