Despite 5 years
of peace and prosperity, growing numbers of Peruvians seem anxious
to return to the bad old days of populist spendthrift governments,
an empty treasury, and hyperinflation. The problem is that strong
foreign investment and steady economic growth of more than 5
percent per year haven't been enough to help Peru's poor-who make
up half the population-achieve social mobility.
Outgoing
President Alejandro Toledo's policies were a good start toward
eradicating poverty, but jobs depend on an educated workforce,
strong rule of law, the absence of burdensome regulations, and a
commercial code that helps the poorest of citizens start a business
as easily as the richest. One potential successor is likely to
embrace such reforms, while the other dismisses them. Peruvians
will make their choice on April 9.
Toledo's
Legacy
Elected
in 2001 as Peru's first indigenous head of state, Toledo turned out
to be as unremarkable as his predecessors were eccentric. He
neither divided citizens with fiery rhetoric nor made unrealistic
promises. As a reward, his public opinion ratings sunk to the teens
and stayed there.
Nonetheless,
Toledo's low-key leadership left room for the congress, courts, and
local governments to grow in effectiveness. And Peru's economy has
expanded while others in the region are struggling. This past year,
growth topped 6 percent while inflation hovered at 1
percent.
In contrast,
populist president Alan García (1985-90) bankrupted the
treasury with ill-conceived spending programs as Sendero Luminoso
terrorists ran through in the countryside. Alberto Fujimori
(1990-2000) restored the economy and stopped the Sendero but did so
by imposing an elected dictatorship.
Progress or
Populism?
The
leading candidates for the presidency are conservative attorney
Lourdes Flores Nano and retired army officer Ollanta Humala. Around
twenty others are also in the running, including former presidents
García and Valentín Paniagua. If no one wins more
than 50 percent of the vote, a runoff will take place on May
7.
Flores Nano, who
ran against Toledo in 2001, advocates balanced budgets, free trade,
and rule of law, as well as an assault on poverty through better
education and economic policies that favor small producers. Until
recently, she had the lead, with up to 34 percent of the projected
vote in ever-shifting polls.
Coming from
behind, retired army officer Ollanta Humala, overtook her late last
month. Humala is a populist and nationalist who would not have
chance in ordinary times but has carefully exploited the growing
unpopularity of traditional candidates and their unwillingness to
tackle poverty. Only six years ago, Humala led a failed military
uprising against president Fujimori and was jailed.
As Fujimori's
reputation declined, Humala's ascended in a story that echoes the
biographies of Venezuelan President Hugo Chávez and former
Ecuadoran president Lucio Gutierrez. Both tried to overthrow
discredited chief executives, served short prison sentences, and
came back as successful presidential candidates. (Ecuador's
congress fired Gutierrez for exceeding his powers in dismissing the
Supreme Court a year ago.)
Humala is
reminiscent of past strongman leaders. He is charismatic and
considers General Juan Velasco Alvarado-whose socialist
dictatorship (1968-75) imposed statist policies, nationalized
industries, and carried out an ill-conceived land reform that
nearly collapsed Peru's economy-his model.
Humala denies his
idea of nationalization amounts to expropriation and claims his
plans would just put business at the service of the nation. But he
clearly would like to reduce foreign investment from Chile and the
United States, even though Peru has trade and investments in those
countries that would be adversely affected.
Risking another
economic meltdown, Humala would abandon the U.S.-Peru trade ties
and renegotiate contracts with foreign investors, triggering
capital flight. To keep the economy afloat, he would have to dip
into national reserves unless an already overcommitted
Chávez comes to the rescue with his checkbook-not
likely.
Copying campaign
promises from Bolivian president Evo Morales, Humala opposes free
trade with the United States and coca eradication. Imitating both
Morales and Venezuelan president Hugo Chávez, he would
convene a constituent assembly to rewrite the constitution to
prolong his stay in power and presumably isolate institutions and
politicians that might oppose him.
Although Humala
denies he has received campaign funds from Chávez, he did
visit the Venezuelan leader in Caracas this January, obtaining a
public endorsement. Peru recalled its ambassador from Caracas and
accused Chávez of meddling in Peru's internal affairs. At
the same time, the Venezuelan leader branded Flores the "candidate
of the oligarchy"-a phrase Humala now uses to describe
her.
In fact, Humala
hints that he would establish his own oligarchy by crushing
opponents. He reportedly wants President Toledo and members of his
party remain in Lima after his inauguration so that they can be
investigated for corruption. This threat suggests a debilitating
witch-hunt against an administration that has been relatively clean
compared to those of Fujimori, García, and Humala's hero
General Velasco. Humala himself was a part of Toledo's government,
serving as a military attaché in France and
Korea.
Peruvians should
expect Humala to purge the armed forces of all but his own
followers and begin muzzling the press. His wife has already talked
of a potential military purge while his jailed brother, Antauro,
has declared that TV channels and radio stations should be
nationalized. And even though he claims-like Chávez-to be a
reformer, Peru would probably slide back into a quagmire of
corruption once he began deciding public matters on the basis of
personal loyalty.
Of the two
candidates, one wants to carry out the orders of the people while
the other would give the orders. One would empower the poor to
participate in the economy and get ahead on their own while the
other would give them handouts in exchange for obedience. The
election has become a choice between democracy and dictatorship.
Peru has limited experience with democracy, but plenty with
dictatorship. Voters should learn from previous
mistakes.
Yet the country's
biggest error is the one that has inflated Humala's prospects the
most. Despite Toledo's macroeconomic reforms, Peru's economy is
still plagued by harsh government regulation and a weak justice
system that fails to protect personal property. Reluctance to
promote competitive markets has caused Peru's ranking to fall 27
positions in 6 years in The Heritage Foundation/Wall Street Journal
Index of Economic
Freedom.
How ironic that
this failure to fully liberalize may lead to the election of a
president who promises to undo what economic progress Peru has
achieved to this point.
Edwar Escalante is
Executive Director of Andes Libres, a new Cusco-based institute
that studies politics and economics in Peru. Stephen
Johnsonis Senior Policy Analyst for Latin America in
the Douglas and Sarah Allison Center for International Studies at
The Heritage Foundation.