Garca’s First 100 Days

Inaugurated last July, Peruvian President Alan García Perez completed the first 100 days of his second administration in early November. Winning a run-off in the June elections with 52% of the vote, García inherited a country torn by divisive socioeconomic and political issues. His first three months in office have been marked by a combination of policy innovation and continuity as he seeks to find workable solutions to difficult problems.

From Washington’s perspective, García is a member of the moderate left and thus more acceptable than either Venezuela’s Chávez or Bolivia’s Morales. He supports market-friendly policies and hopes the U.S. Congress will quickly approve the free trade agreement negotiated by his predecessor in late 2005 and already approved by the Peruvian congress. But García is also committed to reducing Peru’s entrenched poverty, and his political future depends on his success in raising the living standards of nearly half the population that lives on less than $2 a day. To regain the office of the president after leaving it 16 years ago with only a 5% approval rate, García has proven an able tactician. Finalizing the free trade agreement with Washington and addressing the needs of Peru’s truly disadvantaged may turn out to be even greater challenges.

Campaign Promises

In the course of the campaign, García portrayed himself as an elder statesman who had learned from his disastrous first administration (1985-90) when annual inflation reached 7,000% and domestic terrorism threatened the survival of the state. Openly admitting that earlier free-spending policies and his refusal to repay Peru’s foreign debt were mistakes, he painted himself during the 2006 campaign as a moderate leftist no longer hostile to Washington. Even though he left office with the lowest approval rating in Peruvian history, his efforts to reinvent himself enjoyed some success, especially among younger Peruvians with no memory of his first term. He was also helped by his tactical political experience and the support of the Alianza Popular Revolucionaria Americana (Aprista Party), Peru’s oldest political party.

But one of candidate García’s strongest political assets proved to be his opponent, Ollanta Humala Tasso. Compact and energetic, Humala made radical policy statements in the latter stages of the first round that sounded like the positions of Bolivian President Evo Morales. Humala later moderated his views in an attempt to move towards the center, but the damage was done. Many Peruvians, especially those living in the Lima-Callao megalopolis, feared his nationalist views. When the University of Lima, in a post-election poll, asked Peruvians why Humala lost to García, over 50% responded it was because he was authoritarian (19.2%), supported by Venezuelan President Hugo Chávez (17.7%), or radical (13.5%). Conversely, when asked why García won the election, the largest number of respondents (20.3%) answered, “Because there was no other option.” Only 14.3% of those polled responded that García won “because he was well prepared and had experience.”

In contrast to Humala, whose campaign focused on the general problems faced by Peru along with broad prescriptions for change, García was more doctrinaire and policy-specific. He promised to maintain macroeconomic stability, promote worker rights, renegotiate Peru’s contracts with its private utilities, and levy a windfall profits tax on mining companies. In contrast to Humala, he also promised to represent the poor without taking over private property. García also criticized the outgoing administration of President Alejandro Toledo Manrique, especially its management of the Camisea natural gas project , a $1.6 billion project to pipe natural gas from the Amazon jungle to the Peruvian coast.

Out with the Old, In with the New (and Old)

In his inaugural address, President García, a skilled orator, talked about the need for austerity, decentralization, simplified administration, and foreign investment. Specifically, he promised to reconstruct the Peruvian political system, renegotiate the Camisea contract, create a 5 billion soles fund to fight poverty, and reinforce public security with the addition of 20,000 police on the streets. With Peru scheduled in 2008 to host the Fifth Summit of Heads of State and Government of Latin America, the Caribbean, and the European Union as well as the Sixteenth Summit of Asia-Pacific Economic Cooperation (APEC), he promised that his administration would maintain an international focus but reduce travel abroad. His predecessor had been widely criticized for spending too much time outside Peru. García’s expressed belief that “the poor win or we all lose” accurately reflects the results of a public opinion taken immediately before his inaugural address in which 48.9% of respondents said job creation and employment should be the principal theme of the address.

Since his inauguration, President García has pursued an economic model designed to increase jobs, reduce poverty, and promote economic decentralization that is highly reminiscent of his predecessor, Alejandro Toledo. When peasant protests threatened production at Yanacocha, the world’s largest gold mine, the government quickly brokered a deal with the protesters, allowing the U.S.-owned mine to restart operations. His aggressive promotion of market-friendly policies has been welcomed in the White House where President García met with President Bush in early October. In the joint news conference following the meeting, García invoked the name of the Alliance for Progress, an ambitious but unsuccessful foreign aid program launched by President John F. Kennedy, arguing that free trade today could accomplish what the Alliance failed to do in the 1960s.

President García has embraced the free trade agreement with the United States negotiated by the Toledo administration and approved by the Peruvian congress before he took office. One of his first acts was to appoint Hernando de Soto, author and economist, as a presidential envoy to Washington to push for congressional approval of the agreement before the end of the year when trade preferences are set to expire. Following their White House meeting in October, President Bush pledged to work with the U.S. Congress to pass the free trade agreement. In the wake of Republican losses in the mid-term elections and the failure of the U.S. Congress to approve a deal that would have granted Vietnam permanent normal trading relations (PTNR) before the mid-November APEC summit in Hanoi, it remains to be seen if President Bush can make good on his promise. García has also implemented an economic austerity program that includes a reduction in public sector salaries, including his own. To emphasize thrift in government, he took a commercial flight to the inauguration of the Colombian leader, Alvaro Uribe, in early August. Later in the month, the ministry of foreign affairs announced that it would close six embassies as part of the austerity program. The new president has also pledged to maintain open relations with the International Monetary Fund.

A high degree of continuity has also marked the foreign policy of the García administration. In addition to agreeing to host the two international conferences in 2008, President García has maintained the market integration policies of the Toledo administration with Bolivia, Brazil, Chile, Colombia, and Ecuador. In August, for example, Chile and Peru signed a new accord, largely negotiated by the Toledo administration, that widened bilateral economic ties. With Ecuador, efforts continue to implement fully the multiple agreements constituting the 1998 Brasilia Accords.

During the election campaign, Venezuelan President Hugo Chávez openly supported Humala, and in the process, exchanged a volley of insults with García. Since the election, the new president has expressed interest in repairing relations with Venezuela, but he has also recast himself as the regional antithesis of Chávez. During his October visit to Washington, García argued that a bilateral free trade pact was necessary to thwart the threat of a new fundamentalism in South America—“Andean fundamentalism.” With observers inside and outside the region eyeing President Chávez and Bolivian President Evo Morales as threats to democracy in Latin America, García’s approach has played well in many circles in Peru—and also in Washington.

Storm Clouds

With a late October approval rating of just over 60%, President García appears off to a good start, especially when compared to the early days of his first term. But there are storm clouds on the horizon. Garcia entered government with a self-proclaimed 180-day action plan, but fundamental reform to date in many policy areas is at best a work in progress. Observers fear the lack of progress could compromise hope for fundamental change in other areas. On a related point, observers see a disconnect between what senior members of government say and what happens or doesn’t happen at lower levels of government. An editorial in the October 22, 2006 issue of El Comercio, a prominent Lima daily newspaper, called for García to adopt a more aggressive and decisive management style. The article then cited instances in several ministries, including economy, education, and labor, in which lower level bureaucracies were slow to implement administration policies.

The García administration is also criticized for its promotion of market-friendly policies and accommodation of foreign investment while not putting sufficient emphasis on social welfare issues, like education, health, and poverty. The prime minister announced in late August that the administration plans to reduce the overall poverty level from 48% to 40% over the next five years. Nevertheless, according to the Apoyo Institute, social spending in Peru is only 8% of GDP, well behind neighboring countries like Bolivia and Colombia. Addressing this point, sociologist Nelson Manrique, in a recent interview in the daily newspaper, La República, argued that García needed to be more aggressive with socioeconomic reforms. In a word, the administration has promised better education and health services, together with improved working conditions, and it’s time to start walking the talk. If García does not start tackling these social issues quickly and effectively, Manrique predicted he would begin to experience the same political problems he had in 1985-1990, something no Peruvian wants to see.

Decentralization is another policy area in which progress to date has been slow. Candidate García was highly critical of the decentralization program launched by the Toledo administration, arguing that regional governments did not receive the resources necessary to get the job done. In his inaugural address, President García promised to revitalize the process, designating the month of September the month of shock descentralizador. Although the administration has begun to focus on decentralization, regional governments continue to complain of a lack of fiscal, technical, and human resources.

Wait-and-See

A combination of policy continuity and change have marked the first one hundred days of the second Alan García administration with more continuity than change to date. Over 52% of Peruvian voters supported García, but almost 48% did not. And many of his supporters voted for him as the lesser of two evils. Peru is ripe for change, and President García is under increasing pressure to deliver the fundamental change he promised during the campaign. At this point, most Peruvians have adopted a wait-and-see attitude toward his administration; however, President García must recognize that patience is not a widely shared virtue in Peru.

Ronald Bruce St John, an analyst for Foreign Policy in Focus (www.fpif.org), has published extensively on Latin America issues for four decades. He is the author of The Foreign Policy of Peru (1992) and La Política Exterior del Perú (1999). He is presently completing a study of President Alejandro Toledo Manrique’s administration (2001-2006), entitled Toledo’s Peru.