July 6 (Bloomberg) -- President-elect Ollanta Humala sought to assure U.S. officials as he visited Washington today that Peru under his leadership won’t allow relations with its biggest trading partner to sour.
Humala discussed economic relations and drug trafficking with Secretary of State Hillary Clinton before meeting President Barack Obama at the White House.
The 49-year-old former army rebel will use his one-day trip to Washington to try to allay concerns he’ll restrict investment when he takes office July 28, said Michael Shifter, president of the Inter-American Dialogue, a policy research group.
“Humala has become more moderate and more centrist, and this is an opportunity for him to tell the U.S. administration who he is and what his positions are,” said Shifter in a telephone interview from Washington. “The U.S. won’t be a high priority for the Humala administration, but he’ll want to have good relations on trade, drugs and other issues.”
The U.S. has indicated it wants to cultivate ties with the resource-rich nation at a time when China is playing a larger role in Latin America.
At a joint press conference in Washington today, Clinton said the U.S. “stands ready to be Peru’s partner” while Humala said he plans to strengthen ties between the two countries.
“Relations are good, but we want to improve them during my government,” Humala said.
Humala, a one-time ally of Venezuelan President Hugo Chavez, rattled investors during the presidential campaign with pledges to revise mining contracts and free-trade agreements with the U.S. and other nations. Like Chavez, who as a paratrooper in 1992 led a coup attempt, Humala as an army lieutenant colonel in 2000 led 50 soldiers who seized and occupied for a week one of Phoenix-based Southern Copper Corp’s mines to protest corruption in the government of then-President Alberto Fujimori.
Humala shifted his stance during this year’s campaign to defend policies that made Peru the fastest-growing Latin American economy over the past decade. Instead of Chavez, whom he praised during an unsuccessful presidential bid in 2006, he said he now will seek to emulate the business-friendly policies of former President Luiz Inacio Lula da Silva in Brazil.
Humala told reporters in Washington today that Peru wants a relationship with the U.S. based on “mutual respect and reciprocity” while using the nations’ free trade agreement to boost the Peruvian economy. Humala said he’ll also seek an “optimal” relationship with Venezuela.
The 49-year old president-elect said he aims to “strengthen democracy in the Americas through the OAS,” after a meeting with Jose Miguel Insulza, secretary-general of the Organization of American States.
“One of the most pressing tasks is to de-ideologize international relations,” Humala said. “Any ideological confrontation between states risks opening fissures that are difficult to close.”
Peru, the world’s largest silver producer and third largest in copper, has seen gross domestic product expand an average 5.7 percent a year over the past decade. It will lead Latin America with 6.6 percent economic growth this year after expanding 8.8 percent in 2010, according to the International Monetary Fund.
The yield on the nation’s benchmark 7.84 percent sol-denominated bond due August 2020 has fallen 66 basis points since the initial sell-off triggered by Humala’s June 5 election victory, while the Lima General Index of stocks has dropped 8.3 percent.
Investors remain concerned that once in office the Nationalist Party leader will fulfill earlier pledges to rewrite the constitution and unilaterally boost mining royalties.
President Alan Garcia signed free-trade agreements with the U.S. in 2007 and China in 2009 and completed trade talks with the European Union last year. Humala’s 198-page campaign platform said Garcia “has indiscriminately opened our internal market to subsidized products from other countries” and that the agreements will be revised where necessary.
Humala’s visit to Washington comes when competition for natural resources in Latin America is heating up. The U.S. accounted for 16 percent of Peru’s exports and 19 percent of its imports last year. The Andean nation shipped to the U.S. $5.7 billion in exports, mainly gold, copper and gasoline. China, Peru’s No. 2 trading partner in 2010, overtook the U.S. as the biggest market for Peruvian goods in the first five months of this year.
Brazil and Chile
A similar dynamic is evident elsewhere in South America. China, the world’s second-largest economy, passed the U.S. as Brazil’s biggest trading partner in 2009 after becoming Chile’s leading export market in 2007.
Peru’s mineral and natural gas wealth has lured companies including Dallas-based Hunt Oil Co., which led the $4 billion Peru LNG project, the Andean nation’s largest-ever investment. Greenwood Village, Colorado-based Newmont Mining Corp. owns Yanacocha, Latin America’s biggest gold mine, and is investing $3 billion in a gold and copper deposit in the country.
The U.S. is also concerned about rising illegal drug output in Peru. The nation last year rivaled Colombia as the world’s largest producer of cocaine after a government eradication program failed to stem rising cultivation of coca, the raw material used to make the drug, according to a United Nations group. In his campaign platform, Humala vowed to stop the forced eradication of coca, a program for which Peru receives U.S. anti-narcotics aid.
Since being elected June 5, Humala has said Peru needs U.S. support in its fight against drugs.
“The trip is an opportunity for Humala to recast his reputation in Washington, which is based on a lot of gossip,” said Larry Birns, director of the Council on Hemispheric Affairs, a Washington-based research group. “Ollanta will do what Brazil has done and say we feel we can have cordial relations with Venezuela and Cuba and the U.S. We don’t have to pick sides.”
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