García’s Decline in Peru

García’s Decline in Peru

-Plummeting poll ratings register a remarkable shift of status

When Alan García first came to power in Peru in 1985 under the Alianza Popular Revolucionaria Americana (APRA) party, he was hailed as “Latin America’s Kennedy.” Unfortunately, his reign was instead marked by corruption, economic disaster, violence from leftist guerilla groups and the military as well as rampant human rights violations. In his 2006 presidential bid, García was careful to enumerate the lessons he had learned since this initial term. He attempted to distance himself from the unsuccessful era of his first presidency by running on a platform of free market economics, open trade and poverty reduction. He won, but only by a narrow margin, with his primary areas of support stemming from Lima and the northern coast. His leftist rival, Ollanta Humala, retained the dominant vote in the southern provinces and rainforest areas, indicating that a large part of the Peruvian public was disaffected with García’s electoral promises. Their suspicions were confirmed as they realized that García’s campaign commitments had no prospect of being redeemed.

García’s Troubles
Many now feel that García is facing the biggest political crisis since he first took office in 2006.3 After three days of national protests, the President is fighting back with yet another cabinet reshuffle, which was implemented on July 13, 2009. The President’s administration has been besieged by an array of difficulties, including major acts of social unrest, an oil scandal and most recently, a massive round of protests from indigenous groups in the Amazon, which have resulted in at least 34 casualties. Diplomatic relations with Bolivia and Venezuela have become strained, as the Peruvian government has accused Presidents Chávez and Morales of “external meddling” and inciting unrest in the Amazon.4 Peru has since withdrawn its ambassadors from both countries. This is a revealing trait of President García, who tends to externalize the blame for various calamities. However, as the government’s misdeeds mount, he is fast running out of excuses. Although the Peruvian GDP rose by 9.2 percent in 2008 and inflation has declined, the indigenous Amazon clashes and an oil scandal have seriously undermined García’s legitimacy and his party’s standing.5 The administration has disregarded the aspirations of a sizeable portion of the Peruvian public and has left scores of promises unfulfilled, while engaging in blatant partisanship and corruption; this behavior has resulted in stunning consequences.

Recent polls show that García’s approval ratings have fallen to 21 percent, reflecting the general perception that the administration has failed to follow through on its domestic commitments to modernize infrastructure and create effective poverty reduction strategies.6 The President has had to reshuffle his cabinet two times since he gained power. The first was in the aftermath of the October 2008 oil corruption scandal, which prompted the resignation of then prime-minister Jorge del Castillo, who was then replaced by Yehude Simon, a highly regarded independent. However, Simon also resigned from his post on July 10, 2009, in the aftermath of the June 2009 Amazon crisis. While the cabinet had previously contained a mix of independents and Aprista members, the newest appointments (announced on July 13) are all Aprista figures, who share García’s belief that social unrest in the provinces is being incited by radical Bolivians and Venezuelans intent on interference and agitation.7 The new Prime Minister, Javier Velasquez Quesquen is the former head of Congress, and his approval rating is currently 16 percent, which is lower than that of the increasingly unpopular President.

While García is likely to complete the remaining two years of his term, early polls predict a significant increase in support of Humala’s party in the 2011 elections.8 It is worth noting that both Chávez and Morales have vociferously endorsed Humala’s candidacy in the past, an action that has been one of the issues fueling the present animosity between the countries. President García prioritized economic growth over domestic stability and in so doing, provided the very national and regional rivals he sought to suppress with strongholds throughout his country. While Peru has made some progress on the economic front, thanks in part to García’s adherence to free market principles, many say that poverty has not been reduced and that internal conflicts brought on by the President’s economic decisions have far outweighed the advantages.

Pro Business, But What of the Domestic Cost?
When García took office in 2006, he expressed his intent to fight poverty by attracting large volumes of foreign investment. Various domestic initiatives were then turned into equity investment portfolios, courting international exploration of the country’s wealth of mineral deposits. Some of the administration’s initial policies included pushing through a landmark Free Trade Agreement with the United States (while pursuing similar arrangements with Europe and Asia), partnering national oil companies such as Petroperu with private firms, and providing foreign investors with stakes in Peru’s mining, biofuel and logging sectors.9 Peru, as one of the most mineral-rich countries in the world, attracted a lot of interest in its mining sector. Projects have been implemented in the Antamina, Pierina, Alto Chicama and Cerro Corona regions, and met with apparent success, making the President a favorite with big business executives, who regarded him as the preferred pro-trade alternative to the leftist nationalist candidate Humala.10

The national oil company Petroperu also formed partnerships in 2006 with Petrobras and Ecopetrol to explore six areas, and cemented agreements with Norway’s Discovery, India’s Reliance, China’s CNPC as well as Argentina’s Pluspetrol.11 However, a number of problems came to be associated with these agreements when it became evident that they would entail several domestic corollaries such as land distribution conflicts and deforestation. Unfortunately, these ramifications were seldom addressed in a comprehensive manner, with the García administration signing hastily drafted agreements to appease protesters, which were only designed as temporary solutions to the issues at hand. García’s lack of decision-making abilities has had a profoundly negative impact on his presidency.

When the government demonstrated a lack of commitment on these appeasement-based agreements, it attracted protests from social movements, indigenous groups and workers’ unions throughout 2008. The General Confederation of Peruvian Workers (CGPT) demonstrated against the García government in October of that year to protest the government’s lack of enforcement of nearly 34 agreements signed since García came to power, most of which were temporary forms of accommodation.12 The Vice President of the CGPT, Olmedo Auris, said “We are organizing throughout the length and breadth of the country to plan a day of repudiation and condemnation of a political program that lacks credibility, because the government does not keep its word and is ignoring our social demands.”13 The administration implemented several budget constraints on areas such as infrastructure, education and medicine in response to the global financial crisis. These actions prompted a broad wave of opposition and public discontent with the president’s economic agenda.14 The government issued a statement in which Juan Manuel Figueroa, (Coordinating Secretary for the Presidency of the Council of Ministers) explained that several provincial governments were neglecting their commitments to upgrade local infrastructure, and therefore, not all the promises could be fulfilled.

Today, Alan García is a grossly unpopular figure in the provinces, where his center-right position did not win him many votes in 2006. The President’s subsequent steps to implement his economic goals have provoked even greater opposition in these parts. A vicious cycle has begun, in which the government disregarded the impact of mining and oil projects on indigenous areas, as they have already been dismissed as Humala strongholds. This has only served to increase the anti-García sentiment among indigenous voters, as they believed that García’s policies of expansion had directly compromised their welfare. The case of the canon minero tax is illustrative of the discrepancy between García’s supposed economic ideals and his domestic priorities.

Mining
In October 2008, protests broke out in the mining provinces of Tacna and Moquegua regarding the allocation of the canon minero tax, by the Southern Peru Copper Corporation. The canon is the portion of the mining company tax allotted to the mining provinces and a crucial source of revenue to them, which, in turn, is used toward maintaining infrastructure and other public works.15 The provinces were receiving over a billion dollars in compensation for the mining company’s activities, when the canon distribution requirements were altered. This resulted in a severe distortion whereby Tacna, for example, received nearly 80 percent of intended funding.16 Moquegua went on strike in June, demanding a proportional distribution of the tax funds. The leaders reached a compromise with then-Prime Minister del Castillo, who signed an agreement promising the separate distribution of the taxes without specifying any details. An amended tax agreement was sent to the Peruvian Congress on September 25, 2008, which severely disadvantaged Tacna and brought further protests from Moquegua regarding the ongoing delay. 17

The head of the Moquegua Defense Front, Zenon Cuevas, said, “The executive branch has sent the ball into Congress’s court, without honoring its word, and the only result is delay.” In response, then-Prime Minister Del Castillo called the strikes “irrational” and linked the new round of protests to the actions of the left wing “Red Homeland” party.18 There appeared to be a severe disconnect between the García government and issues on the ground. In this case, the economic agreement with the mining company took precedence over the needs of the provincial populations affected by the company’s operations. The appeasement acts were designed solely to quell protesters and were not even reinforced in the long term.

Land Concessions
Another issue that caused severe conflicts in the provinces was the granting of land concessions to foreign multinational companies. Many of the areas allotted for logging, mining and biofuel projects were impinging on local property being used for other purposes, such as residences and farms. Ulderico Fasanando, a member of the regional government in San Mártin, stated that the federal government had granted these concessions without alerting its regional counterparts.19 In March 2009, there were ongoing disputes between the provinces and the federal government which revealed a severe absence of communication between the García administration and regional bodies. For instance, in the area of Barranquita, activists protested the allocation of traditional forest areas for biofuel harvesting by the Romero Group. This private entity claimed that it had received an endorsement from both the national and local governments. Barranquita’s mayor, however, rescinded the agreement that permitted deforestation.

Every land concession in the past had been accompanied by a corresponding round of protests by the affected parties, and while these economic activities might have resulted in growth and development, they have failed to impress the indigenous populations. Given the lack of communication between the various branches of the government and García’s disregard for indigenous claims, it becomes evident that the tragic events of the 2009 Amazon crisis were not destined to be isolated, but, in fact, the certain culmination of three years of public discontent.

The oil scandal of 2008 added to this sense of unrest, and was arguably a catalyst for what was to come. The public had voiced suspicion about corruption within the García administration from the moment it took office. Therefore, for the critics who were already skeptical of President García’s free market policies and his previous governing history, the oil scandal seemed to confirm that the administration was capable of using dubious standards to enact its economic agenda. The CGTP marches, which were scheduled shortly after the scandal broke, incorporated the incident into their own series of protests, demanding a change in the García cabinet.20

Oil Scandal
In October 2008, a Peruvian television channel broadcasted audio tapes that featured Alberto Quimper, a Petroperu board member, and Romulo Leon, a member of the García administration’s APRA party, receiving money in exchange for awarding a lucrative oil contract to Discover Petroleum, a Norwegian company. This was a severe blow for the administration, which claimed to have abandoned corrupt practices, while the petroleum prospecting that had thrived under García’s supervision came to a standstill. The five contracts awarded to Discover in September 2008 were subsequently suspended, as the government debated its next step amidst protests from the CGTP and other organizations. The protestors demanded a significant change in leadership, as well as the public repudiation of García’s economic policies.21 Alberto Quimper was fired, alongside Petroperu President Cesar Gutierrez and Energy Minister Juan Valdivia, as Congress voted to investigate all contracts awarded since 2006.

Later that week, García fired most of his cabinet, including his Prime Minister and close aide Jorge del Castillo, who previously had been mentioned in the tapes as having engaged in meetings between various lobbyists and APRA party members during the energy auctions.22

Yehude Simon, a governor from the provinces and a member of the opposition party with leftist leanings, was appointed in Castillo’s place. Accused of rigging energy contracts for cash, García’s APRA party fell out of favor with the public, giving the opposition a definite upper hand. Simon stated that his aim was to “build a great alliance, friendship between sectors of the left and the government” and that he had no doubt that “businessmen of the so-called right will also draw near.”23 Many believed that this gesture was meant to appease the leftist groups and political coalitions, such as those headed by Humala, in order to send the message that the government was prepared to address its failings and reach out to the opposition. However, the finance and trade ministers kept their jobs, which indicates that President García was willing to change the composition of the government, but not necessarily the policies at the heart of his economic agreements.24 Despite the professed changes, the oil scandal had a lasting impact.

In the aftermath, polls indicated that a large percentage of the public had lost faith in APRA and believed that the President had returned to his “old ways,” especially since the parties involved in the audiotape scandal had been accused of corruption during García’s previous administration.25 The polling firm Ipsos Apoyo indicated that García’s rating fell to 19 percent in the weeks after the oil scandal.26 Despite Simon’s appointment, it appeared that the public’s mind was already made up. As an article from The Economist stated:

“….the outlook has darkened. Peru has done well from high prices for its minerals. With commodity prices falling fast, one hope for continued growth is oil and gas exploration. Congress is now reviewing all contracts awarded since 2006, and investment may slow. Peruvians have not warmed to Mr. García in the good times. Unless Mr. Simon can spread goodwill, the second half of his presidency looks set to be a troubled, loveless affair.”27

The oil scandal, compounded by the administration’s existing economic woes and broken agreements, caused public faith in the government to plummet.28 In some ways, the course had already been set for the crisis that was to come. García’s government entered 2009 to a tense atmosphere of mistrust and low approval ratings, and all that was required was a final catalyst, which occurred when the government signed laws pledging various indigenous lands for multinational exploration and development.

Amazon Crisis
In many ways, Peru’s Free Trade Agreement with the United States embodied the flaws and benefits of the García administration itself. When the FTA was signed in 2007, it was considered an economic triumph for Peru, as it would attract lucrative foreign investment and open up the economy. Even at that early juncture, activists voiced concern over the fate of indigenous property, which they feared would be signed over to foreign multinationals, ousting the provincial populations from their homes and causing them to lose their means of livelihood. Their fears were confirmed when the government passed a series of investment measures in 2008 in congruence with the terms of the FTA. The National Organization of the Amazon Indigenous people of Peru (AIDESEP) and other Amazon indigenous groups protested the executive decrees, especially those permitting the government to seize land it deemed important “to national interest.” 29

The government made several promises to alter the decrees, but failed to follow through, and protests resumed in 2009. The oil company Petroperu reported that one of its pipelines had been blocked. As the police were sent to quell these actions, a violent clash occurred between government forces and indigenous protesters, resulting in more than 30 casualties on both sides. A government curfew was declared in the city of Bagua as the protests spread to the rest of Peru, involving unions and other social groups. García called the natives “genocidal” and “ignorant” while accusing them of impeding economic progress. He also claimed that the protests were the result of interference by “outside agitators” (believed, to be from Venezuela and Bolivia). García defended the police actions by stating that, “We always ask the government to guarantee law and order, and that is fine…But these people don’t have crowns. They are not first-class citizens, 400,000 natives can’t tell 28 million Peruvians you don’t have the right to come here. No way. That is a serious error, and those who think like that are completely irrational.”30

Among the outside agitators named by the authorities were García’s leftist opponent Ollanta Humala and the head of the protests, Alberto Pizango, who went into hiding. Indigenous leaders once again pointed out their lack of inclusion in the investment decisions that were so crucial to them. The Peruvian Congress attempted to appease protesters by suspending the most controversial investment decrees, but the indigenous groups refused to be placated, as they believed it would be only a temporary solution.

Miguel Palacín, one of the main organizers of the protests stated that, “The government only wants to divide indigenous peoples and undermine our just demands. We are not going to back down until our rights are respected. It is simple, but something the government refuses to see.”31

In addition to indigenous opposition, a major foreign policy issue quickly came to the forefront as both Venezuela and Bolivia issued statements supporting the actions of the Amazon groups.
Eventually, after the resignation of several ministry officials, widespread global scrutiny and criticism coming from human rights groups, the Peruvian Congress issued a statement that it would repeal the investment decrees by June 18 2009. Prime Minister Simon had the following to say regarding the matter: “It’s better to take a step back in order to take two forward… people think that we should call in the army and apply the full weight of the law. But we already have twenty four policemen and nine civilians dead. We don’t want this episode to repeat itself.”32 Indigenous groups and opposition parties then called for the resignation of Simon and Minister of the Interior, Mercedes Cabanillas. Simon, in fact, made his resignation official on July 3, 2009, stating that he planned to step down the following week. He subsequently resigned on July 10, 2009, and was replaced by Mr. Javier Velasquez Quesquen, an Aprista official. The position of Interior Minister was then assumed by former national police chief, Octavio Salazar. García also replaced his defense, commerce, work, justice and agricultural ministers.33 The President appears to have repudiated his October 2008 resolution to maintain diversity in his cabinet, as most of the new officials are APRA party members, who share his center-right views on economic and foreign policy.

The new government finds itself in an unenviable position. Committed to the United States, it is generally scorned by the rest of Latin America. President García’s policies have disappointed overseas, and he was never popular at home. His approval ratings are at a record low, and he is seen within the country as elitist, money minded and heedless of the indigenous populations’ needs. Internationally, there remain various terms within the FTA and other multinational agreements that need to be fulfilled. However, the President is likely to encounter difficulty carrying out these obligations, as the Peruvians are no longer receptive to his ideas or commitments. As the Peruvian economy declines along with the global downturn, indigenous and workers groups are demanding a greater say in policy making. 34 Pollster Ipsos Apoyo has situated García’s current approval rating at 21 percent, demonstrating that the latest round of violence and protests have led to the view that the government severely botched up the situation in the Amazon and remains indifferent to indigenous needs.35 Additionally, the fate of García’s presidency has also damned his party, as the APRA stands little chance of winning in the election of 2011.

When García took power, he argued that he was a changed man and that his goal would be to lift Peru out of its economic malaise. At first, he seemed to accomplish this goal to some degree, but he did not ever engage the citizens in the process, content to have them remain on the sidelines. When the protests and violence occurred, García chose to lay the blame on foreign interference instead of focusing on internal policy reform. Perhaps García can remedy the situation in his remaining two years in the presidency, but at present it seems that his second attempt at governance is all the more tragic for its wasted potential.

This analysis was prepared by Research Associate Anagha Krishnan
July 21st, 2009
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