Peru heads in right direction under President Humala

In the two years since taking power as president of Peru, Ollanta Humala has been struggling to please the poor and indigenous majority that elected him and to placate the economic elite and foreign investors who are indispensable to sustaining robust growth. At this point, Humala appears to be walking a fine line, headed in the right direction.

Helping him along that path is in the interest of every Peruvian and others who are betting on that country’s stability and growth.

Being a national politician in a country whose poor majority is impatient to claim its fair share of prosperity can be very tricky work. Policies that merely transfer wealth are not sustainable, and social programs aimed at empowering the poor with the education and training they need to pull themselves out of poverty take time to bear fruit. Even Brazil, once seen as a model for social empowerment, was shaken last month as millions took to the streets to manifest their anxieties about the future.

In a country like Peru it is even more difficult to explain how something like the global commodity market will yield a better quality of life to people who have known centuries of economic exploitation, including many indigenous persons living on the margins of Western society.

So, it is no surprise that appraisals of Humala’s two years in office are contradictory. While some credit him for keeping Peru’s economy on course, his critics say he is coasting. Some are relieved that he has not given in to the temptation to adopt a populist model of his erstwhile patron, the late Hugo Chávez, but others observe that he has failed to implement the next generation of economic reforms that will prime the pump of investment needed to sustain growth. There appears to be a consensus, however, that the former military man Humala has taken a hard line against domestic terrorist groups and narcotraffickers and has pursued a pragmatic foreign policy.

On the economic front, Peru has benefited from the boom in global commodity prices and free trade tapped by Humala’s predecessors. Since 2005, the country’s annual growth rate has exceeded six percent, topping eight percent from 2007-2010. After Humala’s election, growth plateaued around 6.5 percent; growth figures for May 2013 suggest a further slowdown due to falling construction and manufacturing. As commodity prices have fallen, the global market has become more competitive, and some observers say that Humala’s government has not liberalized the mining sector to make Peru more attractive to investors.

In late April, Humala alarmed many in the private sector by suggesting that the state-owned oil company Petroperu might acquire interest in a refinery and other assets being sold by the Spanish company Repsol. Although Humala proposed only taking a minority interest, the idea was rejected by those fearing state involvement in the energy sector.

According to a poll taken in early May, Peruvians disapproved of the oil venture by a margin of 54 to 37 percent, and Humala’s popularity dipped to 54 percent. Rather than pressing forward in caudillo fashion, Humala withdrew the proposal and initiated a groundbreaking dialogue with the private sector.

After that crisis, Humala helped reassure the private sector by joining a new “Pacific Alliance” trade bloc along with Chile, Mexico and Colombia. The Peruvian president committed to attacking inequality in Latin America through “social inclusion” and by extending “access to markets” so that the masses are able to “create wealth and have the opportunity to improve their well-being.” He advocated the creation of scholarships as well as a subregional business council.

On the counternarcotics front, Humala’s government has cooperated fully with U.S. efforts and has committed to eradicating more acreage of the illicit coca crop — in part because the terrorist group Sendero Luminoso (Shining Path) benefits from cocaine trafficking. In recent years, the U.S. State Department has faulted the Peruvian government for not devoting sufficient resources to the anti-drug fight, and Humala appears to be reversing that trend.

Two years ago, I was among those who alerted Peruvians to Humala’s dependence on the “Chavista” political machine. At the very least, President Humala has proven to be more of a pragmatist than ideologue, and he appears increasingly comfortable with free market solutions over a statist agenda.

Certainly, if all Humala is interested in is popularity he could follow the examples of populists in Argentina, Bolivia, Ecuador, and Venezuela who pander to their base to consolidate power. He has not done that. As long as Humala continues to put his country’s progress ahead of his own interests he deserves the encouragement of those who want Peru to prosper.

Roger F. Noriega was assistant secretary of State for Western Hemisphere Affairs and ambassador to the Organization of American States in the administration of President George W. Bush. He is a visiting fellow at the American Enterprise Institute.

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