LatinFinance - March/April 2013 - 12

Man of the year

Seize the moment
By Taimur Ahmad and Lucien Chauvin

Having confounded observers with his pragmatism, Ollanta Humala
now has an historic opportunity as president to cement the gains of
Peru’s economic boom – and secure his nation’s future

T

he day after Ollanta Humala was
elected Peru’s president in 2011,
the local bourse suffered the worst
single day in its history, plummeting
12.5% before trading was suspended.
The left-wing ex-soldier had narrowly
beaten Keiko Fujimori, a right-wing
populist congresswoman and daughter
of a jailed former president, to become
Peru’s head of state. Peruvian Nobel
laureate Mario Vargas Llosa famously
likened the runoff to a choice between
terminal cancer and AIDS.
It wasn’t just financial markets that
reacted badly to Humala’s election. Large
swathes of the public took fright – as did
foreign and domestic companies, the
lifeblood of Peru’s open economy.
The fear was that a Humala
presidency would hurl the country into
the grips of the 21st century socialism
model promoted by Venezuelan leader
Hugo Chávez. He would roll back freemarket reforms, following his campaign
pledge to fight poverty by redistributing
the country’s newfound wealth.
Industries would be expropriated, private
schools shut down and the economy
turned on its head.
His first year was largely an awkward
teething period, during which a series
of missteps saw his approval ratings
falter amid widespread public distrust.
But Humala and his economic advisors
insisted from the outset that they would
preserve economic stability, attract

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March/April 2013

foreign investment and maintain rapid
growth.
Throughout a series of ups and downs
since taking office, Humala has stuck to
that promise on economic management.
He has maintained the policy framework
of previous administrations, while
launching a number of programs to follow
his campaign promise of social inclusion.
He picked Luis Miguel Castilla, a
deputy finance minister in the previous
administration, as finance minister, and
retained Julio Velarde for another fiveyear term at the helm of the central bank.
Both appointments helped encourage
a belief that the erstwhile leftist
revolutionary may pose less of a threat to
economic stability than many had feared.
Since then, Peru’s rapid expansion has
continued unabated, nudging 7% a year.
Peru had the fastest growth, 6.3%, and
lowest inflation, 2.6 %, of any country in
South America last year. Today, foreign
investment continues to pour into mining,
hydrocarbons and infrastructure; business
confidence is at record highs and the
domestic market is booming. Investment
reached 27% of GDP in 2012, up from
18% ten years ago, and is expected to rise.
The result is that 18 months into
his presidency, Humala’s popularity is
close to 60% – a level unseen in Peru
in many years. The public cites solid
government management, economic
stability and social programs as his biggest
achievements. His support is strongest in
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