beyondbrics

By Lucien Chauvin in Lima

Peru is certainly not Brazil, but to the casual observer of the country’s upcoming presidential run-off this point could be missed.

The candidates in the race, leftist retired Army Col. Ollanta Humala and Congresswoman Keiko Fujimori, are competing for the legacy of a former president, but not one from Peru. Both are trying to position themselves as the heir to Brazil’s former President Luiz Inácio Lula da Silva to win votes locally and calm fears of investors internationally.

Lula and Brazil were high on agenda in the days immediately following last Sunday’s poll showing Mr Humala with a comfortable six-point led over Ms Fujimori in the June 5 run-off.

On the campaign trail in Lima on Tuesday, Mr Humala, 48, praised the “successful Brazilian model” and said Peru’s needs to hitch itself to Brazil’s development train. Ms Fujimori, looking for votes in the north of the country, said she likes what Lula did, obtaining “extraordinary numbers in the fight against poverty.”

The stakes are highest of Mr Humala, who still needs to convince a broad section of Peruvians that he is not a firebrand leftist intent on installing Venezuelan President Hugo Chávez’s brand of “21st century socialism” in Peru. In the April 24 national poll by Ispos Apoyo, the first since Mr Humala came out on top with nearly 32 per cent in the first round of voting two weeks earlier, 47 per cent of respondents said they believed he would join the Chávez-led block, while 48 per cent said Mr Chávez was likely funding the Humala campaign.

Markets have responded negatively to his initial win and first place in the polls. The Lima bourse’s General Index is off 19 per cent so far in April – and 28 per cent for the year – and the local currency, the sol, weakened by nearly 1.5 per cent in the first three weeks of the month.

The central bank, which has been buying dollars for the past year to moderate the sol’s appreciation, has switched tactics and is now in a selling mode. The central bank sold $492m on April 27, one of its largest daily sales, to keep the sol from depreciating. It sold $91m on April 14. London-based Capital Economics, in its April report, said Peruvian markets “have been hammered following Ollanta Humala’s victory in the first round,” with equities down 16 per cent on the month.

The country’s media, which is nearly uniform in its opposition to Mr Humala, has helped stimulate the fear, claiming he would take over private pension funds like the Argentine government, raise taxes and nationalise strategic industries, including mineral and gas resources. Mr Humala denies the allegations and has scheduled meetings with the country’s major business groups, including the pension fund association, for this coming Friday. He has also brought on a host of mainstream economists in the past week to shore up a moderate appeal.

Ms Fujimori, 35, has her own motives for evoking Lula’s image. Talking about him could help some voters overlook another former president, her father, Alberto Fujimori. The elder Fujimori, who governed Peru for 10 years (1990-2000) is in prison, serving 25 years on conviction of corruption and human rights violations.

Besides corruption, he is also remembered for taming inflation, controlling terrorism and creating social programs that provided a majority of Peruvians with government handouts, mainly food. In the Ipsos Apoyo poll, 43 per cent of voters who said they support Ms Fujimori do so because of her father’s record.