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July 28, 2006 [LINK]

Garcia prepares to lead Peru, again

Peru flag Today is Peru's Day of Independence, which is also Inauguration Day every five years, and Dr. Alan Garcia Perez was sworn in as president, for the second time. His first term, from 1985 to 1990, began in a state of euphoria, as the gifted, young orator promised everything but the sun and the moon, but it ended in chaos and gloom. The atmosphere in Peru this year, in contrast, seems to be much more subdued, and most people do not expect any sharp changes in policy. Eight Latin American presidents attended the ceremonies, as did Prince Felipe of Spain. The best the United States could muster for this momentous occasion was Commerce Secretary Carlos Gutierrez, but that probably reflects the crisis in the Middle East, which demands the full attention of top Bush administration officials. See

This marks the second time that APRA -- the American Popular Revolutionary Alliance -- has won the presidential election in Peru. Unlike the first time in 1985, however, APRA does not hold a majority of seats in Congress, which is why Garcia is trying to reach out to other parties. Garcia's cabinet nominees have gone out of their way to emphasize moderation and policy continuity, a striking contrast to the brash, innovative agenda that was advanced in 1985. It is a politically diverse group, including Rafael Rey, a leading conservative figure and possible future president. Former Central Bank director Luis Carranza, fiscal conservative, has been named finance minister, an obvious gesture aimed at convincing global bankers that he will not repeat the reckless, spendthrift ways that doomed his first government. Allan Wagner, a prudent-minded professional diplomat who served as chancellor (foreign minister) from 1985 to 1987, is expected to be named defense minister. The fact that Aprista party loyalists do not dominate the new cabinet is a hopeful sign that Garcia will resist pressure to reward party activists with preference in government spending, as happened before. Garcia pledges to fight poverty as a first priority, which is all well and good, but that is the same thing he said before, and that it the same thing outgoing President Toledo promised. Will he be wise enough to realize that lifting people out of poverty is not a matter of earnest good will and charity, but rather of hard-nosed rational policies that give people clear incentives to work and save?

Garcia's success or failure in his second term hinges largely on his ability to gain the trust of a wary populace, a large number of whom voted for him as the "lesser evil." (Defeated rival Ollanta Humala has threatened to mobilize his poor Indian followers if Garcia doesn't do what he wants.) This time around, Garcia will need to show concrete actions, not just try to charm people with his vaunted charisma. He has pledged to roll back the salaries of high government officials, insisting on austerity. That's a good start in a poor country such as Peru, but even so, restraining his natural populist impulse will take lots of self-discipline. In this regard, an innocuous statement by the designated minister of housing, construction and sanitation, Hernan Garrido Lecca, hints at future problems: "Without water there is no democracy." (El Comercio) Garcia will be hard pressed to resist the demands of people who move to the shantytowns around Lima and other big cities, expecting that the government will provide them with water and electric utilities as a fundamental right. To avoid getting caught in that trap, Garcia must pay special heed to promoting development in the Andean highland regions, where most people are of Indian descent.

Prime MinisterJorge del Castillo
DefenseAllan Wagner
Foreign RelationsJose Garcia Belaunde
Economy, Finance, & CommerceLuis Carranza
InteriorPilar Mazzetti
JusticeMaria Zavala
Energy & MinesJuan Valdivia
EducationJorge Chang
HealthCarlos Vallejos
Labor & Social PromotionSusana Pinilla
AgricultureJuan Jose Salazar
ProductionRafael Rey
Transportation & CommunicationVeronica Zavala
Housing & ConstructionHernan Garrido Lecca
Women & Human Resources Dev.Virginia Borra
Commerce & TourismMercedes Araoz

Another good sign, from my perspective, was that Enrique Cornejo, a professor at the University of Lima, has been serving as Garcia's chief economic adviser. He did some work in Garcia's first government, but is not an APRA loyalist. In 1994, I interviewed him for my doctoral dissertation, and he provided me with an in-depth understanding of the decision-making process during those chaotic years of the late 1980s. Notably absent from Garcia's government is Luis Alva Castro, an Aprista economist with a strong devotion to the party's founder, Victor Raul Haya de la Torre. Distrust between Garcia and Alva Castro hurt economic policy formulation from 1985 to 1987. If Garcia is as committed to pursuing a moderate, sensible policy course as he says he is, it would mark a real watershed in the history of Peruvian politics. The country used to be beset with sharp fluctuations in policy direction from one government to the next, which made investors wary of committing to long-term development projects. Given all the human and material potential of the country, Garcia's stated desire for an "investment shock" is a very real prospect.

While no one was looking (well, hardly anyone), the approval rating of outgoing President Alejandro Toledo began climbing a few months ago, and finished at 35 percent. It had been about ten percent for the preceding year and a half. He leaves Peru with the economy in good shape, with strong exports and financial stability. Peru weathered the financial crisis of 1997-2003 better than almost any other country in Latin America. Ironically, the financial and political stability that made this state of affairs possible was largely the result of the severe policies implemented by disgraced former president Alberto Fujimori (a.k.a. "Chinochet"), who is still in Chile, awaiting extradition to Peru.

Russia-Venezuela arms deal

As expected, Russian President Vladimir Putin signed an agreement with Hugo Chavez under which Russia will sell 24 Sukhoi-30 advanced jet fighters to Venezuela, along with 53 helicopters. Sales of additional weaponry, including missiles and a submarine, are still pending. Putin endorsed Venezuela's bid to become a temporary member of the U.N. Security Council, going out of his way to snub the United States. ( (Why is Russia still part of the G-7/G-8?) Chavez took the opportunity to express some thoughts on the United States:

It is a senseless, blind, stupid giant which doesn't understand the world, doesn't understand human rights, doesn't understand anything about humanity, culture and consciousness.

Well, at least we understand how to create a political and economic system that allows individuals to pursue their own dreams and improve their lives without fear of the government taking it all away.

UPDATE: Chavez is apparently upset at the United States for blocking the shipment of spare parts needed in the military aircraft that Spain was going to sell to Venezuela. That has effectively nullified a large portion of the $2.2 billion military sales package, but the sale of Spanish-built patrol boats is still going through. ( Well, what does he expect? Anyway, that is what prompted turning to Moscow for advanced military equipment, which is just like Peru did in the 1970s. At least the Peruvian generals back then didn't act like clowns.

Campaigning in Nicaragua

Sandinista leader Daniel Ortega, who ruled Nicaragua from 1978 until 1990, is on the campaign trail for the November 5 elections, and the fractured state of the conservative parties gives him a very good chance of winning. Hugo Chavez has pledged full support for Ortega, and even negotiated an agreement to sell petroleum to Nicaragua, completely bypassing the government of lame duck President Bolaños. (Washington Post) All is not well with the Sandinistas, however. Many in the rank and file resent the corruption of their leaders, many of whom have tossed aside their revolutionary ideals and have acquired large estates seized from the old wealthy class. The leader of the dissident reformist faction of Sandinistas, Herty Lewites, died of a heart attack earlier this month. He had been expelled from the party after challenging Ortega's leadership. The violent clash within the Sandinista party broke out just as I was visiting there last year.

Posted (or last updated or commented upon): 28 Jul 2006, 9: 24 PM

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