What Is At Stake In Perú's Upcoming Election?

Living in Peru has a feature titled: 2011 Peru elections: What are the best case scenarios for investors? May 31, 2011 14:33:28 | in economy
By Kelly Giem
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This is a good fact based article that everyone who is about to vote in Peru‘s upcoming election should consider. Thank you LiP. I agree with most of this thoughtful piece published by LiP.

If we are to lift the poor out of poverty we need investment to continue and accelerate in Peru. That means we need a Keiko presidency. The one thing I do question in the article is Kelly Giem's long term stable outlook with a Humala presidency. Kelly Giem says it will take 5 to 7 years. I say if it takes that long it will likely never happen. If you lose the momentum it can take decades to recapture those investments. There will be lots of pain and suffering in that period. Beside the fact that in 5 to 7 years there would (hopefully) be a new president if it took that long to recover. And, many more new questions.

One important topic Kelly Giem did not touch on is the Peru Free Trade Agreement (TLC) with the USA. Humala has repeatedly stated he wants to kill the current agreement with the US and renegotiate terms of a new agreement. Although now Humala has modified his statement, as he has all his statements, saying, "Review existing free trade agreements, possibly renegotiate them." I believe his original words.

The existing TLC between the United States and Peru was a long and hard fought battle over many years. Democrats in the USA continually fight these agreements. It was not until President Bush was able to get conservative majorities in both houses of congress that it was possible to enact the TLC with Peru. And even then it was a close battle with the TLC being signed into law just before President Bush left office. President Bush failed to get the TLC with Colombia done  before leaving office. When President Obama took over from Bush one of his first actions was to kill the long standing Colombia TLC talks. Now President Obama is of the same mind as Humala and wants to abolish the current TLC between the USA and Peru. Currently in the USA the liberal Democrats (who oppose all free trade agreements) control the presidency and one house of congress (the Senate) essentially killing any chance that a new free agreement would ever come up for a vote in the Senate. Or, if originated in the House the Senate would simply let it die in committee. Not that it matters, but even if by some miracle a new TLC were to reach the desk of the president, President Obama would veto it. This is just one aspect of the TLC situation. Any tampering with the existing TLC, in the current political environment, endangers its continuance. Humala wants to reassess all trade agreements. Can anyone wonder why investors are nervous and dubious of a Humala presidency?
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Fujimori's main economic proposals and pledges are:
- Economic growth of at least 7 percent per year.
- Tax windfall profits of miners.
- Promote free markets and free trade.
- Cut red tape, simplify tax procedures and reduce the costs of doing business by 20 percent in the next five years.
- Government subsidized credit program to help small-sized businesses, give rural communities access to markets.
- Focus on technology and manufacturing around mines to export more lucrative products and not just raw materials.
Her other proposals include:
- Expand comprehensive health insurance.
- Build more prisons, and impose the death penalty for severe crimes. Create civilian security bodies and encourage crime reports.
- More access to housing and mortgages. Grant land titles.
- Force wildcat miners to pay taxes and stop using mercury.
- Beef up anti-drug efforts and push to get rid of remnant rebel groups that work in the drug trade.
- Increase education spending. Improve test scores that are consistently among the region's lowest.
- Incorporate the rural poor in the global economy by extending property rights to all and formalizing the vast informal sector.


Humala's main economic proposals and pledges are:
- A revised constitution for a "new economic model" that keeps sectors including water and sanitation in public hands.
- Review existing free trade agreements, possibly renegotiate them.
- Keep annual inflation at about 2.5 percent with a stable exchange rate.
- The fiscal deficit not to exceed 1 percent of GDP.
- Raise monthly minimum wage to 750 soles ($268) from 600 soles ($214).
- A gradual reduction of the national sales tax to 14 percent or 15 percent, down from current 18 percent.
- Increase total tax intake to 18 or 20 percent of GDP, (currently below 15 percent).
- Reorganize government pro-investment agency PROINVERSION to promote domestic rather than foreign private investment.
- Create internal markets for raw materials and manufactured goods rather than prioritizing exports.
- Greater role for state-run companies.
His other proposals include:
- Community-based control of coca farms rather than eradication of coca leaf crops in the world's No. 2 cocaine producer.
- Give regions and municipalities greater control of finances and social programs.
- Local communities have right to consultation before concessions for extractive industries are granted.
- Strategic alliances with Brazil, Bolivia, Ecuador and Colombia to further Andean integration.
- Create a national reparations fund for victims of political violence in the 1980s and 1990s.
- Guarantee minimum pension to all individuals over 65.
- Create an independent anti-corruption commission.
- Propose media law increasing number of print and broadcast licenses to encourage diverse perspectives.
- Increase education and healthcare spending.
- Find new energy sources, consider nuclear power.
- Export natural gas produced at Camisea fields only when domestic energy needs have been met.
- Guarantee principle of no re-election, one term limit.

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