Peru’s dilemma: Maintain or overhaul nation’s economic model
By Monica Martinez
Lima, Jun 2 (EFE).- The question of whether to maintain or completely overhaul a market-friendly economic model is at the heart of Sunday’s presidential runoff in Peru, where decades of fiscal discipline and GDP growth have failed to reduce gaping socioeconomic inequalities.
Peru has achieved a certain level of prestige in global financial circles over the past 30 years thanks to the government’s well-managed accounts and stable revenues that have allowed it to boost savings.
But the pandemic laid bare an inadequate health-care and social welfare system while also causing the country’s fiscal situation to deteriorate. A sharp drop in household income also caused the ranks of the poor to grow to 30 percent of the population and left an additional 33 percent in a situation of vulnerability.
Either Free Peru hopeful Pedro Castillo, a leftist rural schoolteacher and union leader, or right-wing former first lady and lawmaker Keiko Fujimori – candidate of the Popular Force party – will be inaugurated on July 28, the date Peru declared its independence from Spain 200 years ago.
The two candidates are on opposite ends of the ideological spectrum and are offering radically different paths to a post-pandemic economic recovery and diametrically opposed political and societal visions.
On the one hand, Castillo has instilled in his supporters the idea that poor people should not exist in a country that is rich in natural resources.
Castillo plans to nationalize the country’s mineral wealth, impose a new windfall profits tax on extractive companies, establish new royalties on mineral sales and renegotiate contracts to reduce companies’ tax benefits.
He also is pledging to carry out a second agrarian reform to combat land monopolies and set aside plots for small farmers, as well to reduce food imports.
“The written plan is much more statist and intrusive on individual liberties of people and economic entities than even what was in the 1979 constitution (prior to the current 1993 constitution),” former Economy Minister Alonso Segura told Efe.
“It’s much more similar to what Venezuela has done. Some want to compare it to Ecuador or Bolivia, but this goes much further,” Segura, also a professor at Peru’s Pontifical Catholic University, added.
The economist said that proposing a new agrarian reform in Peru, which is currently experiencing an agro-export boom, is “incomprehensible” because the country already underwent a similar process between 1960 and 1980 without boosting productive capacity.
But amid the public debate over Free Peru’s economic plan, a member of that party’s technical team, Juan Pari, said the country’s current economic model “has caused us to become dependent. We don’t have food sovereignty; agriculture hasn’t been developed.”
For her part, the daughter of ex-President Alberto Fujimori staunchly defends the economic model set forth by her father in the 1993 constitution to end the hyperinflation and isolation from international financial markets that had been triggered by the policies of his predecessor, Alan Garcia.
That neoliberal (market-friendly) model enabled average annual growth of nearly 7 percent from 1993 to 2013, with the number of people below the poverty line falling to 24 percent of the population in 2012.
Even so, successive governments have failed to narrow the country’s huge socio-economic gaps nor provide decent public services to a large majority of Peru’s citizens.
The economic crisis triggered by the pandemic has laid bare these limitations.
Despite her defense of Peru’s existing economic model, the country’s pressing social needs have led Fujimori to propose distributing 40 percent of mining royalties directly to people and cutting out the intermediation of regional governments, which currently use those funds to execute infrastructure works and pay for public services.
Fujimori also pledges to double the pension benefits paid to elderly adults living in conditions of extreme poverty and increase the number of beneficiaries of that so-called Pension 65 program by 500,000 during each year of her administration.
Segura, however, said these proposals are a “continuation of policies that already exist” and that some would have to be revised because they are “inviable or anti-technical” and will not “get to the root of the problem.” EFE