Peru's economy booming but Peruvians want change
by Andres Oppenheimer
What's happening in Peru is puzzling political analysts around the hemisphere: The economy is booming, inflation is low, poverty is going down, and yet a populist candidate who vows to wipe out the country's economic policies is leading in the polls for the April 9 presidential election.
Nationalist leftist presidential candidate Ollanta Humala, a former military officer who is close to Venezuelan President Hugo Chávez, made headlines earlier this week by ranking first in public opinion polls. The anti-free market candidate is supported by 32 percent of likely voters, followed by pro-free market candidate Lourdes Flores with 28 percent, a survey by the Apoyo polling firm shows.
Immediately after the poll came out, Peru's stock market tumbled. In what may be an additional indication of voter discontent, President Alejandro Toledo's popularity is at 22 percent, one of the lowest ratings in Latin America.
Humala's climb in the polls has left international development experts scratching their heads. Why is the most radical anti-free market candidate winning in one of the Latin American countries where free market economics has been most successful in reducing poverty?
THE GROWTH
Consider Peru's macro-economic figures since Toledo took office in 2001:
The economy grew by a robust 6.7 percent last year, according to government figures. It was Peru's fifth consecutive year of steady growth, which turned it into one of Latin America's fastest growing economies.
Private investment has nearly tripled over the past three years, and exports have soared from $9 billion in 2003 to $16 billion last year.
Inflation is at about 1 percent, one of the lowest levels in the region.
Poverty has fallen from 54 percent of the population in 2001 to 48 percent of the population in 2005. Extreme poverty has dropped from 24 percent to 18 percent.
Last week, I asked Toledo in a soon-to-be-broadcast television interview why his economic policies look so good on paper, but seem to be rejected by so many Peruvians.
Toledo, who was born in extreme poverty and studied at Harvard and Stanford University, responded that there is a time lag between economic growth and concrete benefits for many people.
''It's not sufficient to grow at 6.7 percent, one of the highest rates in Latin America.'' Toledo said. ``We need that the benefits of growth translate into more jobs, less poverty, better healthcare, make people part of the system. There is a [growing] impatience, and it's our role as heads of state to reignite people's faith in democracy.''
Without mentioning Humala by name, Toledo warned that changing Peru's economic course would have disastrous consequences.
''If somebody comes and destabilizes the country, kicks the table, breaks [the system] and tries to refound Peru, that will scare away investments and stop growth,'' Toledo said. ``To fight poverty we must grow, and to grow we need investments, and to get investments we need political, economic and legal stability.''
ROOTS OF DISCONTENT
My opinion: There are two main reasons why many Peruvians are unhappy.
First, while Toledo has been a good manager, he has been a clumsy communicator. He promised too much at the outset of his presidency and later flip-flopped on a number of issues (most notably when he refused to recognize an out-of-wedlock child, and then did so under pressure.) That has steadily eroded his popularity.
Second, Peru's impressive economic figures may not tell the whole story, because more than half of its workers live in what Peruvian economist Hernando de Soto calls the ''informal economy,'' and may not be fully accounted for. They sell things on the streets or drive nonregistered taxis, which means that their situation is often under-represented in official statistics.
Toledo is right in saying that Peru is on the right track and that changing course would increase poverty. China, India, Spain, Chile and many other countries of very different political colors have shown that economic openings work when countries stay the course. But perhaps Peru and other Latin American countries should do more to bring their ''informal'' workers into the formal sector. Otherwise, economic statistics may only reflect one part of the story.
Source: Miami Herald
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