In Search of Lost Optimism. a Year of PPK

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In Search of Lost Optimism. a Year of PPK : SPECIAL REPORT In search of lost optimism. A year of PPK Madrid, July 2017 Barcelona • Bogota • Buenos Aires • Havana • Lima • Lisbon • Madrid • Mexico City • Miami • New York City • Panama City • Quito • Rio de Janeiro • Sao Paulo Santiago • Santo Domingo • Washington, DC IN SEARCH OF LOST OPTIMISM. A YEAR OF PPK 1. INTRODUCTION One year and one day after he started his term, 1. INTRODUCTION LLORENTE & CUENCA Peru reflects onThe Dreams of President 2. A YEAR OF PPK Kuczynski1. At that time, two potential scenarios were discerned 3. OPTIMISTIC START for how the country could evolve. On the one hand, possible 4. IMPASSE IN THE peaceful political coexistence between the PPK and Keiko Fujimori CONSTITUTIONAL DESIGN that would assure stable governing conditions and sustainable 5. CLOUDS ON THE HORIZON economic growth and, on the other, a state of permanent conflict 6. ECONOMY UNDER POLITICAL between the legislative and executive powers that would cast its PRESSURE shadow over political stability and private investment. 7. RECOVERING OPTIMISM 8. IN SEARCH OF LOST OPTIMISM Today, one year after analyzing these two possibilities, we know AUTHORS that the difficulties in managing to create harmonious coexistence between a government without parliamentary support and an opposition with legislative majority is one of the reasons for the growing censure that Pedro Pablo Kuczynski has been suffering. The LLORENTE & CUENCA Latinamerica Public Affairs team has prepared an assessment that not only analyses the main factors that have caused the political turbulence that Peru has experienced, but also considers a new outlook for his second year of mandate. This analysis sets out the main milestones that have shaped this first year of the PPK government, and that marks the course for what could happen in the next, an analysis that is essential for understanding what is actually taking place in Peru. 1 Developing Ideas The Peruvian economy, a success story by José Carlos Antón http://www.developing-ideas.com/2016/10/17/peruvian-economy-a-success-story/#. WXcCbojyiUk 2 IN SEARCH OF LOST OPTIMISM. A YEAR OF PPK 2. A YEAR OF PPK 3. OPTIMISTIC START President Pedro Pablo At the end of an intense Kuczynski’s first year was electoral campaign whose intense. The optimism at outcome was uncertain until the start of his term, due the very last week, with PPK to generating positive winning by fewer than 50,000 expectations in the business votes over Keiko Fujimori, sector, slowly started to there were quite positive fade away as the economy expectations both from citizens underwent a deterioration and private investors. “The optimism [...] triggered by strong political slowly started to pressure. However, only days In the business sector, because fade away as the into the second year of the PPK this was the first time in administration, the possibility decades that the second economy underwent a of better understanding presidential round was deterioration triggered between his government contended by two candidates by strong political and the opposition, led by who both looked favorably Keiko Fujimori, who controls on private investment, and pressure” the Congress, opens up the because the composition of prospect of a recovery of the new Congress made one optimism due to the eventuality think that there would also of a better business climate in be a friendly stance toward Peru. In light of recent months promoting private enterprise. though, this optimism will remain cautious, as this five- But the election results in 2016 year political term will never be entailed another novelty for the free from complexities. Peruvian institutional system. It was the first time in many President Kuczynski with Fernando Zavala, minister of Economy and Finance, years that a single opposition during his swearing-in ceremony party–the Popular Force– gained a crushing majority in the Congress that would let it control the legislative process and closely supervise and monitor the government via the instruments established by the Constitution. These factors all made it clear that the main challenge in the 2016-2021 term of office would not be economic, given the similar outlooks of the main parties represented in Congress, but essentially Source: https://www.flickr.com/photos/presidenciaperu/35450345156/in/album-72157682468470094/ 3 IN SEARCH OF LOST OPTIMISM. A YEAR OF PPK political: How to articulate 4. IMPASSE IN THE harmonious coexistence CONSTITUTIONAL DESIGN between a weak government like the PPK, due to its scant The underlying cause of parliamentary representation, this impasse is a problem in “The Fujimori opposition, and a solid opposition like that the design of Peru’s political due to having a huge led by Keiko Fujimori, in light system, which was analyzed Congressional majority, of its overwhelming majority in well by electoral affairs analyst legislative power. Fernando Tuesta2, who observed: can censure ministers ‘Peru is the only country in as often as it likes, Thus at the outset of PPK's the region in which –being something that would government in July 2016 presidential– mechanisms are one could outline two basic embedded that are typical of be uncommon in a scenarios for how the country parliamentary systems inherited parliamentary system” would evolve. from Europe, creating a hybrid that has negative effects on On the one hand, the optimistic Peruvian politics.’ scenario, which would entail the establishment of basic He adds: ‘In parliamentary political agreement between systems, the government is PPK and Keiko Fujimori that— elected in parliament by a without ever becoming a stable majority of a party or coalition and permanent alliance— of parties. While it does would let propitious conditions exercise a function of political for governance be established, control, the government can helping to set in motion the govern and the parliament implementation of pending can supervise its work. There reforms to promote economic cannot be a government with growth and improve quality of a majority parliamentary life in areas including the job opposition’. market, the pension system and decentralization. Thus, in a situation like the one Peru is going through today, On the other hand, the the Fujimori opposition, due to pessimistic scenario, consisting having a huge Congressional of growing stand-offs between majority, can censure ministers the government and the as often as it likes, something opposition that could place that would be uncommon in a governability at risk due to parliamentary system in which the creation of an institutional if the government lost majority, impasse. This could cause the the prime minister would be mandate to lose due to the directly censured and the permanent duel between those elections moved forward. seeking presidential vacancy and those wanting to dissolve the Congress. 2 El Comercio, Cernsorship in a poorly designed building by Fernando Truesta. http://elcomercio.pe/politica/censura-edificio-mal-disenado-fernando-tuesta-427718 4 IN SEARCH OF LOST OPTIMISM. A YEAR OF PPK 5. CLOUDS ON THE Other menacing factors have HORIZON included the accusations of corruption of politicians and At the start of his mandate, officials from the Operation Car the opposition expressed wash (Lava Jato) case in Brazil, support critical to the PPK which led to an international administration, including a arrest warrant being issued record and nearly unanimous for former President Alejandro investiture vote by Congress of Toledo; along with other the ministerial cabinet led by denunciations, ex-President Fernando Zavala–as required Ollanta Humala and his wife by the Constitution–as well as Nadine Heredia have been “The growing clashes granting legislative powers to ordered preventative detention the government. for 18 months; and this could between the government also affect ex-President Alan and the opposition were Nonetheless and one year later, García and former candidate not the only source of the great difficulty is apparent Keiko Fujimori for having complications for the in establishing elementary allegedly received illegal harmony between the PPK election contributions from the country’s institutions government and the Congress company Odebrecht. and economic endeavors” dominated by Keiko Fujimori’s party. This has frequently seen There was also the strong them taking the negative road impact of the coastal El Niño, of discord described above, with landslides and flooding darkening political stability and causing severe damages to the the business environment. national infrastructures and family estate, especially in the This was the consequence north of the country. of the opposition outlining a complicated and often Finally, there was the aggressive relationship with lamentable action of the the government, which was Republic’s comptroller clearly expressed in the censure general Edgar Alarcón, whose at the end of 2016 of minister of performance damaged the Education Jaime Saavedra. economic process. Its apex was the recording of private The growing clashes between conversations he held with the government and the ministers, which were later opposition were not the only leaked to the media in the source of complications for context of the debate on the the country’s institutions and Chinchero Airport project in economic endeavors. Cusco. 5 IN SEARCH OF LOST OPTIMISM. A YEAR OF PPK As a consequence of To start, public opinion approval the political turbulence on President Kuczynski’s surrounding this project, performance dropped, according
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