Peru: Ollanta Humala is elected president
June 5, 2011
Former military officer Ollanta Moises Humala Tasso was elected President on 5 June in a tight, but surprisingly peaceful run-off election. According to official results published by the National Office for Electoral Processes (ONPE, Oficina Nacional de Procesos Electorales) and with 97.8% of the ballots counted, the Peru Wins (Gana Peru) coalition candidate obtained 51.5% of the vote, while Keiko Fujimori, the daughter of jailed ex-president Alberto Fujimori, from Force 2011 (Fuerza 2011) garnered 48.5%. The result was broadly expected by the market, as exit polls at the close of voting showed Ollanta Humala with a narrow lead over Fujimori. However, as the counting of the votes progressed, the victory of Humala seemed overwhelming, prompting an immediate fall on the Lima stock exchange. The country's benchmark index (indice General de la Bolsa de Valores de Lima, IGBVL) plunged 12.5%, marking the sharpest daily fall in three decades. The fall in the index was fanned by significant drops in the country's main mining firms, as Humala has pledged to impose royalties on windfall profits within the mining industry in order to fund social programs. Nonetheless, the plunge was temporary and stocks bounced back the following day, as Humala promised he would maintain policies to keep the country's economic growth on track. Ollanta Humala, who was criticised by his opponents for having an ultra-nationalist plan, softened his tone during his campaign, claiming himself to be more market-friendly. He reiterated his intentions to welcome foreign investments and backed away from calls to nationalise certain sectors. In addition, Humala, who will take office on 28 July for a five-year term ending in 2016, stated that his government will be one of ?great transformation?, with continued economic growth but also with social programmes that will benefit the poor. In addition, he promised to maintain strong ties with the United States, which he considered a ?strategic partner?. However, on the economic front, changes are expected, as the president-elect maintained his reform proposals for social development, such as a guaranteed pension to people older than 65 years and plans to build a hospital in each province as well as expand health services in the country's rural areas. Humala also promised to boost the salaries of public sector workers and to raise the minimum wage. The market's main concern is regarding Humala's commitment to maintain existing monetary and fiscal policies. In the months ahead, the attention will focus on the announcement of cabinet members, in particular the positions for the Finance Ministry and in the Central Bank. Depending on the composition of the new cabinet, analysts will evaluate the likelihood of structural changes in the country's economic policy during the Humala administration, in particular those regarding the fiscal agenda.
Author: Ricardo Aceves, Senior Economist