When President Martín Vizcarra closed down Congress last September, power shifted towards the executive branch. He was able to rule by decree. Many of the decrees passed responded to demands from the business sector. Among them was a plan to enhance productivity, designed to ‘deepen’ the neoliberal model, and passed in a way to avoid public debate. Other decrees related to the suspension of a capital gains tax and the passage of a new mergers and acquisitions law. Since the onset of the Cofid-19 pandemic, Vizcarra has also approved legislative decrees to authorise the suspension of labour contracts during a 90-day period.
He has thus conceded many of the demands made by the powerful business confederation, Confiep, except in agreeing to its desire for an outright cancellation of labour contracts.
However, the political balance has changed somewhat since the new Congress took office. Keen to curry public opinion, congressional leaders have espoused some social demands. A bill was passed (which awaits presidential ratification) enabling savers to withdraw 25% of their accounts from private pension funds (AFPs) to help them through the crisis. This has been bitterly opposed by the association that represents AFPs. Vizcarra has so far sought to avoid promulgating the law.
Congress has also delayed its approval to Vizcarra’s request for an extension of the period during which he can legislate by supreme decree.
Further, Congress has taken up another issue that the president would like to modify: the passage of a wealth tax to help deal with the extraordinary costs of the Cofid-19 crisis. Different bills are currently being considered. Vizcarra has mentioned a ‘solidarity tax’ on those with incomes of more than US$3,000 a month. He is anxious to avoid a wealth tax that would target the super-rich. The issue is as yet unresolved and could produce a further clash between Congress and the executive. On 30 April, Congress promulgated the law, notwithstanding executive opposition. However, the official rules guiding how the law would operate have yet to be published.
A ‘new normal’ is thus appearing with respect to economic policy, with Congress supporting what opponents call ‘populist’ measures that offer, in the context of the pandemic, to help afflicted people.
In this context, the president is playing a delicate political balancing act, trying to respond to public opinion without alienating the business community.
So far, public opinion has tended to side with the president. His quick responses to Covid-19, his communication skills, the bonos and the reactivation package have all won him credit. But, as time goes on it will become harder simply to rule by decree. Meanwhile congressional leaders have their eye on the forthcoming presidential elections and the need to win public sympathy. The balancing act will therefore prove increasingly hard to sustain.