Peru Politics April 2016

Peru

Peru: Business-friendly candidates are heading to a runoff election

April 10, 2016

There is no longer a chance that Peru will end up with a socialist government following the general elections that were held on 10 April. The two remaining candidates, Keiko Fujimori and Pedro Pablo Kuczynski, both supporters of free market policies, will now head to a runoff election. The left-wing contestant, Verónika Mendoza, dropped out of the race after coming in third place. Presidential and legislative elections took place this year as incumbent President Ollanta Humala is barred from running for a consecutive term according to constitutional law. Peruvians also cast their votes to elect 130 lawmakers to the unicameral Congress.

Fujimori won with a clear lead, obtaining nearly 40% of the votes. Kuczynski came in second, with 21%, while Mendoza garnered 19%. As neither of the front runners cleared 50% of the votes in the first round, there will be the runoff winner-takes-all election on 5 June. With almost 80% of the votes counted, official results state that Fujimori’s party will secure 58 of the congressional seats, which indicates the party as a clear winner in the Congressional race. Early counts by pollsters report that Fujimori’s populist right-wing Popular Force party (Fuerza Popular) obtained an absolute majority with 68 seats. Kuczynski’s center-right Peruvians for Change party (Peruanos por el Kambio) garnered 21 seats, followed closely by the Broad Front alliance (Frente Amplio) of Verónika Mendoza, which obtained 20. There has not been an absolute majority in Congress since 1995 when Alberto Fujimori and his Change 90 party (Cambio 90) won the general elections. This election’s absolute majority reduces the risk of political paralysis, especially if the June presidential election turns bitter.

The result of the first round of the presidential elections pits two right-wing candidates against each other and also ensures the future of Peru’s emerging-market economic model, which the third candidate, left-wing Mendoza, had threatened to change. Mendoza had pledged curbs on the mining industry, increasing corporate taxes and renegotiating natural gas export contracts. However, the increase in support for Mendoza spooked markets, with Peru’s stock exchange tumbling and the sol weakening slightly. A reverse effect was seen on Monday 11 April when the markets welcomed the pro-business outcome of the elections.

Keiko Fujimori is the daughter of former President Alberto Fujimori (1990–2000), who is in prison for corruption and human rights abuses. Among her pledges is a plan to create a rainy day fund to counteract drops in fiscal revenues from cyclical declines in commodity prices. She also promised to issue debt with the aim of closing the gap in infrastructure between rural areas and urban centers firstly by building highways. The plan to improve the country’s infrastructure seems to be promising in terms of raising employment during the construction phase and enhancing economic activity in general.

Pedro Pablo Kuczynski is an economist and a former finance minister. He has said that he will reduce bureaucracy, cut the sales tax and push forward relationships with foreign investors as a monetary source for much-needed infrastructure development such as access to drinking-water and health services. Moreover, he intends to develop the essential mining sector and implement other reforms, which should make the Peruvian economy more business-friendly.

Front-runner Fujimori in a more vulnerable position than Kuczynski in the June showdown. Even though Fujimori got a larger share of the votes in the first round, Kuczynski is likely to receive votes from the center-left political spectrum and other opposition candidates. Moreover, Fujimori still faces a high degree of social disapproval as many Peruvians recoil when considering the dark legacy of her father as he remains a divisive figure in the country’s political scene. The outcome of the June runoff election is still up in the air and it remains to be seen whether the two candidates will attempt to modify their agendas during the final weeks of the campaign in order to differentiate themselves.


Author: Marlène Rump, Senior Data Analyst

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