Peru’s Trip to the Left

Peruvian presidential candidate Ollanta Humala, a left-wing opponent of free trade and free-market policies, is quickly gaining popularity and hopes to win Peru’s presidential election in April. Mr. Humala is backed by leftist Venezuelan President Hugo Chavez, who has cultivated close ties with Cuban dictator Fidel Castro.

Mr. Humala has campaigned with platforms to increase state control over the economy’s key mining and oil sectors. He condemns globalization as a U.S.-led assault on the poor and claims the poor Latin American population has failed to grow and benefit as a result of globalization trends.

Mr. Humala wants to increase taxes and royalties on foreign mining operations and claim at least a 49% share for the government in Peru’s natural-gas fields. The Wall Street Journal says, “Although Peru’s economy has grown rapidly in the past few years, Mr. Humala has been able to seize on the discontent of the poor, especially the region’s marginalized Indian groups, who have benefited only slightly from the growth and are impatient for faster results.”

The populist wave proves bothersome to the U.S.’s President Bush, who is criticized for ignoring Latin America; Mr. Humala has spoken out against U.S. “domination.” While leftist regimes throughout Latin America have criticized the U.S. for failing to alleviate (and further profiting as a result of) the poverty within Latin American nations, the U.S. has been a major source of aid and has great influence in the IMF and World Bank, which are major creditors of the region.

The threat of a leftist and state-controlled government has rattled Peru’s financial markets. Stock prices have fallen over the past months, and currency weakness forced Peru’s Central Reserve Bank to intervene to support it every day last week, selling a total of $292.5 million in the foreign-exchange market.

Many people, like Humala, believe that globalization helps the rich at the expense of the poor. Humala is consequently campaigning to close Peru’s government from high levels of international trade as an attempt to help the poor within his country.

Other people, like citizens of developed nations, disagree with Humala. These proponents of globalization point to increases in efficiency and productivity that globalization affords.

Further, this second group argues that globalization will make poor Peruvians (like the ones that Humala is trying to protect) better off than they would be if closed to globalized relationships.

Clearly, the world has responded negatively to Humala’s quest for a more closed economy because Peruvian financial markets have performed so poorly over the past several months. This might be viewed as a premonition that other nations will not support Peru’s state-controlled government.

In summation, as the Wall Street Journal states, “the presidential race seems to be coming down to a choice between continuity and change. Ms. Flores promises to continue the country’s impressive economic growth under Mr. Toledo, while Mr. Humala says the growth hasn’t helped the poor quickly enough.”