Alan García Perez – someone who most Peruvians never imagined would regain the sash of office, after his first period as head of state (1985-90) ended in hyperinflation and political crisis – was sworn in as president on 28 July 2006, among all the pomp and ceremony of his country's independence day. However, he seems a very different Alan García to the figure sworn in twenty-one years ago, when he used his inaugural speech as a platform to announce Peru's unilateral moratorium on debt-service payments. Today, he pledges to follow orthodox economic policies, and is keen to avoid the mistakes that led to his leaving office in 1990 in disgrace, amid a shambolic, unsustainable economy.
The new cabinet
García's appointment of a sixteen-member cabinet, announced on 27 July, underscores this point in three ways. First, he selected the conservative banker Luis Carranza as minister of economy and finance. Carranza returns to Peru from Spain, where he held a senior position at the Banco Bilbao Vizcaya Argentaria (BBVA). Before this, he was one of the key confidants of Pedro Pablo Kuczynski, the prime minister (and former finance minister) of outgoing president, Alejandro Toledo. Kuzcynski's imprimatur on Peru's economic policy during 2001-06 has been seen by the international financial community as a guarantee of fiscal and monetary rectitude.
It is precisely García's former heterodoxy (which included the ill-fated attempt to nationalise Peru's private banks in 1987) that makes him determined to take every step to convince the outside world that he has learned the errors of his former ways. In practical terms, he and Carranza will follow economic policies that are close to those of the Toledo administration. As always in Peru, however, there will be tension between the economy ministry and those in government who would like to see more public spending. In the short term, at least, the new economy minister will seek to maintain a tight grip on the public purse.
John Crabtree is a research associate at Oxford University’s Centre for Latin American Studies. He is the author of Peru under Garcia: Opportunity Lost (Macmillan, 1992), Fujimori’s Peru (ILAS, 1998), and Patterns of Protest: Politics and Social Movements in Bolivia (Latin America Bureau, 2005). He is the editor of Making Institutions Work in Peru: Democracy, Development and Inequality since 1980 (Institute for the Study of the Americas, London University, April 2006).
Also by John Crabtree on openDemocracy:
"Bolivia's retreat from civil war" (June 2005)
"Peru: the next Andean domino?" (June 2005)
"Bolivia on the brink" (October 2005)
"An Andean crisis of democracy"
"Evo Morales's challenge"
"Peruvians prepare to bite back" (April 2006)
"Peru's chessboard" (April 2006)
"Bolivia stakes its claim" (May 2006)
"Peru: the institutional deficit" (May 2006)
"The return of Alan García" (June 2006)
"Evo Morales: the force is with him" (July 2006)
Second, García is determined to show that he is not going to pack his government with party loyalists as he did in his first term, when these became widely viewed as the beneficiaries of institutionalised corruption. Card-carrying members of the centre-left Alianza Popular Republicana Americana (Apra) are in a distinct minority in the new cabinet. García has gone out of his way to bring in independent technocrats. He has even reserved a seat round the cabinet table for the far-right Opus Dei militant, Rafael Rey, who becomes minister with responsibility for production. Apra militants privately feel rebuffed by García's initial choice of ministers, though at least prime minister Jorge Del Castillo is one of their number.
A third criterion that has prevailed in the selection of the new cabinet is the number of women represented. García has strained to comply with a campaign promise – perhaps reflecting a concern not to be outdone in this respect by Chile's new president Michelle Bachelet – to have a fifty-fifty split between men and women ministers. But to honour this commitment as far as possible (in the event only six women are included in the cabinet, including Mercedes Araoz as trade minister and Pilar Mazzetti as interior minister), there had to be last-minute changes which left one or two highly eligible males out in the cold.
The party landscape
The composition of García's government also reflects new political realities arising from the results of the 2006 presidential contest. This saw the leftwing nationalist Ollanta Humala win more votes (just over 30% of ballots cast) in the first round on 9 April, with García only beating third-placed Lourdes Flores of the right-of-centre Unidad Nacional (UN) by the narrowest of margins. In order to win in the second round on 6 June, García had to appeal to conservative voters who had previously supported Flores. This meant that Apra found itself pushed to the right.
Humala's party, Unión Por el Perú-Partido Nacionalista Peruano (UPP-PNP), is also the largest (with forty-five representatives) in the new 120-seat congress sworn in for a five-year term on 25 July; Apra (with thirty-six representatives) is the second-largest grouping. García could expect little support from Humala's deputies who have no sympathy with neo-liberal economics and want a radical shift in Peru's foreign and social policies. He therefore had little alternative but to seek collaboration where he could find it, on the right, and Unidad Nacional was the first port of call.
Although not prepared to enter any formal coalition with Apra, UN has made clear that it will support the government's legislative agenda for the time being, so long as it roughly corresponds to policies that the right finds acceptable. Since Apra and the Partido Popular Cristiano (PPC), the senior partner in UN, are both reasonably disciplined parties, this should mean that the government can rely on majority support in the single-chamber congress. And even if it suffers defections, there are others from smaller parties that can probably be relied upon for help when needed. Moreover, Humala's opposition UPP-PNP is proving extremely flaky, with early signs of internal schism.
The foreign-policy picture
If in its economic policies, Peru under García will seek to play by the established rules of the "Washington consensus", in its foreign policy it is also likely to fall in closely with the United States in contraposition to countries like Venezuela and Bolivia that reject Washington's tutelage in Latin America.
An early sign here is García's apparent willingness to go along with the free-trade agreement (FTA) with the United States, negotiated by Toledo and signed in December 2005. During the presidential campaign, he argued the need for changes in the text agreed by Toledo, but these doubts seem to have dissipated in the face of Realpolitik. Although ratified by the outgoing Peruvian congress, it now seems unlikely that the FTA will be considered by the United States congress before the US's mid-term elections in November 2006.
The pattern of García's pre-inauguration travels – which have included trips to Brasilia, Santiago and Bogotá – suggest the flavour of likely alliances within Latin America. Peru will seek to align itself with governments that are moderate in their economic policies and prepared to do business with Washington. García has been particularly effusive towards Bachelet, promising détente in the prickly relationship between Peru and Chile in recent years. The Peruvian military regards the military balance as being stacked in Chile's favour and regards rapprochement with suspicion; perhaps it is partly for this reason that García has chosen a retired general as his first vice-president.
The acrimonious war of words between Venezuela and Peru in recent months, heightened by Venezuelan President Hugo Chávez's open support for Humala in the Peruvian presidential race, is set to diminish. However, García is not inclined to cultivate friendship in Caracas if it means alienating Washington, and Chávez was conspicuously absent from the heads of state attending García's inauguration.
In the case of Bolivia, the Peruvian position may be more accommodating. But, as in the past, the bottom line may prove to be Peruvian reluctance to go along with any territorial arrangement along its southern frontier that affords Bolivia some sort of access to the Pacific.
openDemocracy writers analyse Peru's politics:
Ricardo Uceda, "Fantasy Island"
Ricardo Uceda, "Peru's election: a second leap into the void"
Lisa Laplante, "The cloud of fear: Peru's anti-terror lesson" (March 2006)
Justin Vogler, "Ollanta Humala: a Peruvian gamble" (April 2006)
The social agenda
Peru has been among Latin America's fastest growing economies in recent years, but a major challenge for the García government will be whether it has any more success than its predecessor in extending the benefits of this growth to the majority of the population officially classified as "poor".
One of the main reasons for deep public disillusionment with the Toledo administration, which began with high hopes in 2001, was its abject failure to honour its campaign slogan of más trabajo (more work). More than half of the workforce continues to labour in the so-called "informal sector" where remuneration is low, employment unstable and where social benefits (such as pensions) are nil.
Alan García has promised to maintain Toledo's flagship social programme, called Juntos. Like Bolsa Familiar in Brazil and Oportunidades in Mexico, this is a scheme for making direct payments to poor households where families accept the conditions attached by sending their children to school and having the stipulated health injections. The main problem here is that the programme (if implemented throughout the country) is fiscally expensive and is dependent on the highly deficient educational and health provision offered by the relevant ministries. Many families complain, for example, that there is little point in sending their children to school when there are not adequate numbers of qualified teachers and when children can earn money for the family by going to work.
The problem of poverty in Peru is most acute in the Andean highlands, especially in rural areas. Here García has promised to introduce a scheme known as the sierra exportadora whereby peasant farmers are encouraged to produce for niche export markets. For instance, there has been some success in exporting broccoli from the highland valleys, echoing Peru's previous success as an exporter of asparagus. However, it is most unlikely that this will benefit more than a tiny fraction of Peru's highland farmers, while many producing for the domestic urban market face the prospect of disabling competition from subsidised United States producers due to the FTA.
The scale of discontent among low-income households, especially in rural areas, was made clear by a United Nations Development Programme (UNDP) report released in March 2006 which showed a clear rejection of the way in which democratic institutions work in Peru. The elections themselves showed voters dividing along clear lines of class and income, with lower-income Peruvians (especially those of indigenous origin) voting massively for Humala. If García wants to avoid growing social tension and possibly political conflict, he will need to show that he can do something concrete for the millions of poor Peruvians who expressed confidence not in him but in Humala.
The next elections
Even before Peru's new president and congress were installed, politicians' minds were turning to the next electoral hurdle: municipal and regional elections scheduled for November. This will be the first major pointer as to whether Alan García can hold on to his newfound popularity or whether Humala and his friends will take advantage of a mood of disillusion and discontent at the sub-national level.
The last time regional elections were held, Apra won in nearly half of Peru's twenty-five departments. This time, especially in light of their relegation to second place in the congressional elections, the party will be on the defensive. A weak result in the November elections could prove a major psychological blow for the country's new government and its ruling party. Alan García has work to do.