Viewpoints on Energy, Geopolitics, and Civilization
Mac Margolis / Bloomberg: Peru's voters
can solve a Latin American riddle
Cris Bouroncle /SFP
Now is their chance
How to combine a functioning polity with a flourishing economy.
As nearly 25 million Peruvians head to the polls to elect a new parliament later this month, here's a Latin American riddle: How does a nation practiced in the art of political seppuku sustain one of the hemisphere's most consistently flourishing economies?
Three months ago, a battle between caretaker President Martin Vizcarra and the obstructionist legislature pitched the Andean nation into a constitutional crisis. Vizcarra took the nuclear option, invoking an extreme constitutional provision to dissolve congress . The move roiled the political establishment and still vexes the constitutional court, but no matter. All 130 legislative seats are up for grabs in the January 26 balloting. So is Peru's political future.
An accidental president, hoisted into office after President Pedro Pablo Kuczynski resigned amid scandal in 2018, Vizcarra finessed the crisis by playing the righteous outsider. Peruvians swooned , and he still boasts an enviable 60% approval rating. But for how long? Few societies in the Americas have been so mercurial toward their politicians, hailing newly elected leaders as redeemers only to turn on them. To be fair, many leaders have invited contempt. Nowhere else in Latin America has the rolling Brazil-born Carwash investigation into payola and graft claimed so many alpha authorities: Four Peruvian former presidents have been caught up in the scandal. One, Alan Garcia, shot himself to avoid arrest.
Legislators have done even less for democratic cachet: Only 8% of Peruvians said they trust their congress , compared with 21 percent regionally, Latinobarometro found in 2018. Three of four Peruvians named the legislature as the nation's most corrupt institution , Transparency International recently found. Another poll showed 59% favored shutting down parliament “in difficult times.” That's more than double the rate for Mexicans, the second most coup-tolerant society.
That depth of public funk is a petri dish for economic misadventure. Yet the Andean economy has long outperformed most of its continental peers, clocking 6.1% average growth from 2002 to 2013 , and kept pace with Latin America's leaders ever since. Even as growth slows this year , Peru's gross domestic product will likely trump that of its continental neighbors. Exports are up, inflation is the lowest in the region and investment is robust (+4.2% in 2020). Mining alone, which kicks in 15% of gross domestic product, saw a 27% year on year increase in investment from January to November of 2019, according to the Economist Intelligence Unit.
What's behind the disconnect? Political scientist Carlos Melendez, who teaches at Diego Portales University in Chile, reckons that after a ruinous run of profligacy, hyperinflation and authoritarian spasms through the 1980s and 1990s, Peruvians have since struck an unstated civic pact. While politicians are ecumenically reviled and fair game for popular derision, most everyone agrees on the basic rules of economic engagement and fiscal sobriety. Caudillos, populists and enchanters on the left and right may come and go, but market-friendly policies have prevailed.
Take the Central Reserve Bank, whose current president Julio Velarde Flores, has been on the governing board since 2006. For the second time, he was named Central Banker of the Year by The Banker, an international financial publication. “There's a class of technocrats who have been little affected by political convulsions,” Melendez told me. “It's the idea that legitimacy comes from following a rational economic model.”
Peruvian politics should be so blessed. The institutional clash that blew up congress last year was driven partly by the sitting legislature's attempt to sandbag structural reforms that Peru badly needs, from anti-graft measures and an overhaul of the judiciary to new rules for campaign finance. But the only banner that resonated with incumbent-weary Peruvians was the anti-corruption drive, with parliament as the preferred target.
The danger is that Peru falls for “a false sense of security that nothing will change, no matter who is in government,” said Jorge Valladares, who tracks political integrity for Transparency International. “But this rests on a fairly fragile balance of power. As soon as you have a skilled interest group able to exploit public sentiment and politicize the system's failures, the economic consensus we take for granted could crash against the wall.”
Vizcarra, a former provincial governor, has so far escaped the public wrath by playing to the crowd's rejection of the Lima-centered political establishment. An accidental president with no party of his own, Vizcarra is “a populist of the center, without any ideological bent except that of trolling for approval,” said Melendez. “Peru's politics is driven not by ideas or agendas, but contrarians — people who cast ‘no' votes.”
That's hardly encouraging for a country heading to a snap election intended to pacify politics and reset national priorities. The most popular of a kaleidoscope of parties vying for congressional seats, boasts no more than 10% of voter preferences. The storied Popular Force of the former caudillo Alberto Fujimori, now led by his daughter Keiko, has no more than 8%. In a country where voting is obligatory, 35% of Peruvians voted blank or spoiled their ballots in the 2016 parliamentary contest.
The likely outcome: a stand-in parliament with a limited lifespan (it will sit only until general elections in early 2021) with “low credibility and little commitment to structural changes,” Melendez says. “It's easy to implode a congress, but difficult to build one.”
Happily, South America's fifth-strongest economy looks mostly fit and likely to keep a steady course. However, absent deeper reforms, Peru seems fated to continue missing opportunities — a quintessentially Latin American affliction.
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Mac Margolis is a Bloomberg Opinion columnist covering Latin and South America. He was a reporter for Newsweek and is the author of “The Last New World: The Conquest of the Amazon Frontier.”Petroleumworld reprint this article in the interest of our readers.
Editor's Note: This article was originally published by Bloomberg, on Jan. 14, 2020. All comments posted and published on Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld.
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