LatinFinance - March/April 2013 - 16

Man of the year

victory against Keiko Fujimori, Humala
went on to govern with his roadmap.
The turning point came when Humala
failed to offer cabinet posts to the original
plan’s authors. He went on to sideline
almost all his early allies, a large chunk of
whom were booted out within six months
in a shakeup that also saw 10 ministers
leave government. The most conspicuous
left-wing lawmakers brought in to run on
Humala’s ticket, including Social Party
founder Javier Diez Canesco, split from
the congressional caucus less than a year

Humala and Heredia: two for one
into office.
Still smarting from what they see as a
betrayal, Humala’s newfound opponents
on the left, including his parents and three
of his siblings, are harsh in their criticism.
The president’s father, Isaac Humala, say
that if his son does not tack leftward, he
might fail.

No choice but pragmatism

Humala says ideologies cannot cloud
state management and that the goal is a
government that is predictable.
“I have to do what is necessary –
sometimes veering to the left, sometimes
veering to the right – looking for the best
way to get to where we want to go,” he
says, likening his task to that of bus driver.
“There are risks, and these risks we

16 LatinFinance

March/April 2013

assume as a government. The public needs
to be at ease, the state cannot add tensions
to people’s lives. I do not think that any
government policy can be successful if we
do not have a successful economy.”
Some argue that Humala had no
choice but to adopt a pragmatic approach
to leading the country and managing
the economy, precisely to preserve the
country’s high growth rates. Intervening
against the machinery that was producing
rapid growth would have cost him dearly.
A large part of the credit for economic

undermined business confidence would
have had a direct and substantial effect on
growth momentum.
“I always felt that when Humala came
to office, if he tried to do something
radically different a la Chávez, it just
wouldn’t work, it would have been a
recipe for disaster. And he knew that,”
says Michael Shifter, president of The
Inter-American Dialogue, a think tank.
“I’m not surprised that he just let these
things happen.”

Keeping promises

The Humala administration set to work
quickly upon taking office. Almost
immediately, it raised the minimum wage
and ushered through Congress three
bills that increased revenue from mining
companies – a central factor in creating
the environment in which his government
has evolved over the past 18 months.
“We created the mining tax, but unlike
those who did not know me, who thought
I was going to do it based on coercive
methods, threats of nationalization,
we did it through dialogue with the
companies, explaining the country’s
needs,” says Humala. “That is what this is
about: complying with my duty.”
Erich Arispe, a director in Fitch
Rating’s sovereign group, says a major
concern was striking a balance to
win additional revenues from mining
companies while not diminishing Peru
as an investment destination. “The
private sector was a willing participant
policy continuity goes to Humala’s finance in reaching this agreement,” he says.
“If you look at mining investment in the
minister. “Castilla was able to convince
country, the agreement obviously did not
the president that a change in the model
undermine Peru’s attractiveness.”
would have been completely misguided,”
Boosting revenue through mining
says Eduardo Morón, a former Peruvian
levies, tax reform – the tax take hit
deputy finance minister and now head of
the Bogota-based Fondo Latinoamericano 16% of GDP in 2012, the best in Peru’s
modern history – and other mechanisms,
de Reservas (FLAR).
has allowed Humala to expand social
Humala as president today is seen as
much closer in approach to Uruguay’s José programs. The principal component of
the new approach was to set up a Ministry
Mujica, a pragmatic, no-nonsense leftist,
of Development and Social Inclusion
than to Chávez. Humala’s conversion – if
(MINDIS) to implement a host of new
it can be called that – to pragmatism also
schemes, as well as to improve those
reflects some basic truths about Peru’s
already in place.
economy. While growth in Peru today
The president stresses that his
holds up well in part thanks to strong
domestic consumption, it is fundamentally government is not about new initiatives,
but that it has instead “created a social
at the mercy of investment – the main
policy for the first time in Peru. We have
driver of demand. Any move that
LatinFinance - March/April 2013

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