Time was, at the height of the Pink Tide, when Latin American voters often faced a choice between left and lefter. Consider Perú, though, where today’s second round of voting pits the venerable economist Pedro Pablo Kuczynski, known as “PPK” in Peru, is the investors’ favorite in 2016, but is up against another right-winger, Keiko Fujimori.

For Venezuelans, this isn’t one of those obviously resonant campaigns in the Macri vs. Scioli mode. For the most part, Venezuela has been a non-issue in the election, which stands to reason as there’s no leftie in the race to pillory by association. Back at the start of the #LaSalida protests in February 2014, PPK did address the crisis, with the kind of beatific pro-dialogue discourse Venezuelans saw all too much of last week:

Kuczynski often referred to “failed economic models” when competing for the runoff against Mendoza. In a YouTube video published in December, Kuczynski called on the region to exert pressure on Maduro’s government.

“We have to ask everyone to support us in our request that Venezuela release its political prisoners,” Kuczynski said. “We are in the 21st century. We can not tolerate situations of medieval abuse as we are seeing in Venezuela today.”

For much of the campaign, Keiko looked like a shoo-in. But the race has tightened considerably towards the end, with Kuczynski even ahead in some, and is now too close to call. So who is this guy Kuczynski, where did he come from?

Origins

Pedro Pablo Kuczynski was born in Lima to a Polish Jewish father —a doctor who did research on health issues in the Amazon rainforest— and a French mother who was a teacher.

After graduating from Lima’s elite Markham College, Kuczynski earned degrees in economics and politics from Oxford and Princeton. He worked as an economist at the World Bank, researching mining and energy projects throughout Latin America.

In the 1960s Kuczynski came home to work at Peru’s central bank, where he helped engineer a currency devaluation and debt restructuring in center-left President Fernando Belaunde Terry’s first government. In 1968, military general Juan Velasco Alvarado seized power in a coup d’état which would ultimately become 12 years of Peru’s Revolutionary Government of the Armed Forces.

Facing trumped up charges of embezzling from the public treasury, Kuczynski went into exile in the United States, where he went back to work for the World Bank on Latin American studies and mining projects.

After the failure of Peru’s socialist government, the military held elections which saw President Fernando Belaunde Terry elected once more, in 1980. Progress!

Kuczynski returned to join Belaunde’s government as mining and energy minister. While Belaunde released the government’s grip over the media, he failed to privatize the hundreds of companies the military dictatorship had nationalized. Growth was anemic, the fiscal deficit ballooned and mid-double-digit inflation became normal over the years. After two years in government, Kuczynski spent the rest of the 1980s and 1990s working in international banking and private equity in the U.S.

In 1985 Peru elected Alan Garcia, who asserted Peru’s sovereignty over the imperialist interests of the IMF and World Bank, capping the government’s debt payments at 10% of GDP. His government quickly saw inflation turn to hyperinflation and the Shining Path guerrilla insurgency advance toward Lima. Think Venezuela today, but with a blood-cult guerrilla army instead of oil reserves.

The chaos of Alan García’s first government receded in 1990 when Nobel laureate Mario Vargas Llosa ran on a market-reform platform to the absolute shock of observers throughout Latin America. Also an icon of the conservative Lima elite, Vargas lost to a little known Japanese-Peruvian named Alberto Fujimori. Fujimori went on to borrow liberally from Vargas Llosa’s economic model – though politically, he soon turned authoritarian, shutting down congress, subduing  the media, authorizing death squads and stealing over $100 million in the process. (It’s his daughter, of course, who Kuczynski is up against on Sunday.)

After the fall of Fujimori’s government, Kuczynski returned to Peru once more to work in the government of newly elected President Alejandro Toledo, a fellow former World Bank economist. Kuczynski served as Toledo’s finance minister and Cabinet Chief during a government that continued Fujimori’s privatizations of state companies. He also pushed legislation which would serve as a liability today, the legal groundwork which would attract the investment needed to exploit the Camisea gas fields.

Kuczynski ran for president in the 2011 elections heading a coalition which assembled the right-wing Popular Christian Party, the left-wing Humanist Party and the centrist Alliance for Progress party. He took third place with 19% of the vote, but didn’t make the runoff between Ollanta Humala and Keiko Fujimori.

Humala’s candidacy caused great concern for Peru’s business class: five years earlier, the guy had been endorsed by Hugo Chávez himself. In a move he probably regrets today, Kuczynski endorsed Keiko Fujimori for the second round five years ago.

Humala won and PPK spent the next five years preparing for the 2016 elections. He formed the Peruvians for Change party (spelled “Peruanos Por el Kambio” to use his initials) and abandoned the coalition strategy. The party has drawn technocrats from Alan Garcia’s APRA (Garcia’s business-friendly second term as president redeemed him economically), Alejandro Toledo’s Possible Peru and other political parties.

This year’s race

Opinion polls showed Kuczynski was the top contender to frontrunner Keiko Fujimori throughout 2015. But as the election drew closer, polls showed Kuczynski falling behind as Peruvians opted for “outsider” candidates such as Julio Guzman (disqualified), Cesar Acuña (disqualified) and leftist Veronika Mendoza.

The early drama in Peru’s election was before April 10, when Mendoza had all the momentum to earn a spot in the runoff against the candidate whose father’s polarizing legacy inspires protests 30,000 strong in downtown Lima.

But on April 11, Kuczynski defeated Mendoza by just two points to make the second round. Now Peru’s election comes down to two center-right candidates in Kuczynski and Fujimori.

What’s the difference between the candidates? Analysts initially believed Kuczynski would reach across ideological lines and make a play for the kind of leftie voters who’d gone for Veronika Mendoza and jailed Cajamarca governor Gregorio “Goyo” Santos.

Kuczynski had flirted with this kind of move before the April 10 vote, proposing a $30 hike to the monthly minimum wage in a country where only one out of every four workers is formally employed.

Peru’s labor regulation, mandates 30 days of vacation, two annual bonuses equivalent to one month’s salary each, healthcare insurance and of course the prohibition of arbitrary termination. So Kuczynski’s pledge to reduce informality in labor markets seemed to be at odds with his vow to boost the minimum wage.

Not wanting to be forgotten about in his final lame-duck months, President Humala raised the minimum wage by $30 just one week before elections. With Peru’s minimum wage higher than that in Brazil and Colombia before accounting for benefits, Kuczynski is now evaluating another $30 hike, which would bring his proposal to $282 a month, just $15 short of Mendoza’s proposal.

However Kuczynski said early that he did not need to move to the left for the general election. On most issues, he has managed to run to the right of Fujimori, who has grasped any and every populist measure to attract votes in what has become a neck-and-neck race.

Fujimori’s Popular Force party won 55% of Congress in the first round. So if Kuczynski wins the presidency, he will face an unfriendly Congress even if it is ideologically aligned.

 

Liabilities

Kuczysnki’s top vulnerability among voters is that he just doesn’t look the part: he’s a six-foot gringo with a name like Kuczynski. He recently renounced his American citizenship, but the legal part of being a gringo is only half the problem. In a country where power has been concentrated in Lima throughout history, the upper-class white guy from Markham College is a symbol of Peru’s upper crust. Rural and working class voters have a hard time identifying with him: the guy is a technocrat, and he sounds like one.

Kuczynski’s greatest policy vulnerability were the legislative changes and contracts he pushed to develop the natural gas fields at Camisea. Originally discovered in 1986, the Camisea gas fields went undeveloped for almost 20 years. No energy company saw Peru’s populist governments and perennial coups as a good investment. Then the business-friendly dictator in Fujimori insisted on keeping Camisea’s gas for the domestic market, which at the time featured 50% of the population living in poverty.

Toledo and Kuczysnki paved the way for energy companies to export a portion of the gas in exchange for the $3.7 billion investment required to build the facilities needed to exploit the fields. Ten years and billions of dollars in economic growth later, the global price of natural gas collapsed in the wake of the fracking revolution. The original contracts the state is locked into pay Peru a pittance from the export revenue. Voters may have grown accustomed to the benefits of Peru’s cheap gas. But given Kuczynski’s extensive experience in the United States, some Peruvians believe he pulled strings for his pals in the empire.

Kuczynski’s age is another liability. As a public speaker, Kuczynski has all the energy of a 77-year-old, albeit a healthy one.

Despite the Camisea issue, Kuczynski’s top strength is being widely viewed as the least corrupt of the candidates. He’s independently wealthy and has largely avoided scandal.

Kuczynski’s platform in 2016 elections includes overhauling the police force and judiciary, reducing “formalismo” and “tramitología” to make formal business easier, implementing tax breaks for small businesses and reducing the national sales tax from 18% to 15%.

Kuczynski has also made running water his signature social issue. He has promised to deliver running water to 100% of Peru’s towns in five years. The current coverage is just over 85%. He has also pledged to boost healthcare and education spending.

The top issue in Peru’s 2016 election is rising crime, which plays into Fujimori’s favor as the daughter of the hardliner credited with defeating the Shining Path insurgency and restoring security.

Only time will tell whether the left-of-center voters and anti-Keiko voters will rally around the 77-year-old World Bank economist. Or if they’ll see him as the empire’s gringo in Peru.

Veremos…

12 COMMENTS

  1. It’s nice to see a candidate to a country’s Presidency who has the schooling and work experience that Kuczynski has.

    I may be wrong, but it seems to me that in Venezuela a lot of people go straight from school into politics, some even go into politics from being school leaders without ever finishing college ….. and that’s on the opposition side. In the present government one just hast to be a friend of the revolution to aspire to a high government position that affects the lives of all citizens.

  2. Peru voted for a Japanese guy that had even a slight accent for president in the 90s. Having a guy that looks like a rich gringo would not be a stretch.

    Also the military left wing junta of the 70s and Alan Garcia in the late 80s, as you correctly point out, were traumatic. Then there is the continuous growth since 1990 under a market economy. One would think that messianic populist leaders are behind for a generation.

  3. Even though Humala was Hugo’s buddy, he governed in the “If it ain’t broke, don’t fix it” mode, and continued the economic policies of his predecessors, evil right-wingers though they may have been. Following are some stats from the World Bank comparing the effect of Chavismo governance with Peru’s more right-wing governance. They help explain why the Chavista candidate in Peru didn’t make the runoff.

    GDP per capita, PPP (constant 2011 international $) % increase

    Peru
    2001-2013 75.3%
    2001-2014 77.0%

    Venezuela
    2001-2013 20.8%
    2001-2014 14.4%

    Poverty headcount ratio at national poverty lines (% of population)

    Peru
    1998 not listed
    2001 54.8%
    2013 23.9 %
    2014 22.7%

    Venezuela
    1998 50.4%
    2001 45.4%
    2013 32.1 %
    2014 not listed

    Mortality rate, infant (per 1,000 live births)
    Peru
    1998 34.3
    2015 13.1

    Venezuela
    1998 20
    2015 12.9

    In both arithmetic and percentage reduction in Infant Mortality, Peru wins hands-down: 21.3 versus 7.1 in arithmetic reduction and 61.8% versus 35.5% reduction.

    A growing economy has more to distribute. That helps explain why Peru’s performance in reducing poverty and in reducing Infant Mortality is superior to the Chavista “model” pursued in Venezuela. Not that any readers of this blog need any convincing, mind you.

    World Bank: World Development Indicators

  4. Even Peru is doing much better than Vzla. What country in the hemisphere is worse, Haiti?

    They have 2 good candidates now. And Venezuela? A perennial, stubborn Chavista criminal regime, supported by the corrupt military and TSJ and CNE, – – or perhaps the…Muddy MUD…………. Which is basically the same AD/Copey that did nothing but steal for 40 years.

    Countries like Peru and even Colombia are prospering, improving, without major natural resources. Their people steal less, and are better educated than Venezuelans, that’s why.

    • Countries like Peru and even Colombia are prospering, improving, without major natural resources. Their people steal less, and are better educated than Venezuelans, that’s why.

      While neither Peru nor Colombia has the abundant petroleum resources that Venezuela has, they are not without major natural resources. Colombia produces coal and about 1 million BOPD, compared to Venezuela’s ~2.5 million BOPD. Colombia’s petroleum production has about doubled after many of the fired PDVSA hands went to Colombia to apply their oil field skills. For centuries, Peru has been a mining center.

      Total natural resources rents (% of GDP), 2012
      Colombia 11.2%
      Peru 11.85
      Venezuela 25.7%

      For 2014, natural resources rents as % of GDP are down in both Colombia and Peru: 8.45 and 8.7% respectively, but there is no data for Venezuela.

      Both Peru and Colombia have made more with less, compared to Venezuela.

      World Bank: World Development Indicators

  5. Not having been following the Peruvian election, I was intrigued by the title, “PPK: The Peruvian Antidote to Populism?” My first thought upon reading it was what the heck does the Kurdistan Workers’ Party (PKK) have to do with Peru?

  6. “Kuczysnki’s top vulnerability among voters is that he just doesn’t look the part: he’s a six-foot gringo with a name like Kuczynski. ”

    Damn shame that burning stupid racism tends to cloud the judgment of so many folks here un Latin America.

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