[Marxism] Humala's alliance with Chavez heightens pressure on businesses in Peru

["Fred Feldman" <ffeldman@xxxxxxxxxxxxxxxx>]

"Both candidates have vowed to continue the prudent fiscal management of
President Alejandro Toledo's current government."  As the cases ranging
from Chavez and Morales to Lula in Brazil to Gutierrez and Palcios have
shown, such promises can mean many different things.  A key factor in
Peru is still the absence of the kind of mass social explosiion
represented in Venezuela by the Caracazo and in Bolivia by the long
struggles over water, gas, coca growing, and other issues.
Fred Feldman
 
BBC News
Devil in the detail for Peru's voters 
By Hannah Hennessy 
Lima    


On 4 June, voters in Peru will decide whether, for them, it's better the
devil you know or the devil you don't. 

The two men vying for president both represent a swing to the left. The
former President, Alan Garcia, would mean a move to the centre-left. 

His nationalist rival, Ollanta Humala, could deliver a more seismic
shift to the kind of politics favoured by Venezuela's Hugo Chavez, his
close ally and a growing thorn in the side of Washington. 

The policies and political experience of both men will have an impact on
Peru's economy, which has been one of South America's top performers in
recent years. 

Mr Humala is politically naïve, but has tapped into a growing vein of
disillusionment with Washington-friendly free-market policies that are
seen as failing the region's poor. 

Mr Garcia is more business-friendly, but his 1985-1990 presidency was
marked by rampant inflation, destabilising terrorism and debt default. 

Some Peruvians are not convinced when he says he has learnt from his
mistakes. Economists say the international community may demand proof of
this before it is prepared to lend money to Peru. 

Gold and gas 

Both candidates have vowed to continue the prudent fiscal management of
President Alejandro Toledo's current government, which has overseen
sustained economic growth. 

But the real driving force of Peru's economy has been the billions of
dollars of foreign investment pumped into its vast natural resources and
their soaring prices on the world market, says political analyst Sally
Bowen. 

"This is really the key for the future and what most people are focusing
on is energy and mining and what Garcia and Humala will do in those
areas," she adds. 

Mr Humala plans to revise contracts with foreign firms, in effect
nationalising the extractive industries. He has ruled out expropriation,
but wants to rewrite the constitution so the state plays a role at every
stage of the extraction process. 

He wants Peruvians to benefit from the gold and gas that comes out of
the ground. It's a view that has won support among the half of Peruvians
still living below the poverty line, despite the country's economic
success. 

Mr Garcia is more moderate. He knows Peru needs foreign investment and
says international companies must contribute more. 

He wants to revise contracts to increase royalties and make sure those
who owe taxes pay. 

"The overall picture is there is going to be more pressure on
companies," says Sally Bowen. "Garcia reckons he can do this by talking
with them and making them see sense. Humala is planning on making them
see sense, by increased state control at every level." 

Stability 

International mining consultant Mark Smith says investment in Peru will
be affected whichever man is elected. 

"With Humala, it will come to a screeching halt, unless, or until, he
proves to be market-friendly - unlikely, given his affiliations with
Chavez and [Bolivia's President Evo] Morales and his election rhetoric. 

"If Garcia wins, the resource industry will be little affected, but the
rest of the economy could suffer from a short-term fear of a repeat of
the 1980s. If he proves to be a good president, then that slowdown may
be short-lived." 

Mr Humala and Mr Garcia hope to maintain current levels of macroeconomic
stability, pursuing similar targets to the current government, such as
inflation of less than 2.5% and economic growth of 7%. 

They both oppose a free trade agreement signed last month with
Washington and awaiting approval by Congress in both countries. 

Mr Garcia wants to renegotiate it, while Mr Humala wants it torn up. He
backs a regional bloc of left-wing states, proposed by Mr Chavez, which
would make the region less dependent on Washington. 

Social spending 

Both men want to spur growth and end rampant poverty with massive
increases in social spending, although it is not quite clear how they
will fund these changes. 

Mr Garcia says he will slash excess spending and salaries in the public
sector, from the president down. 

Mr Humala's advisors want to issue bonds to finance cheap loans, in
order to promote agriculture among impoverished communities in the Andes
mountains. 

The two men know Peru's future is inextricably linked to its natural
resources. Peru's next president needs to find some balance between
helping ordinary Peruvians and attracting enough foreign investment to
sustain economic growth. 

For now, the economy is strong, but neither it nor the international
community will tolerate sustained mismanagement. 

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/5007556.stm

Published: 2006/05/30 22:17:03 GMT

 
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