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Humala Roils Peru Market as Anti-Fujimori Campaign Nears End

The race to succeed President Alan Garcia of Peru, a country where one-third of the populace lives in poverty, may be decided in up-and-coming neighborhoods such as Independencia where children of peasants who fled the countryside now work and shop at the nation’s biggest mall.

Congresswoman Keiko Fujimori, who is running even with former army officer Ollanta Humala in polls before the June 5 election, is banking on the votes of those lifted into the middle class by a decade of region-leading economic growth.

Peru´s economic expansion has spurred employment and doubled per capita income to $5,224. Still, the prospect of a win by Humala, a onetime ally of Venezuela’s Hugo Chavez, has generated wide swings in Peru’s stock market over the past month. Fujimori has pledged to maintain policies that have nurtured the boom and helped people like Melina Paima stock homes with flat-screen TVs and washing machines.

“Keiko is better prepared to govern than Humala,” said the 32-year-old Paima, who lives in Independencia in the capital city of Lima and sells beauty products in the Plaza Norte mall, which opened there in 2009. “She’s a mother like me and she has an MBA. All Humala has is his military training, and there’s a fear that with him we won’t do so well economically.”

Guarding Gains

Middle-class voters are torn between guarding their gains and concern that corruption may flourish under Fujimori, said Andrea Stiglich, a Latin America specialist at the London-based Economist Intelligence Unit. The candidate’s father, Alberto Fujimori, is serving a 25-year jail sentence for directing a paramilitary death squad as president from 1990-2000.

“The higher-income groups will vote for Fujimori because of her economic policies,” said Stiglich. “The real fight for votes is in Lima’s middle class. They are more worried about corruption and human rights abuses, but in the end they’ll vote to protect their wallets.”

Fujimori, a U.S.-educated mother of two, leads Humala by 2.2 percentage points, within the margin of error, after trailing him by eight points in the first round of the election April 10, according to a poll by Lima-based Ipsos Apoyo issued yesterday. Two other polling firms said yesterday the candidates are tied.

Narrow Loss

Investors are concerned that Humala, who narrowly lost the presidency to Garcia in 2006, will follow in Chavez’s path by nationalizing companies and boosting the role of the state in Latin America’s fastest-growing economy over the last five years, said Gustavo Rangel, an economist at ING Financial Markets in New York. “His victory would add considerable downside to Peru’s long-term fundamentals,” Rangel said in a May 23 report.

As Humala, 48, has seen a six-point lead in the polls evaporate, he has shelved his 198-page campaign platform to back away from an earlier pledge to rewrite the constitution, and said he won’t use private pension fund savings to finance a state retirement plan. Instead of looking to Chavez, he now says he would emulate the pro-market policies of former Brazilian President Luiz Inacio Lula da Silva, and he hired two of Lula’s aides as campaign advisers.

Investors in Peru have ridden a roller coaster since the first round. The Lima General Index of stocks fell 6 percent, the most in seven weeks, on June 1 on speculation that Fujimori’s lead had narrowed. The gauge jumped 7.2 percent yesterday, the most in more than two years, after Ipsos Apoyo’s poll showed her lead little changed from a May 29 survey.

Extra Yield

In the two weeks after Humala led the field in the first round, sol-denominated bond yields rose to a two-year high and the currency fell to a 10-month low. Then, with Fujimori climbing in the polls, the currency gained 2.6 percent and the extra yield investors demand to own Peruvian government debt over Treasuries dropped 42 basis sis points, or 0.42 percentage point, to 189 at 10:55 a.m. New York time, according to JPMorgan’s EMBI+ indexes.

“We have to continue with an open economic model in order to let us grow,” Fujimori, 36, said in a May 19 interview after a day of campaigning in Chiclayo, a thriving agricultural hub and Peru’s fourth-biggest city. “But there must be changes in the government to make it more efficient and transform the budget into services for the people.”

Average economic growth of 5.7 percent in the last decade has turned former shantytowns into centers of industry and commerce. In Independencia, the Plaza Mall separates a hillside district where migrants from the Andean highlands live in shacks from an area of tidy streets where the first apartment buildings are going up, painted pristine white.

Trickle Down

Humala is stronger among the poor and in rural areas where voters are less concerned with him being a “radical” and the benefits of economic growth have been slower to trickle down, said Erasto Almeida, a political analyst at Eurasia Group, a New York-based research company.

At the same time, memories of Fujimori’s father delivering clean water and building schools in remote corners of the country are drawing voters to his daughter, Almeida said.

Alberto Fujimori is credited by supporters with laying the foundations of Peru’s economic boom by slashing inflation from 7,650 percent to 3.5 percent and luring foreign investment. His government collapsed after his intelligence chief, Vladimiro Montesinos, was caught on videotape in 2000 bribing lawmakers.

More Votes

Keiko Fujimori, who met her U.S.-born husband, Mark Villanella, while obtaining an MBA at Columbia University in New York City, was elected to Congress in 2006 with more votes than any other candidate. She has apologized to Peruvians for crimes committed during her father’s government, while saying he is innocent of the charges on which he was convicted. Most people don’t believe her pledge that she won’t free him from jail if elected, a May 23 Ipsos Apoyo poll showed.

As the election nears, the two candidates have increasingly traded personal attacks. Humala has charged that Alberto Fujimori is running his daughter’s campaign from his jail cell, while her supporters have accused Chavez of funding Humala’s 2006 presidential bid. Humala’s running mate, Omar Chehade, on May 26 accused Garcia of trying to rig the runoff in favor of Fujimori. Garcia rejected the claim.

Despite Humala’s best efforts, he hasn’t been able to dispel the specter of Venezuela’s self-proclaimed socialist revolutionary.

“Humala hasn’t got a good platform, he wants to do the same as Chavez,” said Oswaldo Tapia, a construction worker loading steel rods onto a truck in Chiclayo. “With Keiko, things will be different from the way they were under her father. And we should be scared of Humala.”

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

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