S P O T L I G H T

Pedro Pablo Kuczynski’s First One Hundred Days

By Carmen Muñoz

After a neck and neck race, the final results are now in: Peruvians elected 77-year-old economist Pedro Pablo Kuczynski (also known as PPK) as president. He received approximately 50.12 percent of the vote, and his competitor, Keiko Fujimori, received 49.88 percent – a difference of roughly 39,000 votes out of 18 million. PPK had a strong rebound from the April primary election in which he lost to Fujimori by 19 percentage points. After trailing in polls throughout the campaign, PPK won on the back of allegations that certain Keiko Fujimori campaign insiders were allegedly linked with drug cartels. A “No Keiko” movement also helped consolidate votes.

Kuczynski will enter office on July 28, Peru’s Independence Day, following a fierce campaign and an unlikely victory. His administration will have to cope with the fact that Fuerza Popular, Fujimori’s party, won an absolute majority in Congress, putting into question PPK’s ability to implement reforms. Without legislative support, what can we expect from his presidency? How will he reconcile demands for increased spending with slowing economic growth? Will his economic plan be enough to jumpstart the economy?

PPK will have an uphill battle

as rising crime rates, a slowing economy, and an opposition Congress will ensure his first months in office will not be easy.

In this month’s Spotlight: What are the top four issues President-elect Kuczynski must address in his first one hundred days in office?

1Prioritize Crime and Security

An increase in robberies, homicides, drug trafficking, and extortion was the top concern for voters, and will be one of the main challenges the newly elected government must confront. Peru has one of the highest reported crime rates in Latin America; violent assaults and robberies are on the rise over the past five years. In December 2015, President Ollanta Humala declared a state of emergency in various provinces in response to gang violence related to drug trafficking.

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Peru crime and security
Lima residents, in particular, are weary of rising levels of urban crime. (Flickr / Bruce Tuten)

Though less outspoken on security than Fujimori, PPK has also proposed serious reforms to address rising crime rates and a growing sense of insecurity. He plans a complete overhaul of the National Police (PNP) to rid it of corruption and render it more effective. Proposals to renew basic training for all current officers, as well as the creation of a “Community Police Force” in touch with local crime issues form part of this effort. Any anti-crime measures will have to be adopted with a careful eye to the boundaries between tough law enforcement and human rights abuses. Human rights groups will be vigilant.

Complete Overhaul

Though less outspoken on security than Fujimori, PPK has also proposed serious reforms to address rising crime rates and a growing sense of insecurity.

2Rewrite the Long Narrative of Government Corruption

Inflamed by scandals ranging from FIFA, Brazil’s oil company Petrobras, Guatemala’s “La Línea” customs fraud case, and the Panama Papers, citizens around the region are demanding action to curb rampant corruption. According to Transparency International, after security and crime, 46 percent of Peruvians consider corruption the biggest problem facing the nation.

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Alberto Fujimori
Former President Alberto Fujimori at the Supreme Court of Justice in Lima October 25, 2013. (REUTERS/Enrique Castro-Mendivil)

Corruption was one of PPK’s top priorities throughout the campaign, continually attacking Fujimori for her father’s nefarious government. The new head of state plans to address the issue with a number of programs, including strengthening the Anti-Corruption Commission (CAN), creating a “National Observatory” that provides impartial and accurate information about public officials, and decentralizing the corruption office within the Attorney General.

PPK himself, however, did not leave the election unscathed. Keiko Fujimori repeatedly accused his vice president, Martín Vizcarra, of corruption and appropriation of public terrains in Peru’s Puno region. PPK firmly defended his deputy; Vizcarra himself has pledged to take legal action against Fujimori for libel. It remains to be seen how successful PPK can really be in uprooting the deep-seated corruption and rewriting the country’s long legacy of abuse and impunity.

Fed Up

46 percent of Peruvians consider corruption to be the biggest problem facing the nation.

3Accelerate Economic Growth by Shrinking the Informal Sector

After an economic growth rate of 3.3 percent in 2015, the lowest since the 2009 recession, one of the main challenges for Peru’s new president will be how to stimulate the economy. It has slowed over the past couple of years due to the collapse in commodity prices and the rise of the dollar. Although PPK presents some serious reforms to fiscal and monetary policy, he fully espouses the open market and business-friendly policies adopted in the recent past. This has generated confidence within the private sector.

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Informal workers in Peru
Peru has one of the highest rates of informal employment in the Americas. Peruvian police destroy illegal gold mining camps in a zone known as Mega 14, in the southern Amazon region of Madre de Dios, July 14, 2015. (REUTERS/Janine Costa)

PPK and his advisers have pointed to steps to regularize informal labor markets: 64 percent of workers were in the informal sector in 2013, according to the International Labour Organization. Kuczynski’s biggest challenge – and most important opportunity – in moving workers to formal employment lies in the mining industry. President Humala’s administration has largely failed in its attempts to stop illegal mining. Mining was key to Peru’s robust economic growth during the commodity boom and continues to be a driver of both the formal and informal economy, especially in the country’s rural south.

To address the formalization of hundreds of thousands of informal mine workers, PPK has vowed to create a Banco Minero, “Miner’s Bank,” from public and private capital that will purchase gold from small producers that meet basic tax and environmental regulations. PPK also has indicated he will decrease the national sales tax, known as IGV, from 18 to 15 percent by 2018, and temporarily decrease the rent tax from 28 to 10 percent. These measures, according to PPK’s economic advisers, will reduce the entry costs of small, informal producers, thereby encouraging them to formalize and enter the regulated market.

PPK’s proposals are contentious and have been the object of debate by prominent Peruvian economists. It is unclear whether his plan provides the much-needed sectoral strategy, one that moves beyond sporadic police action, to curb illegal mining and its environmental effects. Top priorities for the incoming administration should focus on targeting the criminal networks that own and operate the illicit mines, providing miners with training to help them transition to alternative work, and working with environmental groups.

A Lasting Challenge

PPK’s proposals are contentious and have been the object of debate by prominent Peruvian economists.

4Consolidate Peru’s Role in the World

Foreign policy was not a big issue in the campaign. However, given Peru’s rising position as a Pacific Rim nation, it should be an important component of PPK’s first one hundred days. Peru has been a natural leader of the Pacific Alliance, an economic bloc focused on integration, and will host the Asia-Pacific Economic Cooperation (APEC), a regional economic forum, later this year. Peru aspires to become an Organisation for Economic Co-operation and Development (OECD) member before 2021, and will likely ratify the Trans-Pacific Partnership (TPP) agreement. With an aggressive international economic agenda, there was surprisingly little talk on the campaign trail about foreign policy.

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Pacific Alliance
Presidents applaud the signing of agreements at the 2014 Pacific Alliance Summit in Mexico. (REUTERS/Jorge Dan Lopez)

With the United States, tensions will likely increase over drug enforcement issues during PPK’s administration. In August 2015, the Peruvian Congress unanimously passed a bill allowing the Peruvian Air Force to shoot down small planes suspected of carrying illegal drugs. The United States has expressed opposition to aerial interdiction, which was halted in Peru in 2001 after an American missionary and her daughter were shot down. Compared to Keiko’s tough anti-crime posture, PPK’s moderate stance will likely result in more tempered and less nationalistic rhetoric.

Rising Aspirations

Given Peru’s rising position as a Pacific Rim nation, foreign policy should be an important component of PPK’s first one hundred days.