Peru’s Perilous Presidential Repeat Patterns

Former President Toledo took a 10-point opinion lead entering April’s contest ahead of the daughter of jailed former chief executive Fujimori, with near 2006 victor ultra-populist Humala badly trailing. Previous Lima mayor Castaneda is in the running for second place, but his economic platform is unknown and he faces corruption accusations on public works projects. The business community favors Toledo’s renewed free-trade and economic reform push particularly with Andean neighbor Colombia now also in line for a US agreement after the Obama Administration downplayed old labor objections. Keiko Fujimori in turn has recalled her father’s tough law and order stance and named a past defense minister as a running mate. Humala’s fourth place position is attributed to a failed attempt to recast himself as a moderate pledging to uphold economic orthodoxy to ensure 6 percent GDP growth this year and confidence in the sovereign investment-grade rating. The central bank has been sensitive to overheating claims after last year’s 20 percent credit surge which helped lift the Lima exchange 50 percent. It has hiked reserve requirements and interest rates, and mounted monthly sol interventions at a $100 million clip as portfolio and copper-related inflows spur fluctuations. Longer-term a wealth fund as in Chile’s model will be created to preserve record windfalls for policy and spending contingencies. Fiscal balance is foreseen in 2011 after crisis stimulus measures expired, but emergency outlays have already been authorized to combat a severe dengue fever outbreak.

In Washingtonthe US Trade Representative committed to resolving outstanding Colombia FTA issues in the coming months, as President Santos announced further tax and oil company divestiture moves to cover flood relief costs. Rain swamped vast swathes of farmland to push up food prices and killed hundreds. The overnight rate has stayed at 3 percent although inflation may temporarily creep to that level. The peso should continue around the 1800 range as mining FDI remains strong and the new administration thus far disavows capital control re-imposition. Financial institutions welcomed the open posture in contrast with hard lines in Ecuador and Venezuela, where Presidents Chavez and Correa have respectively sought fresh nationalization and breakup powers. The Venezuelan legislature, which for the first time features a hefty opposition bloc, has been stripped of authority under an 18-month emergency decree following another bolivar devaluation that otherwise would dent the leader’s personal currency.