Subject: The risk of throwing it all away -Peru Presidential Election (ALCOA)
From: "Michael Andrews" <[email-masked]>
To: "Hunter Biden" <[email-masked]>, "Thad Brown" <[email-masked]>, "Ronnie Mainieri" <[email-masked]>, "Chris Heinz" <[email-masked]>, "Eric Schwerin" <[email-masked]>, "Curt Hastings" <[email-masked]>, "Devon Archer" <[email-masked]>
Date: Mon, 4 Apr 2011 09:15:14 -0400

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?