June 8, 2012 10:12 pm

Humala moves away from Peru’s left

Ollanta Humala sent chills down investors’ spines a year ago when the ex-army officer and one-time disciple of Venezuela’s socialist president Hugo Chávez won the race to become Peru’s president.

The local stock market tanked, as did the currency of the world’s second biggest copper producer in what had hitherto been Latin America’s fastest growing major economy.

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Yet in marking the anniversary of his June election, many who used to worry about the former coup leader now wonder if they were barking up the wrong tree. Economic growth is forecast at 6 per cent this year, local business confidence has bounced back and foreign investors have pledged $53bn in new investments over the next decade.

“Things in Peru are looking very good. You don’t need a brilliant government,” says Miguel Palomino, economist at the Lima-based Peruvian Economics Institute. “You just need a government that doesn’t screw it up.”

Unfortunately, it may yet. The conservative and orthodox economic policies Mr Humala’s government is pursuing “need a dose of political knowhow to be carried through ... but I think that that political knowhow is painfully lacking”, says Mirko Lauer, a Lima-based political commentator.

In one sign of that, this week three disaffected left-leaning members of Congress resigned from Mr Humala’s Peru Wins party, leaving it with just 43 seats – well short of a majority in the 130-seat parliament.

The main reason for growing complaints from the leftwing is the government’s sometimes hardline response to recent anti-mining protests.

The biggest of these has paralysed Newmont Mining’s $4.8bn Conga gold and copper project since November. Last week, there were also deadly protests over Xstrata’s Tintaya copper mine.

Mr Humala has accused “radical” leftists of driving the Conga and Tintaya disputes to further a radical anti-mining agenda – an about-face from a president now more popular among Lima’s sceptical urban elites than among the poor who first brought him to power.

Risa Grais-Targow of New York-based Eurasia Group says Mr Humala “remains broadly supportive” of the mining sector and is likely to continue to prioritise its development to pursue his “social inclusion” goals. These include a $1.1bn increase in mining taxes to deliver on social pledges, such as pensions for the poor.

Be that as it may, Mr Humala’s commitment to both will be put to the test in the coming year, as he presides over a Congress fractured by his alienation of the left. Since he was sworn in on July 28, he has relied on 20 seats from former president Alejandro Toeldo’s Possible Peru party.

But the relationship has often been strained, especially as Mr Humala has lost political capital managing 171 active social conflicts across the nation, most of them centred on mining, petroleum and hydroelectric projects in the Amazon, including a $20bn energy pact with Brazil.

Some speculate he could even join forces with the rightwing Fujimori party, the second largest in Congress, to help pass legislation. “Although Humala has been heavily criticised for turning to the right ... it increasingly seems to us that that tack may be his only option,” says César Pérez-Nova of Celfincapital, a brokerage.

Mr Humala’s first-year honeymoon period already appears to be waning, with his approval rating dropping 5 percentage points to 51 per cent last month – although many of his predecessors struggled to rise above 30 per cent.

Social protests, security concerns and Mr Humala’s problematic family have all taken their toll.

On security, Mr Humala faces an uptick in violence in a drug zone controlled by a faction of the shrunken Shining Path guerrilla group, which briefly kidnapped 36 gas pipeline workers in April.

Then there is his family. His brother Antauro, in jail for leading a coup attempt against Mr Toledo in 2005, regularly heaps criticism on Mr Humala from his cell, where he has been photographed smoking cannabis.

Closer to home, his wife Nadine Heredia, a close adviser, regularly outperforms her husband in polls and consistently denies rumours she is planning her own run at the presidency in 2016.

“He has put together a bunker formed by his relatives, friends of the family, people that studied or worked with him in the army,” says Mr Lauer, the commentator. “He has nobody to operate politically and so he is sliding into a very mediocre executive.”

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