High stakes on Election Day in Peru

‘No a la ley seca!’ (‘No to the dry law!’) protested one observer in the comments section of an RPP article on the ban of the sale or consumption of alcohol in Peru, the night before the presidential election. ‘Con estos candidatos requerimos valor para votar!’ (‘With these candidates, we need bravery to even vote!’)

You can’t blame him. In today’s election, Peruvians are stuck between the proverbial rock and a hard place. If Mario Vargas Llosa described the last election, in 2011, as a choice between ‘Aids and cancer,’ it’s difficult to know what comparison the current contest warrants.

The candidate leading the race by a wide margin is Keiko Fujimori, who polls suggest will fall just short of the fifty percent required to secure the presidency at the first hurdle; however, the shadow of her father, disgraced and jailed ex-president Alberto Fujimori, looms large over her campaign, along with allegations of corruption and bribery. On the other side, seeking to pip centrist candidate Pedro Pablo Kuczynski to a one-on-one duel with Fujimori in June, is Veronika Mendoza — a left-wing candidate and former militant whose radical proposals have shaken the business community and increased fears that she will reverse Peru’s recent economic recovery.

The problem with Mendoza

Mendoza’s surge comes at a delicate time for the Peruvian economy. Things seemed to be picking up after a sluggish recovery from the 2014 slowdown; gold and copper prices finally began to rise, while Bloomberg ranked Peru’s iShares MSCI All Peru Capped ETF as the best-performing of 196 single country funds in 2016. The country was even on track to replace China as the world’s second biggest supplier of copper by this year, thanks to the resurgence of its mining sector. Given the still-fragile nature of the Peruvian recovery, then, it’s not surprising that many in the business community look with dread upon a candidate in Mendoza who seems to be targeting the very factors that are spurring it. Unlike her two main rivals, the Cuzco congresswoman would eschew the free-market model that has prevailed in Peru over the past twenty-five or so years, vowing to usher in ‘radical change’ by introducing a new constitution, toughening environmental restrictions on the country’s crucial mining sector and imposing a tax hike on multinational companies operating in the country.

There are fears that Mendoza’s aggressively left-wing agenda, which has been equated with the Chavez-lite policies other South American nations have increasingly turned their back on, will suck investor confidence out of Peru and stunt the growth of the sectors the country is relying on to stimulate its economic recovery. In fact, correlation between the condition of Mendoza’s campaign and the Peruvian stock markets has become clear over the past number of weeks: in the wake of the sol suffering its worst one-day decline since 2013 this month, the hashtag #CulpadeVero (Vero’s fault) emerged on social media, reflecting a belief among Peruvians that the markets were spooked by the rising popularity of such a candidate. Conversely, with Mendoza trailing Kuczynski — a former World Bank economist and Wall Street insider — by nearly four percentage points on Friday, the markets closed having rebounded by four percent themselves.

The business community will likely breathe a collective sigh of relief if, by Monday morning, it is Fujimori and Kuczynski who are gearing up for a second bout for the presidency in June; neither candidate, broadly speaking, would seek to upset the apple cart in terms of their economic vision for the country. Yet on Tuesday night, when thirty thousand people took to the streets of Lima, it was the frontrunner’s campaign, not Mendoza’s, that they were protesting against. Why?

The problem with Keiko

The Peruvian public’s opposition to the Fujimori campaign has drawn international attention to the country and once again shone the spotlight on the corruption and violence that plagued its past. The root of their opprobrium lies in Keiko’s ties to her father, Alberto Fujimori, who ruled the country in infamy for a decade from 1990 to 2000. A long list of charges against his government include ruthless tactics, involving preplanned massacres and kidnapping, employed to put down guerrilla insurrectionists in the early 1990s; the forced sterilization of thousands of Peruvian men and women in an effort to drive down poverty and keep the country’s population under control; a crooked administration that embezzled public funds, bribed journalists and wiretapped opponents to remain in control. Quite a list. The march against Keiko on Tuesday, fittingly, marked the anniversary of her father’s so-called autogolpe (self-coup) in 1992, in which he turned against his own government, shut down Congress and intervened in the judiciary to maintain his grip on power.

Despite publicly pledging not to pardon her father if elected, and vowing not to mirror his autocratic ways, Fujimori has been unable to remove the taint of corruption and crookedness from her own campaign. The question, then, is this: why, given the trenchant public opposition to her campaign, is she able to claim such a comfortable lead at the front of the pack? Well, strange as it may seem, the Peruvian public’s opposition to Alberto Fujimori’s regime is not universal. Many believe that he correctly deployed a firm and powerful stance against the threat of Shining Path guerrillas in the 1990s, while he is also viewed as having laid the foundations for a sustained period of economic success.

Furthermore, and regrettably, there is also evidence that the spectre of corruption that has long plagued Peru is proving beneficial to the Fujimori campaign: two of her rivals, one of whom posed a particularly credible threat to her chances of winning the election, were disqualified from the race under contentious circumstances, while her own campaign was deemed not to have acted improperly despite strong suspicions that it handed out cash for votes. The Panama Papers leaked last week also revealed that her campaign has benefited from funding by a host of murky and illicit donors who laundered their money through offshore accounts. It certainly isn’t the kind of campaign that imbues confidence in the quality and strength of Peru’s democracy, and another Fujimori presidency may not necessarily be a better outcome for markets than a Mendoza one. Keiko may not hold any of her opponent’s radical leftist views, but public opposition towards her is likely to intensify if she does win the election, potentially leading to political instability, and it would be a poor reflection on the country and its international image were it to elect a candidate so closely affiliated with a disgraced ex-president serving time for human rights abuses. A Fujimori presidency would pose a different sort of political risk to a Mendoza one.

The problem with PPK

The third candidate with a credible chance of winning the presidency, then, is ostensibly the most rational choice for Peruvians. Pedro Pablo Kuzcynski — PPK — boasts a distinguished political CV that includes stints as prime minister and minister of finance, supplemented by experience as a World Bank and IMF economist, and as the former general manager of Peru’s Central Reserve Bank. He’s a Wall Street insider whose economic agenda and extensive experience would assuage market fears, and his campaign is relatively untainted by the scent of impropriety, despite recent allegations that it broke rules by handing out beer to supporters. Kuzcynski fares much better than Mendoza in head-to-head polls against Fujimori, but there are voter concerns over his age — 77 — and a recent bizarre outburst against Mendoza, who he said ‘nunca ha hecho nada en su perra vida’ (has never done anything in her dog life), did not play well with many voters who characterized him as out of touch and condescending. Also, despite the comparative lack of controversy surrounding his campaign, PPK did not emerge unscathed from the release of the Panama Papers; he was found to have written a letter to a friend recommending that he open an offshore shell company, something Kuzcynski insists was done in good faith and with no intention of breaking the law.

As Peru heads to the polls, the political risk swirling around this election is acute. Mendoza’s social and economic proposals have already alarmed the business community, while another Fujimori presidency would send out the wrong signals about Peru’s commitment to democratic progress and transparent government. Kuzcynski offers strong economic competence and a moderate message, but his age and difficulty connecting to many voters may prove problematic down the line. The markets will probably be content as long as Mendoza does not advance to the next round in June, but the thousands who turned out in Lima to oppose Fujimori’s campaign should not be ignored either. As ever in the murky mire of South American politics, there are no easy choices today for Peruvians.

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