By Lucy Conger
One thing is certain about Perus presidential election:
its unpredictability. Yet the most striking feature of the
race is that it has become a battle of radically opposed
economic ideologies, thanks to the unexpected strength of
left-wing nationalist candidate Ollanta Humala.
His surging popularity in the contest has spun the
traditional debate on its head and has pitted orthodox
against unconventional economic policies.
Lourdes Flores, the conservative candidate of the Unidad
Nacional coalition, who consistently led the polls before
succumbing to a Humala lead, and former president Alan
Garcia, the social democratic candidate of APRA (American
Popular Revolutionary Alliance), have both been forced to
underscore their allegiance to market friendly policies, in
contrast to the left-wing aspirant.
Humala, a 42-year-old retired army colonel, is leader of an
ethnic nationalist group of Peruvian military men. His
approach is underscored by, among other things, his rejection
of the Free Trade Area of the Americas, and his opposition to
the Free Trade Agreement (FTA) reached this year with the US;
instead, like his Venezuelan neighbour, he advocates regional
integration, particularly among South American states.
He is also proposing a review of all privatizations of the
last decade a fact that has spooked investors of all
stripes and sent jitters through international markets. He
would promote greater state participation in strategic
sectors that include hydrocarbons, ports, water and
But, for all the rhetoric, Humala is also a pragmatist. He
tells Emerging Markets he would promote investment in
infrastructure roughly $50 billion is needed to create
modern ports, roads and communications that would help the
country decentralize and link remote areas to markets.
We dont have the money. I dont see why we
cant get private domestic or foreign capital [in road
building] its a profitable investment and would
help develop the country. We all have to participate in the
construction of infrastructure, he says.
More fundamentally, Humala promises The Great
Transformation a political project which would
start with a constitutional assembly to rewrite the
constitution so as to combat corruption that, he says, is
rife in government, to reestablish a claim on Perus
natural resources handed over to international capital, and
to review Perus contracts with multinational mining and
hydrocarbons firms that guarantee a stable tax and juridical
regime. It is not possible that the constitution
impedes review of contracts, he says.
Humalas leading economic adviser and vice-presidential
candidate is Gonzalo Garcia, a former central bank director,
who raised eyebrows when he justified the proposal of a new
constitution by saying the Humala project will last 20 years.
Garcia, however, promises to audit government debt.
Once you open the pot, there probably are some
skeletons, he tells Emerging Markets, hinting that
there may be some items that could be repudiated. He also
promises the Humala government would stimulate private
investment with incentives including tax credits. If
you have cash flow and could expand your productive base, we
would give credit for investment in technology [and]
machinery, Garcia says.
In stark contrast to Humala, the 46-year-old Flores, a lawyer
and former congresswoman, is strongly identified with big
business and the upper middle class. This image was
compounded by her nomination of vice-presidential running
mate Arturo Woodman, a powerful entrepreneur and long-time
associate of one of Perus leading conglomerates, Grupo
Romero, and its flagship property, the Banco de
Flores has yet to announce the precise make-up of her team.
She tells Emerging Markets that, at least on economic policy,
she has no commitments to her current advisers. The
team is being expanded permanently; we will bring in others
who are outside Peru; they will all be professionals,
Flores says. Ultimately, she says, she is looking to assemble
a team that will have to send clear signals of
In terms of economic priorities, Flores, who advocates
signing the draft FTA with the US, says that she will not
review contracts with multinational mining and energy
companies. She will stimulate private investment to create
jobs in Peru, where 60% of the population are under-employed
with no worker benefits, and 10% have no jobs.
Nevertheless, as support has grown for Humala and Garcia,
Flores has begun to backtrack on her hitherto stalwart
defence of Perus economic model. The trickle-down
policy has failed; trickle down is a fraud, she says.
She has subsequently promised to channel $2 billion in public
funds to small and medium businesses through the
governments development bank, Cofide, and to promote
formalization of the informal enterprises that create over
70% of jobs in Peru.
Yet Flores Achilles heel is perhaps what she
stands for. Her basic problem is the option she
represents is the right, says Nelson Manrique, a
sociologist at Limas Catholic University and a
political commentator. Flores last bid for the
presidency in 2001 was stymied in the run-off by Alan Garcia,
who won 1% more of the vote.
The former president
We are going to correct the errors and settle that debt
with the country, says Garcia, who has taken to Latin
dance as a campaign tactic: he began taking salsa turns and
hopping reggeaton at his rallies and soon gained some ground
in the polls and a shot at the decisive second-round
In a race that juxtaposes so sharply orthodox and heterodox
economic models, Garcia is positioned firmly in the centre.
In recent years, he has dedicated considerable energy to
convincing private business that he has forsaken his populist
past and would pursue market-friendly policies and seek the
most productive niches for Peru in the global economy.
Garcia pledges to respect foreign investment and shuns the
idea of unilaterally revising contracts. We have it
very clear that money from outside generates jobs,
Hernan Garrido Lecca, Garcias campaign strategist,
tells Emerging Markets. Garcia has successfully communicated
his concrete economic plans, including shifting highland
farmers to export crops,
private concessions for a network of farm-to-market roads,
incentives to employ youth and tourism promotion.
Whoever wins the presidency will face the twin challenges of
building an economy that works for a wider segment of the
Peruvian population and forging changes with a
congress that will be divided, with APRA as the strongest