June 9 (Bloomberg) -- We now know that Ollanta Humala will be the next president of Peru. The question is which Humala will take office: the Latin American nationalist who in a previous campaign expressed solidarity with Venezuela’s Hugo Chavez, or the candidate of 2011 who distanced himself from Chavez and promised to respect democracy and avoid what his running mate Marisol Espinoza called “authoritarian” economics.
Since the June 5 election, Humala’s team has tried to reinforce the image of moderation, but investors in the Lima Stock Exchange appear unsure. On June 6 trading had to be suspended after shares dropped 12.5 percent.
The uncertainty is not confined to markets. Ask Peruvians how their country did during the last decade and you will get sharply different answers depending on whom you ask.
Those of European or mixed ancestry living in the capital of Lima and the comparatively wealthy coastal areas will likely note that, under the prudent stewardship of President Alan Garcia, Peru’s economy grew by 8.8 percent in 2010 with low inflation.
But Peruvians in the Andean highlands and urban slums, many of whom are of indigenous ancestry, will tell a different story. They will point out that a third of their countrymen live below the poverty line and that Garcia’s refusal to raise social spending meant that they saw little tangible improvement in their lives.
The Chavez Path
Humala has said that Peru’s mineral wealth -- in copper, silver, zinc and gold -- should become an engine for social inclusion. We hope he will follow not the Chavez path but the one set by moderate Latin American leftists such as former Brazilian President Luiz Inacio Lula de Silva, who was able to lift millions of Brazilians out of poverty by supporting business while increasing social spending.
Peruvians, and the world, will get the first clues as to Humala’s direction when he names his economic team. It will be a hopeful sign if, as reported yesterday by Bloomberg News, Humala offers the finance and trade ministry posts to respected officials from a previous free market government.
Another indication will be whether the new president keeps Peru in the Acuerdo del Pacifico, a group that promotes trade with Asia and includes conservative-leaning nations such as Chile, Colombia and Mexico, or if he joins ALBA, an anti-American bloc led by Chavez’s Venezuela that also includes Nicaragua, El Salvador and Ecuador
These decisions, more than any rhetoric, will tell Peruvians, and Peru’s hemispheric neighbors, what to expect from Humala.
Washington’s message can be straightforward. To the extent that Humala stays on the democratic course and chooses not to emulate Chavez’s strong-arm actions, U.S. support will continue and grow.
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