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It is possible that the Peru election might come up since Alcoa does
business in Per One of the candidates, Ollanta Humala is sympathetic
to Chaves although his party does not have the deep Congressioanl
support Chavez has in Venezuala.


Peru's presidential election
The risk of throwing it all away
Populists like Ollanta Humala (pictured below) threaten to overcome
divided moderates in one of Latin America’s fastest-growing economies
Mar 31st 2011 | LIMA | from the print edition


LIVING in Peru’s capital is like watching a film on fast-forward.
Every few months you can spot a taller skyscraper, a swankier hotel,
glossier shops and restaurants, new roads—and more traffic. House
prices in the leafier neighbourhoods have almost doubled in the past
two years. Rapid change is not confined to Lima. The only provincial
cities of any size that do not already boast one or more new shopping
malls and multiplex cinemas are about to get them. These are the
tangible results of a decade in which Peru’s GDP grew by over 5% a
year, the highest rate among Latin America’s bigger economies.

Since 2006 the growth has accelerated, averaging 7% despite the world
recession. Some good effects have been widespread. The share of
Peruvians living in poverty fell from 49% in 2004 to 35% in 2009. Much
of the Pacific coast, where farmers export asparagus, grapes and a
plateful of other products, enjoys full employment. Though many parts
of the Andean highlands remain poor, the arrival of paved roads is
cutting journey times, and some farmers there have joined the export
boom with artichokes and herbs. Social indicators have improved.
Between 2005 and 2010 Peru climbed 24 places in the United Nations
Human Development Report, which ranks countries by income, life
expectancy and educational measures. It now scores better then Hugo
Chávez’s Venezuela.

This success has been based on “a combination of good policies and
good luck”, as the World Bank put it in a report released this week.
The good luck was the boom in the world price of Peru’s mineral
exports (it is the world’s largest silver producer, second in copper
and zinc and sixth in gold). The policies include the successful
pursuit of price stability, fiscal rigour, foreign investment and open
trade. They were first adopted in the 1990s by Alberto Fujimori, an
elected autocrat whose regime collapsed amid systematic corruption,
but they were pursued more effectively by two democratic presidents,
Alejandro Toledo and Alan García.


Given the quickening progress, one might expect Mr García, the
president since 2006, to have chosen a successor set to romp to
victory in an election on April 10th. Both Brazil’s Luiz Inácio Lula
da Silva and Colombia’s Álvaro Uribe managed that feat last year. But
no. Mr García’s approval rating languishes at 26%, according to a poll
by Ipsos-Apoyo. His APRA party doesn’t even have a candidate.

Instead, Peru’s election runs some risk of turning into a lesson in
what happens when economic growth is not backed up by more effective
government, and when a democracy is hobbled by weak and fragmented
political parties (see article). Mr García chose to pour public money
into roads rather than social programmes. That helped sustain growth.
But a fifth of Peruvians still lack access to piped water, almost a
fifth of children are malnourished and health care is patchy. The
interior ministry, run by a series of APRA mediocrities, has failed to
stop Peru from becoming the world’s biggest cocaine exporter. Although
it is still a fairly safe country, the murder rate tripled between
2002 and 2008, according to Ciudad Nuestra, an NGO in Lima. Gangland
killings among drug mafias are a frightening novelty.

Polls show that roughly two of every three Peruvians want democracy
and only moderate reforms of economic policy. They retain the painful
memory of a quarter-century wasted by leftist and populist policies,
notably in Mr García’s first term in the 1980s. (It was only in 2005
that income per head surpassed its level of 1981.) But they are also
disgruntled by rampant corruption, rising crime and a sense that most
of the benefits of the boom are going to the few. Income distribution
has become less unequal, but only a bit. And none of the politicians
seems to inspire them much.

Toledo has floundered
The three candidates who stand for continuing and improving the
policies of the past decade—Mr Toledo, his former prime minister Pedro
Pablo Kuczynski, and Luis Castañeda, a former mayor of Lima—have
squabbled among themselves. The result: a poll released by Ipsos-Apoyo
on March 27th found that in a desperately tight race the front-runner
is now Ollanta Humala, a populist former army officer, who came out
one point ahead of Keiko Fujimori, the daughter of the former
president. That suggested it could be she and Mr Humala who will go
through to a run-off ballot in May.

A short, lithe, copper-skinned man, Mr Humala appeals to the third of
Peruvians who have yet to see much benefit from the modern economy,
partly because he looks like them. He came within six percentage
points of beating Mr García in a run-off in 2006. Back then he made no
effort to hide his ties with Venezuela’s Mr Chávez.

This time Mr Humala’s pitch is more moderate, with echoes of Lula. He
says he would distribute wealth more equally through a “national
market economy”. This seems to come down to “national planning”, and
renegotiating or cancelling foreign companies’ contracts to run ports
and operate mines and gasfields. Mr Humala also promises to give a
modest non-contributory pension to the 1.2m Peruvians over 65 who, he
says, do not have one. He promises to be tough on crime and
corruption. He wants to change the constitution—the tactic used by Mr
Chávez to stay in power in Venezuela—but he insists he will leave
after five years.

Ms Fujimori’s main goal seems to be securing an amnesty for her
father, who is serving a 25-year sentence for human-rights abuses. She
would not change economic policy. But she is hardly a guarantee of
democratic reform or the rule of law.

A few weeks ago Mr Toledo was comfortably ahead in the polls. But he
has come under fire for his personal failings. His critics accuse him
of heavy drinking and cocaine use, which he denies. Mr Toledo has lost
support, especially among younger Peruvians, to Mr Kuczynski, a former
IMF official and investment banker. Aged 72, Mr Kuczynski has through
clever campaigning pulled off the improbable feat of turning himself
into a political novelty. He promises to introduce a professional
civil service and legalise the vast mass of informal businesses. But
he started late, his support is concentrated among the better-off, and
his opponents have made much of the fact that he holds an American
passport as well as a Peruvian one.

The tightness of the race means that a televised debate on April 3rd
may be decisive. Centrist opinion may rally behind whichever man, Mr
Toledo or Mr Kuczynski, seems more likely to win. Much is at stake.
Mining firms alone are poised to invest $42 billion in Peru over the
next three years, according to Luis Carranza, a former finance
minister of Mr García’s. But to keep the boom going beyond that, he
cautions, requires deeper reforms of education, health and government.
Neither Mr Humala nor Ms Fujimori would offer them.

Mr Humala’s rise has injected alarm into the complacency prevalent
among Peru’s businessmen, prompting a sell-off of shares and the
currency this week. Mr Humala would lack a majority in Congress and
would find it much harder than Mr Chávez to establish an elected
autocracy, even if he wanted to. But his manifesto reads like a recipe
for five years of wasted opportunities, at best.

Even if Mr Humala gets to the run-off, he may well lose, as he did in
2006 when Peru was in worse shape than it is today. But much will
depend on who his opponent is. Although rivals are sceptical of Mr
Humala’s new-found moderation, it may yet broaden his appeal. Both Mr
Humala and Ms Fujimori embody risks that a majority of Peruvians would
prefer not to entertain. But will they now find a way to express that
in their vote?