Global Insight Perspective

Significance

With a 10-percentage-point lead over his nationalist rival when 84% of the votes have been counted, Alan Garcia is almost certain to become Peru’s next president in July this year, a formal final promulgation the one remaining barrier to an official victory.

Implications

As his victory became clear yesterday, Garcia made a speech essentially aimed at allaying the fears of investors by emphasising his commitment to moderate economic policy, the free-trade agreement with the U.S, and the maintenance of macro-economic fundamentals; all wrapped up in a mea culpa for his poor showing during his first presidency. A clearly triumphalist speech against Venezuelan President Hugo Chavez set the tone for future relations with the country and Garcia’s political allegiances beyond Peru.

Outlook

Garcia is very much aware that the extent of his victory – well above his party’s traditional support base of around 25% of the electorate - is more linked to the nature of his rival Ollanta Humala than a spontaneous and untainted enthusiasm for his own persona or platform. His government will have to reflect this reality by reaching out to various parties - which did not make it in the run-off but certainly contributed to Humala's defeat - by incorporating them in his government and securing alliance in the split Congress.

Defeating the Ghosts of the Past - Reassuring Investors

American Popular Revolutionary Alliance (APRA) candidate and former president Alan Garcia had garnered 54.7% of the vote yesterday after around 84% of the ballots were tabulated. Nationalist runner Ollanta Humala (Union for Peru - UPP) secured 45.3% of the valid votes, according to official figures.

Alan Garcia quickly staged a massive public meeting where he proclaimed victory. Essentially, his speech focused on giving the electorate an indication of the administration-to-be as he vowed to construct a business-friendly environment. Under his leadership, inflation and fiscal matters will be tightly controlled and the free-trade agreement with the U.S. will be backed. The president-elect also announced the freeing-up of US$400 million to be used in the first months in office to upgrade and expand the country's infrastructure and fund other agricultural entities. Garcia’s address to his supporters and the nation in general acknowledged his last presidency from the outset, stating that he would not "govern with passions and impulses as we did in the past. We need to think about errors in a sincere act of contrition". The message essentially targeted the business community, cautious over Garcia’s populist leanings in the past and massive economic and political mismanagement between 1985 and 1990 (see Peru: 5 April 2006: Election 2006: Candidate Profiles - Alan Garcia, Returning from the 1985-1990 Debacle). With these clarifications, free of the influence of electoral tactics, one may expect that the new Garcia administration will not depart drastically from the pro-market policies currently in place, while attempts at better income distribution and some contract renegotiations are expected.

Chavez’s Meddling Backfires

Garcia not only secured a personal victory in yesterday’s vote, demonstrating his ability to rise from the ashes of his first presidency, but also won over the candidate formally endorsed and supported by Venezuelan President Hugo Chavez. The two have clashed verbally in the run-up to the vote to such an extent that Chavez promised to break off bilateral relations in the event of a Garcia win. Peru and Venezuela withdrew their respective ambassadors in May, and they have still not returned to their posts (see Venezuela: 1 May 2006: Peru Recalls Ambassador to Venezuela over Intense Political Row). In the context of Chavez’s tentacles spreading across the region, Garcia’s victory is seen as a barrier to Venezuela’s extended influence that has proved powerful in Bolivia (see Latin America Regional: 29 May 2006: Hundreds of Accords Enhance Venezuelan-Bolivian Ties). The election was conceived as a duel between the "good" and "bad" left, or more precisely between a soft civilian populist/moderate left against Latin America’s authoritarian/military populists, or caudillos, with whom Humala is associated. Garcia’s supporters were very vocal about his victory, which had been feared by Chavez, chanting "Listen Chavez, Garcia won". Garcia did not miss the opportunity to highlight Chavez’s "defeat", stressing the sovereignty of Peru and the brake on Chavez’s controlling enterprise in the Americas. The Organization of American States formally condemned Chavez’s political interference this weekend (see Latin America: 5 June 2006: Regional Divisions under Spotlight in OAS Talks ).

Remember Flores? The Challenges Ahead for APRA

One-time frontrunner Lourdes Flores, who lost in the first round of voting in April, reminded him that his triumph essentially stems from the "fear vote" or "lent ballots" i.e. from voters that do not really support or would not vote for him if Humala were not the other option. Her comments are an obvious nod to the "lesser evil" image that benefited Garcia all through the campaign ahead of the run-off. Garcia’s victory hinges on the major support in received in Lima where 30% of the electorate reside - the only district that Flores won, with more than 50%, in the first round. Other central and coastal areas threw their weight behind Garcia but in 14 of the 24 departments Humala garnered the most votes.

Garcia will thus have to acknowledge the support from other moderate parties in his government, essentially Flores’s National Unity (UN) in Lima but also other parties such as Valentin Paniagua’s Central Front (FC). In addition the first minority in the fragmented Congress is held by Humala’s UPP with 45 seats. APRA only enjoys 36 seats in the legislature, with the rest of the 120 seats being shared by the UN, the pro-Alberto Fujimori party and FC and National Restoration (RN, centre-right) (see Peru: Election 2006: 11 April 2006:Election 2006: Battle for Run-Off Intensifies in Peru, Radical Candidate is Through).

Against a backdrop of poor parliamentary leverage,,and reactive (against Humala), rather than pro-active, patterns of voting, Garcia will have to concede governmental positions beyond APRA and across the board to see his governmental plans materialise. According to a list unveiled in La Republica, APRA is thinking of Paniagua for the Premier post, and the return of Minister Luis Carranza, close to President Alejandro Toledo, for the Economy and Finance portfolio. It is not certain whether Paniagua would accept the post.

Outlook and Implications

Garcia is very much aware that the extent of his victory - well above APRA’s traditional support base around 25% of the electorate - is more linked to the nature of his rival Humala than a spontaneous and untainted enthusiasm for his own persona and platform. His government will have to reflect this reality by reaching out to various parties that did not make it to the run-off but certainly contributed to Humala's defeat.

Humala cannot be easily disregarded as a political player now. He still secured above 40% of the electorate’s support, and won in more 14 of the 24 departments, in particular in the southern area of the country, and leads the major political force in Congress. Garcia should be cautious in not alienating the large section of Peruvians he represents. Contrary to what has been reported, Humala has not conceded defeat but merely acknowledged the lead of the former president.

While little can be done to avert a formal promulgation of Alan Garcia as president-elect, Humala is holding on, waiting for the remaining votes to be counted. He has in any case claimed a kind of "victory" as his candidacy, and the fear it aroused, "awakened consciences about poverty and social exclusion", bringing the country’s deprived to the top of the political agenda.

Garcia should be keen to deliver on social policy as his administration's performance will have a major bearing on the next elections, and possibly the force of support behind Humala in case of failure.

Raul Dary

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