Political Pipeline: Peru’s Presidential Election

Peru will change government this year. Ollanta Humala’s five-year administration will leave the economy expanding at decent rates despite a complicated global scenario, but also one of the worst corruption scandals in decades.


Humala, a former army officer, run first against Alan García in 2006. At that time, he branded himself as an anti-system candidate admirer of Hugo Chavez. He lost in a tight runoff. He came back in 2011, and having learnt his lesson, presented himself as “Peru’s Lula”. That year, but this time Humala defeated Keiko Fujimori in another tight race.

Humala’s presidency did not resemble Chavez’s or Lula’s. He continued moving further to the center and even more to the right than the left side of the political spectrum. He not only embraced the liberal economic policies of his predecessors, but took some to the next level.

International trade has consolidated as one of Peru’s economic pillars. During the administrations of Alan García and Ollanta Humala, the country complemented its WTO membership and a couple of limited preferential trade agreements under ALADI’s framework with 17 free trade agreements (FTAs) that involve more than 50 countries. Only in 2011, year that Humala took office, Peru signed FTAs with Costa Rica, Guatemala, Japan, Korea, Mexico, Panamá and Thailand. In 2011, Peru also joined the Pacific Alliance seeking to foster economic integration with Chile, Colombia and Mexico. Last month, the Andean country signed the Trans Pacific Partnership (TPP) along with other 11 nations.

Trade as a percent of GDP has increased from around 35% in 2000 to roughly 50% in the last years. The treaties, combined with the commodity (i.e., copper) boom, gave Peru one of the fastest economic growth rates in the region. On average, the country has grown more than 5% between 2000 and 2015. Over the same period, GDP per capita PPP more than doubled, going from $5,300 to $12,400 with a population 28% larger (+7 million).  It was no coincidence that last year Peru the first IMF Summit hosted by a Latin American country since Brazil (1967).

By not following Chavez and Lula, Humala took advantage of the commodity boom but avoided the economic recession, inflation and current account imbalances that Brazil and Venezuela are currently experiencing. However, there is a resemblance between the three countries. Humala has not been able to capitalize Peru’s economic boom and suffers low presidential approval rates, similar to his peers in Brazil and Venezuela.  Dilma (5%), Maduro (25%) and Humala (18%) have the lowest approval rates in the region.

In Humala’s case, his low approval rate is due to a corruption scandal that started last year when the media published the content of one of his wife’s notebook, which linked the presidential couple to money laundry and other corrupt activities. The scandal finished with Humala’s Partido Nacionalista Peruano opportunity to retain the presidency on April 10. Its candidate, Daniel Urresti, has less than 1% of the vote intentions according with the last survey of the local pollster Gfk.



The greatest surprise of Gfk January’s survey is that Julio Guzmán, candidate for Todos Perú, jumped in voting intention from 1.9% in December to 10.4% in January. That was enough to leave behind César Acuña (10%) and Pedro Pablo Kuczynski (9.5%), who have been competing for the second place in the last months.

Currently, the strength of Fuerza Popular’s Keiko Fujimori looks insufficient to reach the 50% threshold that would give her the victory and avoid a runoff in the presidential election. Although Julio Guzmán is still far from Keiko’s 32% voting intention, he could have a chance if he capitalizes his momentum in the expected runoff.

Keiko Fujimori is Alberto Fujimori’s daughter, a controversial president of Peru in the 1990’s, who defeated the guerrilla group Shining Path, restored Peru’s macroeconomic stability, but is currently in jail accused for human rights violations. Keiko’s relationship resulted problematic for her in the 2011 runoff and could become an issue all over again.

LATAM PM’s take: Peru’s next president will face declining copper prices and financial turmoil as key risks to keep economic growth momentum alive. The needed diversification of the economy and structural reforms require a much higher political capital than what Humala currently has. At the moment, the fragmented presidential race represents a challenge to provide a president with such political capital. Recent polls in Peru show a Keiko Fujimori’s comfortable lead. Despite Keiko’s clear advantage, we still believe that the election is far from decided. Keiko is not close to the 50% threshold to avoid a runoff that could represent an obstacle in her presidential race. The recent Argentinean election provides some evidence that second rounds can twist presidential elections fast.