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Wednesday, September 21, 2011

Peru's President Humala In Depth



New president moderates his inner warrior

Who is Ollanta Humala? A good question – and one to which Standard & Poor’s seems to have an answer.
Peru’s controversial new president had only been in office for a few weeks when the credit rating agency upgraded his country’s debt.
But then the upgrade came after Mr Humala had made a moderate inauguration speech, after he had appointed a “rainbow cabinet” and after his prime minister, Salomón Lerner, gave a well-received presentation of the new government’s programme to Congress.
S&P’s vote of approval was reflected in other ways too: Mr Humala currently enjoys a 55 per cent approval rating – high by Peruvian standards, even if that approval is not across the board. While Mr Humala scores a rating in the mid-60s from the country’s poor, wealthier classes are less convinced and give him just 40 per cent or so.
Their misgivings are understandable. Mr Humala led an army revolt in 2000. He was a radical pro-Hugo Chávez presidential candidate in the 2006 election, which he narrowly lost. He then entered the 2011 presidential campaign in much the same form.
However, after his rather radical platform only looked set to win him 15 per cent of the vote, Mr Humala gradually changed his political message from à la Chávez to à la Lula – coached by Brazilian advisers.
Mr Lerner, then acting as Mr Humala’s campaign manager, played a crucial role in persuading him to drop his original radical “plan” and adopt a more moderate “road map”. All this helped Mr Humala to eventual victory. After he won, Mr Humala was also wise enough to insist on Mr Lerner accepting the premiership.
Where is Mr Humala from? His family is from Ayacucho, a proud but poor Andean region, where the Shining Path guerrilla movement had its roots. His father was a member of the Communist Party in the 1950s and he instilled a sense of political destiny in his sons. Indeed, Ollanta means “far-seeing warrior” in Quechua and is a name of which Mr Humala feels proud.
He is happily married to Nadine Heredia, a distant relative who, some believe, has presidential ambitions.
What does Mr Humala think? That is unclear. At first, he called for a new constitution that would increase the state’s role in the economy, compared with the current 1993 version. Although Mr Humala swore himself in as president on “the democratic spirit of the 1979 constitution”, he has since dropped plans to change the 1993 constitution. This, however, may be simple pragmatism, given that he lacks sufficient votes in Congress to do so.
Elsewhere, he has shown a similarly pragmatic streak. A windfall tax on mining profits followed negotiations with the industry. The result only partially lowered the competitiveness of the mining sector while raising more than $1bn to be spent on social inclusion projects in some of the poorest regions.
To reassure financial markets, Mr Humala also asked Julio Velarde, the orthodox Central Bank governor, to stay for another term. And he appointed Luis Miguel Castilla as finance minister. Mr Castilla is respected, having worked previously at the Andean Development Corporation, a multilateral lender, and as vice-minister of finance in the previous administration.
True, some other appointments – in the military and the foreign service – have been controversial. There have also been some hiccups and reversals in government policy towards coca growers and fighting drug traffic. But these are perhaps the teething problems of any new government. There have been no major mistakes, as yet.
Mr Humala has a varied political base – much of it comprises centre-left moderates, although leftwing radicals form an important but smaller proportion. The latter are likely to want to see big changes to Peru’s economic model; the former may be content with minor adjustments.
The model has been successful, by and large. Over the past decade, the economy has grown at 6 per cent a year and some 3.4m Peruvians have been lifted out of poverty. Still, the state remains remarkably inefficient. Partly as a consequence, this has generated a widespread sense that corruption has flourished. Social inequality remains high.
For many analysts, Peru is a country with great potential. One reason is its extraordinary diversity. Such diversity, however, also makes it difficult to govern. Political representation is scarce. Indeed, Peru’s main political party, the APRA, now only accounts for four seats of the 130 in Congress.
Three months after the election, Mr Humala’s presidency presents more questions than answers.
Can a former military officer, imbued with a messianic calling but with limited administrative experience, walk Peru’s political tightrope?
What will his instincts be when he confronts his first crisis? Hold to the centre – or hew to his original and more radical constituency?
More importantly, will he learn from what he has been achieving by continuing to broaden his political vision?
This is the main unknown: whether Ollanta Humala will rise to the Quechua meaning of his name.
For the moment, after a volatile first half of the year, Peru is enjoying a mood of cautious optimism.
Felipe Ortiz de Zevallos is chairman of the Apoyo consultancy and Peru’s former ambassador to the US.
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