The future direction of economic policy in Peru hangs on the outcome of today’s tight three-way race to elect a new president.
The favourite candidate among the financial community is conservative Pedro Pablo Kuczynski (PPK), a well known former finance minister. However, according to the final opinion polls, he is running second, well behind former congresswoman Keiko Fujimori, who has about 40% of the vote.
But, crucially, she is below the 50% required to win outright and would require a run-off with the second-place finisher on June 5.
Fujimori and PPK, who is 77, offer similar ideas, pledging to reduce bureaucracy, provide stable conditions for investors and use public resources to increase social and economic inclusion.
PPK faces a battle for second place with left-wing congresswoman Veronika Mendoza. Mendoza, 35, who heads the leftist Broad Front (Frente Amplio) coalition saw her candidacy blossom in March, with support jumping from low single digits to close to 20%.
Financial market participants are hoping for a PPK victory. Bankers at Bank of America Merrill Lynch have warned about a spike in spreads on Peruvian bonds if support for Mendoza’s candidacy were to surge.
A Fujimori economic team could be led by Luis Carranza, who held the post under former president Alan Garcia (2006-2011) during the boom years.
“I am voting for Keiko,” said Gloria Ríos, who runs a small business in Lima, the capital city. “I think it is time for a woman. She should not have to pay for her father’s mistakes.”
Misgivings about Fujimori are linked to her father, former President Alberto Fujimori (1990-2000). He is in prison, serving 25 years on corruption and human rights charges. Big anti-Fujimori rallies were held on Tuesday, the 24th anniversary of Fujimore Sr’s coup when he dissolved Congress and sent the army on to the streets.
The links have not stopped her from leading in the race, however, but could prove crucial in a run-off vote. A poll by Ipsos Peru, the leading opinion firm in the country, had Kuczynski with a slight lead over Fujimori in a potential second-round vote.
CITIZEN MONETARY POLICY
PPK, who was in a statistical tie for second in the final polls with around 20%, would bring in a technocratic government. Leading his economic team is Oxford-trained Alfredo Thorne, a former managing director of JP Morgan Chase’s global research department. His campaign has focused on stability, offering Peruvians a transparent government that would deepen reform and pump up investment.
“Kuczynski knows what he is doing. I think this time we need someone with experience at the top,” said Miguel Vidal, a college student in Lima.
Mendoza’s Broad Front calls for a much greater state presence in the economy, with vice president candidate Marco Arana suggesting in an interview with a leading Peruvian paper that monetary policy should not only come from technocrats, but citizens should be able to elect a member to the governing board.
Pedro Francke, an economist from Peru’s Catholic University who could be Mendoza’s finance minister, rejected comparisons with South America’s other left-wing governments.
“We have said that we do not share the central ideas of the Venezuela economic model,” he said. “Price controls, exchange rate controls are not ideas in our government plan. Each country has to choose its own mode and that is not for us.”