Peru’s 2016 elections focus on growth and dysfunctional politics

PERU’S gross domestic product is estimated to have grown by 2.8 percent in 2015 – an excellent result when seen against the background of the contraction of 0.3 percent that Latin America recorded in the same period. According to most analysts, though, the country’s growth could have been higher had it not been for the country’s ineffectual politics – writes World Review expert Carlos Basombrio. In early December, an Ipsos poll of participants of the CADE 2015 Annual Executives Conference, Peru’s most representative business gathering, indicated disappointment over the government’s failure to stimulate investment in the economy. Entrepreneurs estimated that Peru’s economy could grow by an impressive 4.9 percent per year over the next five years if the government proved willing and able to encourage private investment; should Lima fail to deliver its part of the deal, average growth could be as low as 1.9 percent. Peru, like other emerging economies, will be strongly affected by outside factors: the Chinese slowdown, the weak EU recovery and, more recently, gradual interest rate hikes by the Federal Reserve, the United States’ central bank. The Fed’s policy inevitably leads to increases in financing costs and an outflow of capital from Peru. In the region, Peru will also feel the bite of Brazil’s protracted economic and political crisis. There are, though, some comparative advantages for Peru hidden in the international context. The Pacific Alliance, an increasingly consolidated trade group formed by Mexico, Colombia, Chile and Peru, has been so successful that several other countries, including Panama and Costa Rica, want to be part of it. The alliance’s position has been strengthened by the political collapse of kirchnerismo in Argentina and the debacle of chavismo in Venezuela. Peru also signed the Trans Pacific Partnership, which will open new markets for Peruvian products in 12 Pacific Rim countries. It now has free trade agreements with nearly all of the world’s major economies and is negotiating to add India to the list. If Peruvians’ expectations about their economy are mixed, their level of approval for the current government and the country’s political institutions has become abysmally low. According to a December 2015 GFK survey, President Ollanta Humala’s approval rate was only 16 percent and that of his once influential wife, Nadine Heredia, sunk to a dismal 12 percent. Prime Minister Pedro Cateriano, was approved by 13 percent of the respondents. The cabinet of ministers, as a whole, clocked in at the same figure, while the Congress and the judiciary scored 12 percent. While the slowdown in the economy played a role in these results, there is widespread consensus in Peru that the main reason for the unpopularity of the government is linked to politics: the lack of leadership from the president and the appalling weaknesses of the country’s key institutions. Peru is heading to the April 10, 2016 vote with a deeply discredited and dysfunctional political system. This manifests itself in the fact, for example, that there are as many as 18 contenders for the presidency. Quite a few of them are backed by parties that are unknown to most voters. They become active only during election campaigns and act as organizations for rent, available to candidates who pop up out of nowhere, with no registered political structures that are needed to participate in the ballot. There is some good news in this madness as well. An overwhelming majority of the candidates for presidency – 15 out of the 18 – basically support a market-driven economic system that has given Peru its recent prosperity. Several of the contenders criticize some aspects of that model – either out of conviction or mere electoral strategy – but only three candidates of the extreme left reject it entirely. For a more in-depth look at this subject with scenarios looking to future outcomes, go to our sister site: Geopolitical Information Service. Sign in for 3 Free Reports or Subscribe.

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