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Country ProfileA rich history provides a mix of culture and languagesMetals and minerals are among the key exportsThe percentage of urban residents continues to growBigger roles for political parties and alliancesIssues of social inequality more prominent in politics

COUNTRY PROFILE SNAPSHOT

The past decade has seen political stability and economic liberalisation

A major metals and minerals exporter, Peru experi-enced steady growth for most of the 2000s and rap-id expansion in 2007 and 2008 on the back of highdemand for key exports such as copper. The coun-try avoided negative growth in 2009 in spite of theworldwide economic crisis and reduced commodi-ty prices, and the economy began to once again seegreater success in 2010, when growth was estimat-ed to have come in at 8.8%.

While the 1980s and 1990s were characterisedby varying degrees of political violence, stability anddemocratic rule have been consolidated since 2000.Reforms begun in the 1990s and continued through-out the 2000s have liberalised the economy and thecountry welcomes foreign investment.

Peruvians are proud of their country’s Amerindi-an heritage and the Incan and other Andean civili-sations for which Peru is known throughout theworld. They are similarly proud of the country’s var-ied geography, which includes part of the Andesmountain range, lush rainforest and a long coastline. GEOGRAPHY: With a surface area of 1.29m sq kmand 2414 km of coastline, Peru is the third-largestcountry in South America. The country can be divid-ed into three geographic regions: the narrow coastalstrip of plains and deserts in the west (including thecapital Lima), known as the costa; the mountainoushighlands in the centre, called the sierra; and the rain-forest-dominated east, known as the selva. GOVERNMENT: Peru is a constitutional presidentialrepublic and the current constitution was ratified in1993. The president, who is elected by popular voteevery five years, appoints a 18-member Council ofMinisters, headed by the prime minister. Presidentscannot serve more than one consecutive term, butcan serve multiple non-consecutive terms. The cur-rent president, Ollanta Humala, was elected in July2011 and will serve until 2016.

The legislative branch consists of a single-cham-ber, 130-member parliament known as the Congress

of the Republic of Peru, whose members are elect-ed by proportional representation through a partylist system every five years and in tandem with thepresidential elections. In addition to passing laws,the Congress must approve the ministers appoint-ed by the president. LOCAL GOVERNMENT: Peru is administratively divid-ed into 25 regions or departments. Regions arethemselves made up of provinces that are in turndivided into districts. Each level of local governmentis appointed through popular elections. POPULATION: The country’s population stood atapproximately 28.2m at the time of the last nation-al census in 2007 and was estimated by the USBureau of the Census to be 29.9m in July 2010. It grewat an annual rate of 1.6% from 1993 to 2007, but pop-ulation growth was estimated in July 2010 to haveslowed to around 1.1%. According to the 2007 cen-sus, 30.5% of the population is aged 14 or under, while63.1% is between the ages of 15 and 64.

Some 75.9% of the population resided in urbanareas in 2007, up from 70.1% in 1993. Just over halfof Peruvians live in the narrow Costa region, com-pared to around 31% in the central Sierra region and13% in the eastern Selva jungle region, according tothe 2007 census. Lima is by far the biggest city, witha population of 8.47m at the time of the 2007 cen-sus. The second largest is the south-western city ofArequipa, with a population of 749,000, followed byTrujillo, with 683,000 inhabitants. RELIGION: The majority of Peruvians are Christian.The constitution does not specify an official religionbut “recognises the Catholic Church as an importantelement in the historical, cultural and moral forma-tion of Peru”. According to the 2007 census, thegreat majority of Peruvians – around 81% – areCatholic, while 12.5% are evangelical Protestants.

There are small communities belonging to otherfaiths, which include other Protestant denomina-tions, Judaism, Islam, and syncretic and Amerindian

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THE REPORT Peru 2012

The perfect mixDiversity in landscape and population in a country with a rich history

COUNTRY PROFILE SNAPSHOT

religions. The constitution provides for freedom ofreligious opinion and practice, which the govern-ment respects. The country has several importantreligious events, such as the festival of Corpus Christi,which is celebrated 60 days after Easter Sunday andinvolves statue-bearing processions. It is particular-ly popular in the south-eastern city of Cuzco. Majorcities such as Lima and Arequipa contain numerouswell-maintained colonial-era Spanish churches. LANGUAGE: The official languages are Spanish,which is spoken by around 84% of the population,and the Amerindian language Quecha, spoken byaround 13%. Quecha and other native American lan-guages, such as Aymara and Ashaninka, are prima-rily used in the Andean highlands. English is widelyused among the business community.CULTURE & HERITAGE: Peruvian culture has strongNative American – specifically Incan – influences.Around 45% of Peruvians are indigenous Amerindi-ans and 37% are of mixed Amerindian and Europeandescent. The culture is defined by the fusion ofindigenous traditions with European – predominant-ly Spanish – and African influences.

Peru boasts a wide range of arts and crafts, witha thriving handicraft export industry. Traditionalproducts include wooden carvings, pottery, sculp-ture and jewellery, much of which is influenced bythe country’s Incan heritage, featuring complexAmerindian geometric designs and patterns. MostPeruvians, especially younger people, wear West-ern-style clothing, and businesspeople are expect-ed to wear Western-style business suits. However,in rural areas many indigenous people such as QuechaPeruvians wear traditional outfits or a mixture ofindigenous and Western clothing. Traditional itemsinclude the hand-woven poncho worn by men, knit-ted caps with ear flaps, known as chullo, and pollera,multi-layered woollen skirts or petticoats.

There are numerous traditional Peruvian dances.The best-known is the courtship dance, the marinera,

which is performed throughout the country and hasnumerous regional variations. Other notable dancesinclude the alcatraz and the festejo, which originat-ed in African slave communities and can take the formof competitions, and the huayno of the Andeanhighlands, which originates from Peru’s Inca civili-sation. Dancing is often accompanied by tradition-al Peruvian music. This includes both Andean musicplayed on a variety of local instruments – such aspanpipes and the charango, which is similar to asmall guitar – and Afro-Peruvian music, which hasits roots in African slave communities that came intothe area in the colonial era.

Football is very popular in Peru, as is bullfighting,with fights predominantly taking place on Sundaysand public holidays. The most famous bullring is the14,000-capacity Plaza de Acho in the Rimac districtof Lima – the oldest in Latin America and the sec-ond oldest in the world, dating back to 1766. CLIMATE: In keeping with its diverse geography, theclimate varies widely across Peru. The coastal plainsand deserts in the west are relatively warm and arid,while the central mountainous highlands are muchcolder and the densely rainforested east is hot, humidand subject to heavy rain. Temperatures are gener-ally pleasantly mild in Lima, though humidity levelscan be high. The coldest month in Lima is August,when the temperature varies between 13°C and19°C. The capital is at its hottest during the summermonths, January to March, when the temperaturepeaks at 28° and seldom falls below 19°.

The winter months of July to September see themost rainfall in Lima, an average of 8 mm per day,while precipitation levels drop to close to zerobetween December and April. The city is oftenenveloped by mist that comes from the sea, knownas garúa, between April and November. Temperaturesare slightly lower but still mild in Arequipa, thoughits rainy season occurs between January and March. NATURAL RESOURCES: Peru is a minerals and met-als producer of global importance. In 2008 miningand minerals represented around 7% of GDP, andalmost 60% of exports, with total minerals exportsworth around $18.7bn. About $20bn worth of invest-ment is currently in the pipeline for the sector. In2008 the country was the world’s largest producerof silver, the third-largest global producer of cop-per, bismuth, tin and zinc, the fourth-largest produc-er of lead and molybdenum and the fifth-largestglobal producer of gold. By value, its largest miner-al export in 2008 was copper, with exports at around$7.7bn, followed by gold, with exports around $5.6bn.

Peru is a net oil importer, with proven reserves ofaround 470m barrels and production about 148,000barrels per day (bpd) in 2009, versus consumptionof 157,000 bpd. Natural gas reserves stood at 334bncu metres in 2009, ranking Peru 39th in the world,with annual production of around 3.4bn cu metres.Its largest gas fields include the Aguaytia field inUcayali, in the eastern rainforest region, and theCamisea field in the south-eastern region of Cuzco.

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While there is no official religion, Catholicism is recognised as an important part of the country’s culture

www.oxfordbusinessgroup.com/country/Peru

COUNTRY PROFILE OVERVIEW

Ollanta Humala was elected to the presidency in June 2011

Following the fall of now-imprisoned former Presi-dent Alberto Fujimori from power at the turn of themillennium, Peru has enjoyed over a decade of sta-ble political and economic progress. Economic devel-opment, in particular, has been rapid, partly due toelevated global commodity prices, as well as thecommercialisation of the giant Camisea natural gasfield and the establishment of free trade agreementswith a number of countries.

Successful economic policies have combined withprudent fiscal spending, leading to a reduction ofexternal debt and the accumulation of internation-al reserves – a significant accomplishment consid-ering an environment blighted in recent years by asovereign debt crisis on one side of the Atlantic anda sub-prime mortgage crisis on the other.

Peru is also active in a number of internationalorganisations. It is a member of and host to theAndean Community of Nations, and has also joinedthe Asia-Pacific Economic Cooperation (APEC) – asign of its historically strong and ever-increasing tiesto Eastern nations such as China and Japan. OBSTACLES AHEAD: The election of President Ollan-ta Humala in June 2011 signified a slight political turnto the left as economic development, though strong,has lacked the dynamism to have an effect on all seg-ments of society, leaving some of the country’s low-er-income classes disenfranchised (see analysis).The success of the extractive industries over thepast decade has corresponded with increased socialconflict over mining and energy projects as ruralcommunities demand more tangible economic ben-efits and environmental planning from the privatesector and government. Other challenges, includ-ing corruption and the escalating domestic produc-tion of cocaine, also face the administration, as wellas the continuing war against poverty. DIVERSE DEMOCRACY: Peru comprises three vast-ly differing regions that have over time shaped theeconomic, political and social make-up of the coun-

try. The coastal desert and Amazonian jungle regionsare separated by the towering Andes mountain rangerunning from north to south through the centre ofthe country. The extreme, yet diverse, terrain hasallowed for the development of various customs,religions and languages over the years. Whereas thedesert coastal region, partially marked by Europeaninfluences, is the most densely populated and devel-oped area, the sparsely populated Amazonian jun-gle, or selva, remains home to a wide array of tribalcultures. The mountainous sierra, home to vast min-eral deposits as well as the native Quechua popula-tion, falls somewhere in between as a largely ruralagrarian society. These geographic and societal dif-ferences play an important role in politics and canat times impede political decisions at the nationallevel, as exemplified by the plethora of ongoingsocial conflicts throughout the country. HISTORICAL BACKGROUND: Following nearly threecenturies of Spanish colonial rule, Peru gained itsindependence in 1824, although it took another halfcentury – until 1879 – for the European power torecognise Peru’s sovereignty. In the 50 years follow-ing independence, the country was governed prima-rily by a ruling aristocracy that favoured the land-owning bourgeoisie. By the mid-1920s governmentpolicies reinforcing static social classes led to theformation of nationalist and populist political move-ments, perhaps most notably the creation of theAmerican Popular Revolutionary Alliance (APRA),also known as the Peruvian Aprista Party, by VíctorRaúl Haya de la Torre in 1924.

APRA remains Peru’s most entrenched politicalparty, with unwavering support from party loyalistsfrom generation to generation. However, its ideolo-gy has undergone an extensive evolution from itsbeginnings as a party heavily in favour of socialisteconomic policies and agrarian reform to its currentstatus, which is slightly left-of-centre on the politi-cal spectrum. Four years after the establishment of

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THE REPORT Peru 2012

Economic changes over thepast decade, including theincreased success ofextractive industries, haveraised issues surroundingsocial inequality andenvironmental problems.

Steady progressThe past decade has brought a number of successful new policies

COUNTRY PROFILE OVERVIEW

APRA, the Peruvian Socialist Party was founded byJosé Carlos Mariátegui, while APRA also had a broad-er influence on the pan-Latin American populistmovement known simply as “Aprismo”.

Haya de la Torre exerted considerable politicalinfluence over the following 50 years as Peru’s dem-ocratically elected governments continued to beheavily controlled by the military and oligarchy, withruling military juntas holding power on several occa-sions. Although Haya de la Torre was twice electedto the presidency, he was prevented from takingoffice by the military, formerly APRA’s chief opposi-tion. His second victory in 1962 against FernandoBelaúnde Terry and former President Manuel Odria,in which no candidate acquired the then-constitu-tionally mandatory one-third of the popular votenecessary to take office, resulted in the installationof a transitional military junta before new electionsin 1963 handed Belaúnde the presidency.

Belaúnde would himself eventually succumb to amilitary coup in 1968, resulting in more than a decadeof direct military rule from 1968-80. In 1975 Gen-eral Francisco Morales Bermúdez replaced the rul-ing General Juan Velasco Alvarado, and he eventu-ally presided over the return to civilian governmentin 1979 when Haya de la Torre, who would die thatsame year, led a newly formed Constitutional Assem-bly. Meanwhile, the intermittent military coups, apolitically entrenched oligarchy and inspiration fromthe Cuban Revolution (and various Latin Americanoffshoots) led to a rise of guerrilla warfare, terror-ism and an internal strife within Peru that wouldeventually climax in the 1990s.FUJISHOCK & A RETURN TO DEMOCRACY: Presi-dent Belaúnde was again democratically electedduring the May 1980 elections. However, his secondterm in office ended poorly due to a combination ofeconomic hardship prompted by an El-Niño-affect-ed agriculture industry, rising rural insurgency frommovements such as the Shining Path and eventual-

ly soaring inflation. This paved the way once morefor APRA, which went on to win the 1985 election,with President Alan García inheriting a deteriorat-ing economic situation that worsened throughoutthe late 1980s. Hyperinflation saw the Peruvian solreplaced by the inti in 1985 – with the inti itself lat-er being replaced by the nuevo sol in 1991.

A shrinking economy intensified already existingsocial tensions and the overall environment was fur-ther soured by increasing terrorist threats. The com-bination prompted the Peruvian electorate to choosea relatively unknown quantity in the 1990 electionswhen Alberto Fujimori emerged victorious. ADDRESSING ECONOMIC PRESSURES: The presi-dent’s reforms came to be known as “Fujishock”, andhe was able to rein in the hyperinflation that wasravaging the economy. However, due to growingopposition to his leadership in Congress, Fujimori dis-solved the legislative body, revised the constitutionand called for new congressional elections.

Having subdued his political opposition, Fujimoricontinued to institute his economic reforms, whichsaw the privatisation of numerous state-ownedenterprises and the creation of an investor-friend-ly business climate. He is also credited with subdu-ing rural terrorist organisations and insurgent groupssuch as the Shining Path and the Túpac Amaru Rev-olutionary Movement (MRTA), the latter of which tookover the Japanese Embassy in Lima in 1996, althoughquestions would later be raised over the conduct andpractices of security forces deployed under intelli-gence chief Vladimiro Montesinos.

After winning an unconstitutional third term inoffice at the turn of the millennium Fujimori wasquickly mired in scandal a month later as allegationsof bribery involving Montesinos emerged. Fujimorithen called for new elections, which would be wonthe following year by leading opposition figure Ale-jandro Toledo. Although many still hail Fujimori forrestoring economic stability to Peru, it was his admin-istration’s authoritative rule and more specifically itsuncompromising crackdown on insurgent groupsthat would mar his time in office and eventually leadto his prosecution and imprisonment for crimesagainst humanity, bribery and embezzlement. Indeed,Fujimori still enjoys some level of support in Peru forhis successful economic policy and addressing theissue of terrorism, which to a small extent has beenillustrated by the support his daughter received dur-ing her presidential campaign in 2011.ELECTIONS: Following Fujimori’s brief third presi-dential term, Congress sought to restrain presiden-tial authority and avert the potential of a future dic-tatorship by preventing incumbent presidents fromrunning for re-election for at least five years after theirterm in office. Voting in elections in Peru is manda-tory for all citizens from the ages of 18 to 70, afterwhich participation becomes optional.

The National Registry of Identification and Civil Sta-tus (RENIEC) is responsible for determining and track-ing who must vote. The National Office of Electoral

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The country has greatly broadened the scope of its political and economic relations over the past decade

Alberto Fujimori came topower in 1990 andlaunched a set of reformsknown as “Fujishock”,which helped to stopinflation. However, Fujimoridissolved Congress andrevised the constitution,implementing anauthoritarian regime thatlasted until 2000.

www.oxfordbusinessgroup.com/country/Peru

COUNTRY PROFILE OVERVIEW

Processes (ONPE) organises and carries out elections,while the National Judiciary of Elections (JNE) super-vises the process to ensure the legality of both elec-tions and campaigns. PARTIES & ALLIANCES: The 2011 general electionssaw a number of significant changes to the make-up of Peru’s executive and legislative branches. Whilethere were more than a dozen candidates runningfor the presidency, five frontrunners emerged: LuisCastañeda (National Solidarity Alliance), Pedro PabloKuczynski (Alliance for Great Change), AlejandroToledo (Peru Possible), Keiko Fujimori (Force 2011)and Ollanta Humala (Peru Wins).

Former President García was unable to run due tothe new regulations barring presidents from serv-ing two consecutive terms in Peru, although thatleft the door open for his predecessor, Toledo, to re-enter the fray. In fact, García’s party, APRA, did noteven field a candidate.

Political parties in Peru are severely fragmented,as evidenced by the steady emergence of new organ-isations all along the political spectrum and the fre-quent merging of parties to pool political capital(see analysis). This is partly due to historical trends,though Fujimori’s strict regime also had a devastat-ing effect on numerous parties.

The lack of institutionalised political parties –which usually bring strong voter loyalty – often forcescandidates to run more personality driven cam-paigns. It also at times produces candidates of sim-ilar ideals running simultaneously, whereas electionsin two-party systems typically weed out such candi-dates in the pre-election primaries.

In the first round of voting in April 2011, OllantaHumala took the largest share of votes, just as hedid in 2006 before he went on to lose the runoff elec-tion to García. Humala’s 31.7% was followed by KeikoFujimori’s 23.6% and the two went to a runoff elec-tion in June, in which Humala defeated his opponent51.4% to 48.5%. Sworn in on July 28th, 2011 (Nation-al Independence Day), Humala became the thirdpresident since the ouster of Fujimori. EXECUTIVE BRANCH: As president, Humala is thehead of the government as well as the head of state.The president is elected for a five-year term and mayserve more than once provided the periods are notconsecutive. The vice-president is also elected along-side the president in the general election, and thecurrent vice-president is Marisol Espinoza. In spiteof being in the presidential line of succession, thevice-president serves no official capacity other thanto stand in for the president in the case of death,illness, travel or any other related issues preventingthe head of state from performing his or her duties.

The president appoints a prime minister, who advis-es him on the choice for minister in the rest of thecabinet. Oscar Valdés, former minister of the inte-rior, is now the prime minister following a cabinetreshuffle in December 2011 that saw Humala change10 of the 19 appointments. Salomón Lerner, Humala’sfirst prime minister and two-time campaign advisor,

resigned on December 10th, 2011, following protestsagainst the country’s largest foreign investmentproject – the Minas Conga mine in Cajamarca. UnderPeruvian law, if the prime minister steps down, sotoo must his cabinet – though many are likely to bereinstated in the subsequent reshuffle. Membersare not subject to individual approval from Congress,although the entire cabinet must be approvedthrough a congressional vote of confidence.

Both the executive and legislative branch may pro-pose laws, although the president must first obtainthe approval of his cabinet. The president also mustseek cabinet approval on any laws related to legisla-tive and emergency decrees, for which he must alsonotify Congress. Finally, the president holds bothgeneral veto powers on approved legislation as wellas the more specific line-item veto allowing for thedeletion of specific clauses in a proposed law.LEGISLATIVE POWER: The Congress is a unicamer-al legislative body made up of 130 representativeswho, like the president, are elected to five-year terms.Eligible candidates for office must be Peruvian citi-zens of at least 25 years of age and are electedunder a proportional representation system in whichcongressional seats are assigned to political partiesaccording to the proportion of votes acquired byeach party. There is a wide variety of political par-ties serving in the Congress, with six currently hold-ing power (see analysis).

While the main function of the Congress is to passbills into law, it is also responsible for ratifying treaties,authorising government loans and approving thefederal budget (along with the Ministry of Economyand the executive branch). It serves the importantrole of acting as a counter-balance to the executivebranch. The Congress may request information withregard to acts carried out by the executive branch,and it also has the power to call ministers before theentire Congress or any of its sub-committees andapprove executive decrees issued by the president.

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THE REPORT Peru 2012

The National Congress is a unicameral legislature made up of 130 representatives

The president is elected toa five-year term, along withthe vice-president. Thepresident is responsible forappointing a primeminister, who helps tochoose the other membersof the cabinet.

COUNTRY PROFILE OVERVIEW

There are 22 sub-committees within Congress, allof which focus on specific legal issues. These includesocial, economic, environmental, foreign relations andsecurity-related concerns. Congress is also dividedinto parliamentary groups, which are generallyformed along party lines, although alliances amongfractured political parties are common and occur toobtain a majority group when possible. The presidentof the Congress is currently Daniel Abugattás, amember of Humala’s Peru Wins party.

Until the dissolution of Congress under Fujimoriin 1992, the legislative branch was bicameral, witha Senate and a Chamber of Deputies, which consist-ed of 60 and 180 delegates, respectively. The newconstitution designed and introduced by the Dem-ocratic Constitutional Congress in 1993 reduced thelegislative branch to one chamber, although today’scongress features an additional 10 seats. THE JUDICIAL BRANCH: The judicial branch oper-ates independently from the executive and legisla-tive authorities. It consists of a four-tier nationalcourt system. At the top of the judicial branch sitsthe 16-member Supreme Court, which exercisesjurisdiction over the entire nation.

Judges serving on the Supreme Court are appoint-ed and ratified when needed by the National Coun-cil of the Judiciary, a seven-member elected bodywhich also appoints public prosecutors, as well assupervising appointed public officials and disciplin-ing them when appropriate.

Below the Supreme Court is the superior courtssystem, with each court presiding over defined judi-cial districts. For the most part, these correspondwith Peru’s 25 departments, although there are actu-ally 28 judicial districts. Beneath the superior courtsare the trial courts, which are also referred to ascourts of first instance. The trial courts oversee judi-cial issues at the provincial level. Finally, districtcourts known as courts of peace are responsible forserving individual districts in the country. The Con-

stitutional Court, a seven-member judiciary bodyelected by Congress to five-year terms, is the last ele-ment of the judicial system, but only serves the pur-pose of interpreting and preserving the laws laidout in the constitution.LOCAL GOVERNMENT: Decentralisation of federalgovernment authority is a continuing process inPeru, where political power has historically beenconcentrated in the capital of Lima. For much of itshistory the country’s primary administrative subdi-visions were known as departments, which changedin 2002 when Peru became subdivided into 25 admin-istrative regions – though many still refer to themby the former name.

Three years later a referendum was held to fur-ther merge 15 of the 25 regions into five significant-ly larger regions, although voters opposed the move.Beneath the regions are the administrative subdivi-sions of provinces, of which there are a total of 195.Lastly, there are 1833 districts, the smallest admin-istrative units in the country.

Regional governments are made up of a regionalcouncil, composed of the regional president, vice-president, secretary and council members, whichnumber from a minimum of seven to a maximum of25. All members of the council are elected to termsof four years. Regional councils were integrated in2007 through the establishment of the NationalAssembly of Regional Governments, a significantevent in the ongoing decentralisation process.

The capital city of Lima, which is home to rough-ly one-third of the entire population of the country,is the only province that does not belong to one ofthe 25 regions. However, prior to the alteration in2002 it counted among the country’s departments.It is currently governed by the Metropolitan Munic-ipality of Lima (MML), which is headed by MayorSusana Villarán de la Puente. OUTLOOK: After a campaign filled with promises ofsocial inclusion, the new administration has its workcut out for it, though the early signs have been prom-ising. Indeed, the administration has made it knownit will seek to achieve its social goals without disrupt-ing Peru’s current economic model.

Nevertheless, numerous obstacles remain in thepath of the administration’s social agenda, includ-ing the reform of some of the current ineffectivesocial cash-transfer programmes and the creationof new development-oriented programmes that canprovide the much needed training, finance and infra-structure to assist micro- and small enterprises.

The early renegotiation of mining royalties (a sig-nificant campaign promise) was handled compe-tently, although the impact of the new law of priorconsent has yet to become fully apparent. Further-more, the administration faces the delicate task ofresolving the scores of social conflicts around thecountry that could easily harm investor confidenceor popular support. It seems that 2012 could be adifficult year for the administration, but for the mostpart Peru’s upward trajectory looks set to continue.

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The Supreme Court has 16 members, who are appointed and ratified by a judiciary council

The Supreme Court is atthe top of the judicialbranch, followed by thesuperior courts, courts offirst instance and thecourts of peace.

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COUNTRY PROFILE ANALYSIS

Higher royalties from mining firms will support poor communities

Following a campaign laden with promises of socialinclusion, President Ollanta Humala’s administrationhas already begun fulfilling some of them. Having gainedlegislative approval to establish the Ministry of Devel-opment and Social Inclusion only weeks after takingoffice in August 2011, Humala turned his sights torenegotiating royalties derived from the country’s maineconomic growth driver, the mining sector, to fundsocial programmes. An assortment of other reforms,including a higher minimum wage, pension reform andthe overhauling of various social programmes, havealso been promoted during his first year in office. AN ENDURING CHALLENGE: Social inequality is amajor problem in Peru and recent economic growth hasfailed to have a consistent positive impact across all socialclasses, leading to dissatisfaction among some of thelower-income segments. Nevertheless, overall pover-ty is in decline. According to the National StatisticsInstitute, between 2005 and 2010 the percentage ofthe Peruvians living below the national poverty line fellfrom 48.7% to 31.3%. In view of such progress, the eco-nomic agenda of the current administration has for themost part continued the successful, business-friendlyeconomic policies of previous administrations.

At the heart of the debate on economic developmentand social inclusion is the mining sector, which hasbeen the primary catalyst of recent economic success.However it has also been the cause of protests and socialconflicts around the country, many of which have beenset off by public anger over the lack of economic ben-efits trickling down to local towns and communitieswhere most of the mining activity takes place.

Humala has set about renegotiating royalties paid bythe mining industry. Despite initial fears that the indus-try would be unjustly penalised, the administrationsought private-sector involvement when hammeringout the details of the scheme (see Mining chapter). Thehigher royalties paid by mining companies to the gov-ernment are calculated based on operating profits and,as such, any significant cyclical decline in global com-

modity prices could result in decreased royalties, shield-ing the private sector from potential heavy losses. Thenew royalty scheme is predicted to bring in an addi-tional $450m a year, much of which will go towardfunding social programmes in areas where mining activ-ities are most fiercely opposed in the Andean highlands.FACILITATING DEVELOPMENT: Humala appointedrural development expert Carolina Trivelli as the firstminister of development and social inclusion, who willbe tasked with implementing the administration’s socialagenda. The ministry was created to centralise thenumerous social programmes, although Trivelli hasstressed the importance of linking short-term pover-ty alleviation cash-transfer programmes with develop-ment programmes designed to eliminate the conditionspreventing families and neighbourhoods from escap-ing the poverty cycle. Programmes such as PRONAA,the national food assistance programme, and Juntos,a national cash-transfer programme for families inextreme poverty, have already been placed under theministry’s watch. In early 2012 the ministry launchedan initiative providing support to 16,000 children inthe poor rural areas of Ayacucho and Cajamarca. INTERNATIONAL SUPPORT: The World Bankannounced it had approved a $3bn loan to the Peru-vian government to aid Humala’s anti-poverty initiatives.The bank’s vice-president for Latin America, Pamela Cox,said she hoped the Peruvian government would be assuccessful in reducing poverty as the administration offormer Brazilian President Luiz Inácio Lula da Silva.

While many social programmes that rely on cashtransfers will certainly increase the short-term liveli-hood of low-income households, only economic devel-opment will raise their standard of living in the long term.Indeed, some of the administration’s loftier long-termgoals include the overhaul and expansion of universalaccess to public services, such as education and healthcare, both of which are in need of reform and devel-opment. If the administration can achieve these goals,it will bring enduring benefits to the Peruvian people.

A number of initiativeshave been set up to aiddisadvantaged populations,including PRONAA, thenational food assistanceprogramme, and Juntos, anational cash-transferprogramme for families inextreme poverty.

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THE REPORT Peru 2012

Spreading the wealthSocial inclusion is playing a greater role in domestic policy-making

COUNTRY PROFILE INTERVIEW

President Ollanta Moisés Humala Tasso

Investment in mining has increased since your elec-tion. How will you maintain this upward trend?HUMALA: From the first day I assumed the presiden-cy, I have made it very clear that I will respect the com-mitments assumed by the country.

We in government are aware that the social inclu-sion we offered to the Peruvian people during the elec-tion campaign must be sustained through economicgrowth, for which investment is fundamental. We there-fore do not discourage investment, and nor will westop keeping our promise of development with socialinclusion. We are making our best effort, in all sectors,to assure and sustain social harmony and political andeconomic stability in the country.

On this basis, when we took office we opened nego-tiations with the mining sector. In the process, I foundevidence that many companies are quite clear on theidea of their social responsibility towards neighbour-ing populations, and display a serious commitment tothe environment. These are the modern companies wewish to see in the country. This is the type of invest-ment we are looking for, and we are sure that it will aidin the development of the remote communities in whichthey generally develop their projects.

We seek to assure harmonious coexistence betweenmining capital, investment and the working popula-tions, through clear rules and responsible companies.As the state, we are also succeeding in establishing apresence that guarantees citizens’ rights, environmen-tal respect, dialogue and the participation of compa-nies, based on a modern, socially responsible outlook.

How much of your policy to spread prosperity in thecountry can be achieved in five years? HUMALA: In my government, this is a central, high-pri-ority issue. To this end, we have created the Ministry ofDevelopment and Social Inclusion (Minsterio de Desar-rollo e Inclusión Social, MIDIS), which gives us a profes-sional team to coordinate and drive the social policy ofinclusion. This sector is in charge of, for example, the

design and implementation of the social programmesthat help to generate the conditions for inclusion. Thiswill ensure that, above all, the poorest and most vul-nerable population groups can exercise their rights,apply their skills, and take advantage of the opportu-nities they find in their environment.

A set of goals has been defined, along with a follow-up system to measure and evaluate the social policy'seffectiveness. Although MIDIS' involvement shouldresult in a reduction in poverty indicators nationwide,the primary challenge is for these results to occur inthe most excluded homes and areas. For us, povertyhas a face, name and age. It is living in remote, indige-nous and rural populations where the state did not gofor many years. In my government they are prioritised.

Our country is growing, but we have inherited extremepoverty with very deep roots. We cannot continuegrowing while maintaining poverty.

Our challenge is to make every effort to ensure thatgrowth leads to wellbeing. For this reason, by the timeI finish my term in 2016, we hope to have reducedextreme poverty from 36% to 19%, and to have raisedthe number of homes that are receiving integratedstate services from 11.6% to 46%.

The education and health care of our children is aconstant concern, and by the end of our term we hopeto have increased school attendance among three- tofive-year-olds from 60% to 78%, while reducing chron-ic malnutrition of children aged under five from 23%to 10%. But the most important thing is to work toreduce the care gaps in the rural populations wherepoverty is concentrated. We are focusing efforts there.

Do you believe that Peru would benefit in terms ofcontinuity if presidents were allowed two consec-utive terms, as in the US?HUMALA: Presidential re-election is a controversialissue here in Peru, as it is in other Latin American coun-tries. In North America, the realities are quite different,as are the perception of citizens living in those states.

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Spreading prosperityOBG talks to President Ollanta Moisés Humala Tasso

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COUNTRY PROFILE INTERVIEW

What is your strategy to reform education to devel-op research and development?HUMALA: A country’s wealth is also measured by itscapacity for generating knowledge and exporting tech-nology. In Peru, we need to invest more in research andin the production of knowledge. At the moment, ourinvestment is very low compared to the average in Lat-in America, even though we are one of the countrieswith the highest economic growth rates in the region.

My government believes the development of sci-ence, technology and innovation is fundamental tothree objectives: economic growth, environmental sus-tainability and social equity. I aim for investment hereto grow from 0.1% to 0.7% of our GDP by 2016.

Based on the proposals recently presented to the gov-ernment by the Consultative Commission for Science,Technology and Innovation, we will make an effort toimprove the quality of education and increase the num-ber of researchers and administrators to create, trans-fer, and adapt knowledge and technology.

As a sign of this drive, we have just started the Schol-arship 18 (Beca 18) programme, so that outstandingyouths with limited resources can study at the under-graduate level and receive doctoral scholarships fromdomestic and foreign universities.

Is economic strength in the Union of South Amer-ican Nations (Unión de Naciones Suramericanas,UNASUR) possible without political integration?HUMALA: UNASUR's path is different from that of theEU, and is based on our peculiarities and experiences.Economic might is not the objective that UNASUR ispursuing. Our priority is integration that contributes tothe development of our settlements in areas such asinfrastructure, education, health care, energy, scienceand technology, and others.

We do seek growth, but alongside the inclusion oflarge sectors of our population that have not benefit-ted from the advances of our countries. In this way, sta-bility is generated, which contributes to development.

To this end, it is crucial that we have a consensual polit-ical arena to strengthen democracy and contribute tothe peace, security and development of our regions.

How will you strengthen political ties with Brazil tobecome a trade platform between your neighboursand Trans-Pacific economies?HUMALA: I think that Peru’s political links with itsneighbours, and Brazil in particular, are excellent. Peruand Brazil have a strategic partnership that commitsus to look towards the future together. One exampleof this is the presidential meetings planned as part ofthe Bi-national Cabinet, the first of which is to focuson the sectors linked to social inclusion. In addition, thereis a willingness from both governments to make a num-ber of efforts to facilitate mutual trade and investment.

How can inter-regional disputes over water andother resources be resolved? HUMALA: We feel that dialogue is the basis of con-flict prevention and resolution. Here, the Presidency ofthe Council of Ministers (Presidencia del Consejo de Min-istros, PCM) plays an outstanding part, since it haspolitical and technical means through its decentralisa-tion office. Its participation is also an important factorin the population feeling the presence of the state. ThePCM, through its conflict prevention office, providestraining in averting and resolving conflicts to regionalgovernment officials, especially those which have directcontact with the population and act as mediators. In2008 the National Water Authority was created to serveas the body overseeing the National Water ResourceManagement System. Its work is to promote the mul-ti-sectoral and sustainable usage of water resourcesfrom drainage basins. It also participates in the reso-lution of water conflicts in conjunction with regionalgovernment. It should be noted that, as part of a nation-al agreement, all social and political efforts are har-monised on the state's water management policy. Thispromises also to be a highly important development.

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THE REPORT Peru 2012

COUNTRY PROFILE INTERVIEW

Juan Manuel Santos, President of Colombia

What measures are you taking to attract investors? SANTOS: Economic, political and social stability arekey factors in determining the investment climate. Clearlegislation with stable regulations is equally important.

Developing a favourable investment climate has beenone of the most important public policy goals in Colom-bia over the last decade, and has been carried out byimplementing tax incentives for investment, reducingpaperwork, simplifying formalities, undertaking pro-motional activities and increasing security for investors.Thanks to this comprehensive approach, Colombia wentfrom receiving $2.1bn in foreign direct investment in2002 to more than $15bn in 2011.

Colombia offers investors a robust network of inter-national investment treaties that provide a favourable,fair and stable framework for foreign investment.

How does Colombia expect to position itself inSouth America over the next few years? SANTOS: Colombia’s economy has its own specificgravity, not only because of its strategic location, butbecause the size of its market, its resource endow-ment, productive structure and pro-globalisation atti-tude. In this context, Colombia expects to position itselfas a leader in regional integration, embracing surround-ing nations regardless of their size. It is crucial to takeadvantage of our FTAs and to increase intra-industrytrade as a way of advancing towards a higher-value-added production. By negotiating flexible rules of ori-gin, we have opened the door to productive alliancesbetween companies from different countries to directregional products to foreign markets.

In what ways will free trade agreements (FTAs)change the basis of the Colombian economy? SANTOS: We anticipate additional GDP growth throughFTAs of 0.46%, along with an increase in exports ofmore than 0.7%. Through these agreements, we havegained greater access to service areas of interest forColombia, such as consulting services and call centres.

This will encourage Colombian entrepreneurs and busi-nesses to strengthen exports even more. At the sametime, local industries will benefit from the gradual elim-ination of import tariffs on raw materials and inputs,as well as machinery and high-tech equipment, thusenabling them to become increasingly efficient andcompetitive in their production processes.

What are your expectations of the FTA betweenColombia, Peru and the EU? SANTOS: The agreement will ensure stability, trans-parency and certainty of access for our exports to amarket of nearly 500m people, the biggest importerof goods and services in the world, with a per capitaincome exceeding $32,000. Additionally, on public pro-curement matters, Colombian businesses will haveaccess to all European bodies at the central and sub-central levels, as well as to independent companiesand entities of the 27 member countries of the EU.

The potential is enormous and we are encouragingour businessmen and businesswomen to set their sightson this huge market with high purchasing power, andto focus on producing and selling goods and serviceswith high demand levels in the European market.

Will stronger ties with Peru make both economiesmore resilient to external financial shocks? SANTOS: It is difficult for any economy to be fullyresilient to external financial shocks, and their levelsof resilience obviously depends on the degree of eachcountry’s exposure to “contaminated” securities. Forexample, in the 2008-09 economic crisis, damagedepended on the volume of sub-prime mortgages ortheir derivatives held by institutional investors such aspension funds and banks. In the current case it woulddepend on the volume of sovereign bonds from theeconomies facing the greatest problems being held bythe respective financial entities in Peru and Colombia.In both cases, however, the current exposure is mini-mal, and a shock via financial channels seems unlikely.

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Regional integrationOBG talks to Juan Manuel Santos, President of Colombia

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COUNTRY PROFILE INTERVIEW

The greatest risk our economies currently face islinked to foreign trade. Despite the fact that we havediversified our foreign markets, the US and the EU arestill very important trade partners for Peru and Colom-bia. In this case, the resilience of our economies lies inthe foundations supporting our economic growth, andon having healthy macroeconomic policies. Peru andColombia have shown strong macroeconomic perform-ances and our foundations are solid. Both economieshave inflation under control, public finances are on theright path and foreign trade has strengthened. In thiscontext, the deepening of the integration and thestrengthening of bilateral relationships should help inthe mitigation of foreign impacts.

Which sectors possess the greatest potential todevelop downstream industries? SANTOS: There are five “macro” sectors we have iden-tified as “locomotives” or driving forces for growth andjob creation in Colombia. They are: innovation-basedsectors; agriculture, livestock and rural development;transport infrastructure; mining development and pow-er generation expansion; and housing construction.

Thanks to joint cooperation between the public andprivate sectors, we created a Productive Transforma-tion Programme (PTP), which has been recognisedinternationally as an example of an innovative way totransform strategic, new and consolidated sectors intotop global market players based on the linkage of pro-ductive chains and contribute to Colombia’s competi-tiveness. Among the 16 sectors included in the PTP areinformation technology, eco-tourism, horticulture, dairy,power generation, and oils and bio-fuels.

What is happening to produce more value-addedgoods and to promote research and development? SANTOS: The purpose behind PTP is precisely to encour-age the production of more value-added goods andinnovative services where our country has shown provenstrengths. We plan to move towards an innovation-

based economy, showing our commitment by allocat-ing 10% of royalties generated by the mining and oilsectors towards encouraging innovative ideas.

The new national royalty system created the Science,Technology and Innovation Fund, which will have at itsdisposal approximately $350m in 2012, and whose pur-pose is to boost Colombia’s scientific, technological,innovative and competitive capabilities. Furthermore,tax benefits have been put in place for educationalinstitutions and research centres, and for investmentsin technological research and development. In 2011,a total of 175 projects were approved under this pro-gramme, amounting to more than $120m.

Project financing through private capital funds helpsprioritise innovative ventures with high growth poten-tial, featuring higher-value-added products or servic-es. Those funds have at their disposal aggregate fund-ing resources that amount to nearly $2.2bn.

What regulatory and infrastructural improvementsare necessary to further increase cooperationbetween Colombia and Peru? SANTOS: We have been working with Peru on threefronts: cooperation, regulation and infrastructure totake advantage of our free trade agreements. We sharebest practices and information for negotiations withthird countries. Additionally, we have cooperated intrade facilitation mechanisms such as the one-stopforeign trade window/counter and the joint leverag-ing of cooperation resources from the EU.

Regarding infrastructure, we are anticipating jointefforts on border projects, such as the navigability ofthe Amazon River and bi-national transport connec-tions, as well as on an electricity interconnection proj-ect also involving Ecuador and Chile. On regulatorymatters, in the Andean Community and the PacificAlliance initiative – of which Colombia and Peru are part– we have been working together on policy coordina-tion, institutional adjustments, sanitary measures andthe regulation of trade in services and investments.

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THE REPORT Peru 2012

COUNTRY PROFILE INTERVIEW

Rafael Roncagliolo, Minister of Foreign Affairs

What steps have been taken to develop the goal ofa multilateral foreign policy?RONCAGLIOLO: This is an important moment for Lat-in America. This is evident when you see how the glob-al economic crisis is affecting the world. Although we,too, are feeling the effects, we are in a better positionto resist them. So it’s time not only for national devel-opment but for regional development and integration.

President Ollanta Humala expressed this interest forjoint action to other leaders on his South American tourbefore taking the presidential oath. The Union of SouthAmerican Nations (Unión de Naciones Suramericanas,UNASUR) and the Andean Community (ComunidadAndina, CAN) organised summits on the day of thepresident’s inauguration in which social inclusion wasunderlined. We helped create the Community of LatinAmerican and Caribbean States and we will assume thepresidency of UNASUR in the last quarter of 2012. Weare also restructuring CAN. The 40-year-old goals of cre-ating a Customs union and a common market cannotbe achieved today. However, CAN is very important asa free trade area because trade between Andean coun-tries has a high degree of added value and includes par-ticipation by small and medium-sized enterprises.

I have travelled to every South American country toamplify existing trade agreements, joint investmentsand regional trade – which represents less than 20%of all trade, but remains our best protection in the faceof a global crisis. We negotiated a trade agreement withVenezuela and we are trying to improve trade termswith protectionist countries. In addition, we are form-ing the Pacific Alliance with Mexico, Colombia and Chile.

How will UNASUR gain a stronger voice in the world?RONCAGLIOLO: The idea of Latin American integra-tion is 200 years old and, today, UNASUR is its mostdynamic manifestation. We have a Joint Security andDefence Council, which is very significant, consideringprevious agreements failed in the Malvinas War. We ini-tiated the council of ministers of economy to plan

strategies to confront the global crisis and we have edu-cation and health councils. We have also integrated roadinfrastructure, which is crucial, as it connects northand south, Atlantic and Pacific. This is very importantfor developing the region. We are planning a petrochem-icals pole in the south of Peru, which could be connect-ed to Bolivia, Brazil and even the River Plate basin.

In what way will foreign policy help achieve socialtransformation and poverty reduction?RONCAGLIOLO: Foreign policy and internal policy arenot separate things. President Humala has defined twofocus points: economic growth and social inclusion.Our foreign policy is in line with these. Promoting growthincludes diversifying economic relations, continuedparticipation in the Asia-Pacific Economic Cooperationforum, which links us to the US and Asian countries,and free trade agreements with the EU. We also wantthese to have a positive effect on social inclusion. That’swhy regional trade is so important – it helps small andmedium-sized companies conquer new markets.

Social inclusion also relates to the 10% of our citi-zens living abroad. Their impact on the economy ishuge, since their remittances are five times bigger thanthe amount we receive through international cooper-ation. We need to defend Peruvian expats since theyface hostility and human rights abuses in some coun-tries. We are currently signing agreements inside CANand Mercosur to regularise their status. We are work-ing towards similar agreements with other countries.

The contribution Peruvians living abroad make tothe economies of foreign countries is significant. Weare trying to develop international mechanisms so for-eign investment and international cooperation schemesserve social inclusion. Even though exporting primarygoods is important, it will not automatically producedevelopment. We need to change our economic matrix.Our bilateral-agreements will bring in technology andget scholarships for Peruvians so they gain advancedtraining, helping improve their employment options.

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A stronger voiceOBG talks to Rafael Roncagliolo, Minister of Foreign Affairs

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COUNTRY PROFILE ANALYSIS

In 2011 China overtook the US to become Peru’s top trading partner

The 40th anniversary of the establishment of for-mal relations between the governments of Chinaand Peru was marked in 2012, underlining a long-standing relationship that has become increasinglyimportant as time has gone on. In recent years bilat-eral relations have grown significantly. Trade betweenthe two countries has increased sharply in recentyears, particularly since the signing of a free tradeagreement (FTA) in 2009. Two-way trade reached anall-time high in 2011, when China overtook the USto become Peru’s largest trading partner. Much ofthis is due to the country’s vast mineral wealth, aswell as its position on the western coast of SouthAmerica, both of which have attracted numerousChinese companies hungry for raw materials andaccess to growing Latin American markets.

As one of just three Latin American countries tojoin the Asia Pacific Economic Cooperation (APEC)forum – the other two being Chile and Mexico – Peruhas been positioning itself to become a centre fortrade between Latin America and Asia. Public andprivate investments to upgrade coastal ports andinland transport corridors have been made with aneye to increase trade (see Transport chapter). INCREASED CONTACT: On the sidelines of the APECConference in November 2011 in Hawaii, PresidentOllanta Humala met with his Chinese counterpart HuJintao to discuss how to further deepen the relation-ship between the two nations. Both leaders calledfor the continued strengthening of political con-tact, the deepening of economic cooperation, andtrade and closer cultural exchanges, while Humalareaffirmed Peru’s support of the “One-China” poli-cy. Hu previously visited Peru in 2008, and formerPeruvian President Alan García also took a trip to Chi-na during his term. President Humala is likely to makean official trip to China in 2012.

Numerous other official meetings between thetwo governments have also taken place at lower lev-els. For example, Chinese Vice-Premier Hui Liangyu

met with Peruvian Vice-President Marisol Espinozain Lima in September 2011. MILITARY TIES: Meanwhile, a Chinese military del-egation, led by China’s vice-chairman of the CentralMilitary Commission, General Guo Boxiong, paid a vis-it to Lima in November 2011, along with a memberof the Central Politburo of the Communist Party andother high-ranking military officials. While in Limathey met with Peru’s former defence minister, DanielMora Zevallos, to sign two military cooperation agree-ments. This was the second such meeting in 2011,the first occurring in May when Jaime Thorne, theformer Peruvian defence minister, travelled to Chi-na to meet Xu Caihou, vice-chairman of China's Cen-tral Military Commission, as well as Liang Guanglie,the Chinese defence minister.

Although political and military ties are strong andcontinue to expand, they are overshadowed by theeconomic integration between the two countries.China purchased $6.95bn worth of Peruvian goodsin 2011, mostly minerals and fishmeal. Moreover,Chinese investments are predicted to total as muchas $10bn over the next five years, all of which is partof China’s larger scheme to place an estimated 60%of foreign investments in Latin America by 2020,according to the Peru-China Chamber of Commerce. 40 YEARS: Celebrations of the 40th anniversary ofdiplomatic relations took place both in Lima andShanghai on November 2 of 2011. The Chineseambassador celebrated with former Peruvian ForeignMinister José Antonio Meier, while their counter-parts met for a similar exchange in Beijing.

Although trade may gain the most attention, oth-er aspects of bilateral relations, such as frequent mil-itary exchanges, are also important. Lima has oneof the continent’s largest Chinatowns, known as theBarrio Chino de Lima – an important area for Chi-nese culture in the country. With investment andtrade expected to keep growing, it appears likelythat China-Peru relations will continue to deepen.

China purchased $6.95bnworth of goods from Peruin 2011, and Chineseinvestments in the comingfive years are predicted toreach $10bn.

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THE REPORT Peru 2012

A successful partnershipPolitical and economic ties with China are stronger than ever

COUNTRY PROFILE ANALYSIS

The 2011 election involved a number of parties and alliances

In 1990 the Peruvian electorate veered away from well-established political parties and instead chose the rel-atively unknown Alberto Fujimori, campaigning underthe banner of his newly formed Cambio 90, to be pres-ident. Now, more than a decade after democracy hasbeen restored following the fall of Fujimori’s authori-tarian regime, they are still in the process of rebuild-ing. Progress has been slow and inconsistent, with majorpolitical parties having varied degrees of success. Thefractured nature of the party system has encouragedthe establishment of coalitions and alliances for elec-tions, and of parliamentary majorities once in power. PERU WINS: Peru Wins, the party of President OllantaHumala, falls on the left side of the political spectrum.It was formed specifically for the 2011 election as acoalition of various parties, including the PeruvianNationalist Party and nationalist members of the Unionfor Peru party who had united behind Humala in the2006 elections. The Socialist Party, Peruvian Commu-nist Party and Revolutionary Socialist Party also joined.

Aside from winning the 2011 presidential runoffelection, Peru Wins was successful in Congress as well,winning 25.3% of the popular vote and 47 of 130 con-gressional seats – the largest share among the parties.The party has formed a majority coalition with the PeruPossible (PP) Alliance, the centrist group of formerPresident Alejandro Toledo. It also won 27% of the votein the election of Peru’s five members of the AndeanParliament, handing the party two representatives. FORCE 2011: Led by Keiko Fujimori, daughter of thecontroversial former president, Force 2011 is consid-ered a right-wing conservative organisation. Formed forthe general election, the party and its presidential can-didate received 23.6% of the votes in the general elec-tion before losing in the presidential runoff with 48.7%of the vote. The party also finished second in the con-gressional elections, picking up 37 seats in the Con-gress and one seat in the Andean Parliament.PERU POSSIBLE: Founded by former President Tole-do in 1994, PP is one of many centrist political organ-

isations in Peru. After succeeding in replacing AlbertoFujimori in 2000, the PP pulled its candidate out of the2006 elections before Toledo decided to run for a sec-ond presidential term in 2011 (the Peruvian constitu-tion prevents consecutive presidential terms). Toledofinished the election in fourth place, having won 15.6%of the votes. However, PP came third in congressionalelections, winning 21 seats.ALLIANCE FOR GREAT CHANGE: The Alliance for GreatChange (PPK) was also formed for the 2011 generalelection to prop up non-partisan presidential candidatePedro Pablo Kuczynski. The PPK gained support fromthe Christian People’s Party, the Alliance for Progress,the National Restoration Party and the Peruvian Human-ist Party. In the congressional elections the PPK won12 seats, with 14.4% of the popular vote, and one seatin the Andean Parliament, while Kuczynski won 18.5%of the presidential vote.NATIONAL SOLIDARITY ALLIANCE: Also formed forthe 2011 general election, the National SolidarityAlliance is led by former presidential candidate andformer Mayor of Lima Luis Castañeda. Parties in thecoalition include the eponymous National SolidarityParty, some of the core members of the Union for Peru,Cambio 90 (a successor to Fujimori’s former party),Always Together and Everyone for Peru. The alliancewon 10.2% of the vote in the 2011 congressional elec-tion, giving it nine seats. Castañeda’s presidential cam-paign began quite brightly, but he slid into fifth place,with 9.8% of the votes in the general election. APRA-PERUVIAN APRISTA PARTY: The AmericanPopular Revolutionary Alliance (APRA) is Peru’s oldestand traditionally most institutionalised political party.Founded in 1924 by political activist and lawyer VíctorRaúl Haya de la Torre, APRA is the party of former two-term President Alan García. Mercedes Rosalba AráozFernández, the party’s candidate in the 2011 presi-dential elections, withdrew her candidacy amid a con-gressional corruption scandal involving members ofthe party. APRA won four congressional seats in 2011.

Much of the last decadehas been dedicated torestoring democraticinstitutions, includingpolitical parties followingthe authoritarian regime ofAlberto Fujimori.

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Party linesA look at the major players in a fragmented political scene

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