A Glimmer of Hope in Peru's Elections?

As the American presidential campaign shakes the world’s collective faith in democracy, the Peruvian electorate offers a reason to be hopeful.

In recent years, a worldwide collapse in mineral prices and slowing economic growth have threatened the progress of Peru, a South American country notable for its free-market-policy-induced economic growth. Additionally, a poorly managed election process and a history of corruption have disenfranchised voters and sparked strong anti-establishment sentiment. All of these factors suggested that the Peruvian electorate might choose a populist candidate who, while giving voice to voter discontent, would overturn Peru’s economic progress through increased state control. By voting for Keiko Fujimori and Pedro Pablo Kuczynski on April 10, however, a majority of Peru’s citizens chose two candidates to compete in a June runoff who both promise to continue free-market policies. Wall Street applauded Peruvians’ choice: the value of the country’s currency rose more than it has at any time since 1992 and Peru’s stock index took its biggest leap since 2008. Peruvian voters’ cool-headed rationality inspires faith in the democratic process as a vehicle for good governance.

According to The Economist, in spite of Peru’s current commodities-induced economic slowdown, annual income in the country grew at 3 percent from 1990-2013, which compares favorably with the 1.7 percent figure for Latin America overall, while the poverty rate fell from 54.7 percent in 2001 to 22.7 percent in 2014. Peru benefited significantly from the recent commodity boom and, unlike much of Latin America, took advantage of the windfall to implement much-needed reforms and reduce its public debt-to-GDP ratio from 37 percent in 2000 percent to just 3.6 percent in 2014. For the past two decades, Peru’s economy has grown steadily at rates in the high single digits. However, with polls showing that the majority of Peruvian voters want more state intervention in the economy, it was unclear before the April 10th election whether the recent economic slowdown would cause voters to reaffirm or reject the policies that have created so much prosperity.

These concerns were especially strong given the public’s anger at the current state of Peruvian politics. With sitting president Ollanta Humala at an approval rating of 15 percent and 84 percent of Peruvians saying they mistrust Parliament, anti-establishment sentiment is high. Indeed, three of the last four Peruvian presidents had never run for elected office before becoming president. The combination of corruption allegations, attempts to disqualify all candidates, and the fact that this is the first time Peru has had four consecutive free elections presented a reminder of the precariousness of Peruvian democracy. Incidents like the recent disqualification scandal only added to distrust of the government among Peruvian citizens.

A few weeks before the April 10 election, two promising candidates, Julio Guzmán and César Acuña, were disqualified for violating minor, weeks-old campaigning rules, a disqualification many thought was unfair. Guzmán was disqualified because his party changed its nominating procedure without informing the authorities, and Acuña was disqualified for distributing $4,400 to supporters. The Organization of American States issued a statement declaring that the disqualifications rendered the elections “semi-democratic.” Indeed, Guzmán, “a centrist development consultant,” was considered likely to win the election as a popular alternative to Keiko Fujimori, who led in the polls. On the topic of these disqualifications, The Economist mocked those who insist that, “The law is the law,” by stating that “in this case the law is an ass, is being misapplied and, it seems, is not the same for everyone. The electoral law has been disfigured by frequent amendments and absurd regulatory detail . . . Disqualification is a grossly disproportionate punishment and elevates a minor administrative error above the constitutional right to participate in politics.” Voter anger over the disqualification was compounded by the fact that Fujimori was video-taped distributing money, but was not punished.

The candidacy of Fujimori, a center-right candidate representing the Popular Force party, has been defined by her father’s record. Alberto Fujimori, Keiko’s father, was Peru’s president in the 1990s, during which time he successfully reined in hyperinflation from a high of 12,000 percent, doubled the GDP, and defeated the Maoist terrorist organization Shining Path in a bloody conflict that took 69,000 Peruvian lives. However, his successes were marred by human rights abuses, including a forced sterilization campaign that affected 300,000 women and a massacre of civilians during the war on Shining Path. This, along with his shutdown of Congress in a 1992 coup and accusations of election fraud, led to his receiving a twenty-five-year prison sentence in 2009. Although he still commands the fierce loyalty of approximately 20 percent of Peruvian voters, about 50 percent of voters refuse to vote for anyone affiliated with him, notably his daughter. On April 5, the twenty-fourth anniversary of the coup, this segment of the population took to the streets in massive numbers to protest against Keiko Fujimori.

Although Keiko ran on her father’s economic record and promises of security in the face of mounting crime and a recent resurgence of the Shining Path, the darker aspects of her father’s record have hindered her prospects. She has strong support in rural areas and is seen as relatively pro-business, supporting reduced small business taxes and increased spending on public works. However, she has had to combat her opponents’ declarations that a Keiko victory would mean a return to authoritarianism. To compensate for voters’ anger at her father, she has been forced to spend much of her time assuring voters that she will respect human rights and democracy and not pardon her father. Although pre-election polls predicted that Keiko would garner about 40 percent of the vote, and that her Popular Force would win almost half of congressional seats, a plurality of the vote does not guarantee the presidency. In the 2011 presidential election, Keiko lost the runoff to current president Ollanta Humala despite winning a plurality of the vote. Given that the majority of voters polled said they would not vote for Keiko, it seemed likely she would lose the runoff once again. Polling leading up to the election generally had Fujimori hovering around 40 percent. Many believe that the non-Fujimori candidate is likely to win the runoff, making the second-place vote the most important one. Her promise of continuity and obvious establishment credentials do not seem likely to inspire Peruvians.

Her two primary challengers, Pedro Pablo Kuczynski and Verónika Mendoza, are about as dissimilar to one another as possible. An Oxford-educated, seventy-seven-year-old liberal banker, and former finance minister during the boom years of 2001-2006, PPK (as Kuczynski is known) is perceived as a successful administrator is the mining industry and Wall Street favorite. PPK aims to continue the open economy and free trade policies that Peru has recently pursued so successfully, explicitly backing a lower sales tax and more public works spending through debt, and promising to increase revenue by cracking down on the “informal economy” of transactions that occur outside the reach of Peru’s tax collectors. At the same time, PPK’s age, apparent weakness on crime, and inability to connect with rural voters and ordinary citizens seemed to make him a similarly weak standard-bearer for economic liberalization.

His rival for second place, thirty-five-year-old Verónika Mendoza, is an congresswoman representing the Broad Front. She dresses in red, praises unions, and admires Hugo Chavez. Her advocacy for lowering oil and gas exports, increasing government control of mining, increasing the minimum wage, and loosening inflation targets spooked Wall Street. Her rise in the polls leading up to the elections caused a massive increase in the volatility of the Peruvian currency, the sol, and a drop in Peruvian bond values, signaling a decrease in investor confidence should Mendoza reach the runoff stage. Wall Street feared that a young, principled, populist candidate running against Fujimori would open the door for Peru to repudiate free market economics.

Despite these worries, the Peruvian electorate delivered a stunning victory for free-market economic policies in the first round. Fujimori came in first with 40 percent of the vote, while PPK took second with 21 percent,. He handily beat Mendoza’s 19 percent of the vote, even though the last pre-election polls had the two tied at around 20 percent. Even in the face of economic and political dissatisfaction, rather than making the easy choice and picking an exciting candidate with extravagant promises, Peru will vote in the June runoff between two candidates who have both promised to maintain free-market, pro-growth policies that will continue to promote prosperity in Peru and in the region.

Americans, and others throughout the world concerned about the future of effective democratic governance, should look to the Peruvian example with hope. Peru has shown the world that the people are capable of making effective, sensible and rational choices about their future.

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