LatinFinance - July/August 2016 - 19

He instead plans to set a ceiling at 2.9% for
the first year in office, gradually bringing it
down to 1% by 2021.
"We are going to use a deficit ceiling and
we are going to commit only to a transitory
deficit. The idea is have some room for
a few years and then bring it back to 1%,
which is right for Peru," Thorne says.
Razor-thin win
The plans are impressive and will have
international investors paying close attention. But how much he can execute
is unknown. Kuczynski won the closest
presidential race in more than 50 years.
This means his first order of business will
be figuring out how to get things done in
the country's legislature, which will be
dominated by Fujimori's Fuerza Popular
party. He defeated Fujimori in the June 5
election by less than 50,000 votes.
Fuerza Popular holds 73 seats in the
130-member unicameral Congress. Kuczynski's Peruanos por el Kambio (PPK),
holds only 18 seats. Four other parties
hold the remainder. The potential political consequences are huge: Ms. Fujimori's
party has enough votes to reject Cabinet
members and bills proposed by the administration. Its lawmakers are in line for
speaker and to chair 18 of the 24 standing
committees in Congress.
Congresswoman Luz Salgado, Fuerza
Popular's longest-serving lawmaker, says
the party plans to make its voice heard.
"We are going to exercise our role as the
opposition, representing the half of the
population that voted for us," she says.
Fuerza Popular's majority could, however, pose a political test for the party.
Peruvians have never had a great love for
the legislature, with approval ratings of
Congress staying below 20% since early in
the last decade. The party has repeatedly
emphasized its dominance of the legislature, which could hurt it in the long run if
legislative gridlock takes hold, says Jo-Marie
Burt, head of the Latin American Studies
Program at George Mason University.
"They have set themselves up to be seen
as obstructionist, which is something Peruvians don't want," she says. "There will have
to be some level of negotiation, because if
not things will deadlock quickly and Fuerza
Popular will be held to blame."
Opposition parties know there is a risk
to gridlock. Peru's constitution gives the
president power to close Congress and call
new elections if lawmakers fail to give a vote
of confidence to two consecutive Cabinets.

Setting priorities
The top items on Kuczynski's economic agenda
* Tax breaks for small and medium-sized enterprises
* Lower the value-added tax from 18% to 17% and eventually to 15 % by 2021
* Create decentralized infrastructure agency to work with state and local
governments
* Free up large-scale public and private investment projects blocked by red tape
or protests

Peru's vitals
Annual GDP growth

2015

2016

4.20%

2.50%

3.37%

3.54%

$60.02 billion

$60.21 billion

- $1.7 billion

- $616 million

3.16

3.37

Data for 12 months to end-April

Inflation
Data for 12 months to end-May

Net international reserves
Data to June

Trade balance
Data for Jan-April period

Exchange rate
Soles per dollar at end-May
Source: Central Bank of Peru

One issue hovering above all else is
Alberto Fujimori, the former president
(1990-2000) and Keiko Fujimori's father. He
is in prison serving multiple sentences on
corruption and human rights abuses committed under his watch. He will be 92 when
he completes his 25-year sentence in 2030.
Kuczynski has said that a pardon is not an
option, but has offered an alternative that
puts the issue in Fuerza Popular's hands. He
would allow inmates "of a certain age who
committed certain crimes" to serve their
sentences under house arrest, he says.
Any decision would require a great deal
of finesse, as an agreement on the former
president could provoke a backlash among
left-wing parties and civil society groups.
They swung their support to Kuczynski
during the campaign more out of a desire to
keep Fujimori from winning than actually
championing his agenda.
While some balancing will be needed,
Kuczynski's vice president, Martín Vizcarra,
expects the different caucuses to coalesce
around a "basic agenda" of key points
raised during the campaign.
"I believe that there are common points
that will allow us to build consensus to approve reforms," Vizcarra says. LF
July/August 2016 - L ATINFINA NCE.COM 19
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