The seemingly stable Peruvian runoff election raises concerns about the next President's ability to push needed reforms that would decrease the possibilities of the rise of a new radical outsider in 2021.
By Alvaro Zapatel
For the first time in 16 years Peruvians elected two right-leaning candidates, challenging the conventional wisdom that the contest is always between left wing populists and moderates. Since 2001, the presidential candidates' economic and political platforms have generated instability and unpredictability about the country's future in the short-term. In contrast, the right-leaning candidates competing in the 2016 runoff election have relatively similar economic platforms, reducing unpredictability and guaranteeing to an extent the continuity of the macroeconomic policies that have made Peru an example of robust economic growth in Latin America.
Yet, there is a leftist candidate whose fiery anti-mining platform and ability to mobilize support make him a potentially destabilizing force: Gregorio Santos. Santos's radical agenda has quickly gained political traction and he is likely to become a high-profile opponent to Peru's next president--with economic consequences for the country if he continues his rise and the next president does not take into account the environmental demands that may trigger further social unrest in Peru's mining regions. What is really at stake is the country's future vis a vis the 2021 election.
In terms of economic policy, the June 5th election is a foregone conclusion. Keiko Fujimori, daughter of former president Alberto Fujimori (1990-2000) and Pedro Pablo Kuczynski, former Minister of Finance and President of the Council of Ministers of Peru, have similar economic platforms: both defend an open market economy, promote entrepreneurship, and are not heavy on tax policies. Fujimori is the heir to "fujimorismo," the political movement founded by her father that combines Washington Consensus policies with clientelism in rural communities and marginalized urban populations. Kuczynski, a former investment banker, is running for the second time after finishing in third place in 2011.
This election's surprise was the 4% of votes that Gregorio Santos, an elementary school teacher and governor of Cajamarca--Peru's northern Andes region and home to the fourth largest gold mine in the world--obtained. Santos has built his political career on a platform of harsh opposition to mining projects in Cajamarca and other Peruvian mining regions due to environmental concerns. An admirer of Hugo Chávez, Santos has been among the promoters of a radical agenda in Cajamarca, inciting rural communities to rise against multinational mining companies in the area. Other anti-mining leaders, like former priest Marco Arana--who in this election ran for vice president of leftist Verónika Mendoza and has been elected Congressman--have shared Santos's opposition to mining in Cajamarca and other regions, such as Arequipa and Apurimac. Santos led the successful protests against Conga in 2011, a project worth US$5 billion. In mid-2012 the Conga project was canceled.
While sitting governor of Cajamarca, Santos was arrested amid allegations of corruption in May 2014. Two years later, Mr. Santos--still in prison and without sentence--ran for President, an unprecedented case in Peruvian politics. Without campaigning, he won 4% of the national vote, with 40.7% of the votes from Cajamarca--8 percentage points ahead of Mrs. Fujimori who is a rival in the Peruvian Andean region. In this way, Mr. Santos ran for national office to legitimate his political power in Cajamarca and obtained outstanding results.
Neither Fujimori nor Kuczynski has shown any concern. The potential impact of nationwide environmental protests that an empowered Santos could promote in the next five years is worrisome, to say the least. Since 2011, 53 people have been killed and almost 1,500 injured in social conflicts in Peru, mostly related to extractive industries. In the last 15 years, Peru has also lost approximately US$8.5 billion in foreign direct investment related to mining projects blocked by protests. Consequently, in the context of decreasing prices of commodities, a further boycott to the mining industry would jeopardize Peru's economic growth and therefore its ability to fund development projects in the region.
Mr. Santos could be declared innocent, which would skyrocket his political career to the national level. But even if he is found guilty he will continue to have regional influence with national reach in one of Peru's most resource-rich regions. Santos is already responsible for blocking one of Peru's largest mining investments of this decade and is the leader of other significant anti-mining protests nationwide. Mining accounted for 1.95% of Peruvian economic growth, which registered a total of 3.72% in March, according to Peru's National Institute of Statistics. Without the commodities boom that boosted the economy in the 2000s, Peru faces an even more complex situation if its significant mining projects continue to be challenged.
The International Monetary Fund (IMF) predicts that Peru will show the strongest economic recovery in the Latin American region, after growing at a 2% to 3% annual GDP rate in recent years compared to the average 6% GDP growth rate experienced in the 2000s. But the IMF does not take into account that the potential unrest Mr. Santos's radical agenda promotes could jeopardize Peru's already fragile social stability--with social conflicts mounting nationwide since 2014--and economic growth. The next president of Peru, whether Kuczynski or Fujimori, must be willing to incorporate leftist reforms to decrease social tension in mineral-rich districts and province--and potentially nationally. Otherwise, Peruvians may have to pay the price in 2021 with a radical outsider as president.
Alvaro Zapatel holds a BA in Economics from Boston College, and currently works as a Specialist in Project Monitoring and Evaluation at the Peruvian Ministry of Education. He is also a Professor in the Department of Economics and Communications at the University of Lima. Alvaro is a Latin America Fellow at Young Professionals in Foreign Policy.