President Humala at the half-way mark

EDITORIAL | 28 January 2014

On January 28, the Humala administration reaches the half-way point of its five year term. Elected in June 2011 and taking office officially on July 28 of that year, Humala will step down (assuming nothing untoward happens in the meantime) on July 28 2016, following elections earlier that year.

In attempting to evaluate the first half, we have to start with the programme on which he was elected in 2011. As readers of the PSG will recall, 2011 saw a fairly dramatic turnaround on the Humala government’s electoral commitments.

The radical reform plan with which the year began was jettisoned in favour of the ‘road map’, a watered-down version which pledged to maintain the rules of the liberal economic game (in place since the introduction of Fuji-economics in the early 1990s) but to engineer a social transformation with the benefits of economic growth being channelled to sectors of the population that had received little over the previous decade. The ‘Brazilian model’, copying the achievements of the Lula administrations in Brazil, was the main inspiration for the Humala-lite political agenda.

It became very clear from the beginning that the Humala government found itself hemmed in by pressures from the business community, both locally and from foreign investors. Business lobby groups, enormously empowered during the previous two decades, made it clear that any shift in the model was, for them, unacceptable. A few timid electoral promises – such as taxing some of the extraordinary profits made by mining companies from the minerals price boom and the introduction of a law to enable communities to be consulted over extractive projects – were passed in the initial weeks, but the reforming impetus soon weakened.

Economic policy and poverty

Who controlled economic policy became abundantly clear when proposals for the state to reacquire assets to be sold by Spanish oil company Repsol were hastily abandoned after protests by Confiep (the private business confederation) and an onslaught on the government from the right-wing press.

Of course, the fact that Gana Peru – the ruling coalition in Congress – lacked an overall majority limited the government’s freedom of manoeuvre. But the decision to appoint Luis Castilla as minister in the all-important Ministry of Economy and Finance – and the fact that he is still there – is eloquent testimony of an unwillingness to upset the business community whatever the nature of the electoral commitments made in 2011. Castilla had been Alan Garcia’s economy minister and had been carefully selected to keep investors happy.

Social policy has received greater attention than in the past, but it is far from clear whether this is leading to a ‘new deal’ for Peru’s poor, especially the very poor in the highlands and Amazon jungle regions. The figures regarding poverty reduction, much vaunted by the Garcia administration, need to be analysed with care, but poverty levels do not appear to have fallen as dramatically since 2011 as they did, for instance, in Brazil under Lula. And those whose income levels have risen just above the official poverty line can easily see themselves slipping back below it.

Ollanta Humala has failed to capture the public imagination as someone who is engineering fundamental changes in Peruvian society. Although his popularity rating has not fallen as fast and as far as his two immediate predecessors, only around a quarter of the population appear to think Humala is doing a good job as president. Opinion polls suggest, unsurprisingly, that scepticism is deepest in those parts of the country which voted for him in 2011 in greatest numbers. And while the government’s reforming zeal has waned, new preoccupations have emerged in public opinion – like concern over public insecurity and perceptions of corruption – which will be hard (if not impossible) to assuage in what remains of his term.

The outlook

It is also now clear that the Peruvian economy is not immune from the international downturn and the growing difficulties facing developing economies worldwide. The 2013 growth rate will be still fairly high by Latin American standards, but the trend this year and next appears to be downwards. This will make it harder to maintain reasonably buoyant employment levels and curbs in government spending are likely as tax income begins to falter.

Monday's compromise on Peru's maritime border with Chile is may give Humala a slight boost. Responding to a request filed by Peru in 2008, the International Court of Justice ruled that 70 per cent of the territory sought did belong to Peru, but most of the coastal waters, and their valuable stock of fish, remain in Chilean hands. Humala said that "Peru can feel satisfied" and predicted that the date would be remembered with pride by future generations, as some Peruvians took to the streets for flag-waving celebrations.

The next two and a half years will be dominated by electioneering; indeed this began no sooner than Humala had taken office in 2011. Campaigning appears likely to be vicious and with no holds barred. This may provide a distraction for public opinion, whipped up by the frenzied media, but is unlikely to improve people’s perceptions of their representatives and the institutions in which they operate. As we suggested in previous analysis, this is not a context in which democracy and democratic institutions will be consolidated. 

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