He was an unlikely pick for president. How will Pedro Pablo Kuczynski govern Peru?

After a close runoff vote and an unexpected alliance between sectors of the left and the right, the pro-trade Kuczynski takes reign over Peru on July 28. Could he now be a global partner on mining sector reform and environment protection?

By: /
July 28, 2016
Pedro Pablo Kuczynski
Peru's President Pedro Pablo Kuczynski, centre, gestures at the presidential palace after his inauguration ceremony in Lima, Peru, July 28, 2016. REUTERS/Guadalupe Pardo

At the beginning of the Peruvian electoral campaign, the calm and composed Pedro Pablo Kuczynski (or PPK, as he is known in Peru) seemed an unlikely pick for president. Most pundits predicted the return of Fujimorismo — a part hard-right ideology/part personality cult built around disgraced former president Alberto Fujimori. His daughter, Keiko, carried his torch and ran against Kuczynski.

Alberto Fujimori is remembered as a grass-roots politician who waged a violent counterinsurgency campaign against Maoist rebels known as the Shinning Path and tamed crippling hyperinflation in the ’90s. He was also responsible for encouraging large-scale mining projects in conjunction with foreign conglomerates through mining-friendly legislation and a near-zero royalties policy. The mining and resource extraction sector now makes up for the bulk of the Peruvian economy.

Today, Fujimori sits in jail after being found guilty of human rights abuses, illegal arms trafficking and corruption, among other charges brought against him. Despite his crimes, he is still held in high regard by large portions of the Peruvian electorate. As such, his daughter — who sat as first lady after her father’s divorce — carries the mantel for Fujimori’s political movement.   

Peru’s recent election had only one true protagonist: Keiko Fujimori. Keiko was the favoured candidate throughout the whole campaign. Her only challenger was political outsider Julio Guzman. However, a shady ruling by the Peruvian electoral court disqualified Guzman in March. The court’s decision was based on a small clerical error on his candidacy papers; many eyebrows were raised after the ruling was made final. Without strong opposition, Keiko breezed through the first round of elections and was ahead in the polls until the very end.

Yet, it was Kuczynski — a social conservative with a long career in the private sector and strong supporter of foreign direct investment and trade — who came out on top on election night.

Kuczynski squeezed through to the second round of elections on June 5, at which point his campaign went on the offensive. He portrayed himself as the only viable option against Fujimorismo, labelling Keiko as a risk to Peru’s democracy. PPK also benefited from a last-minute endorsement by the third-place finisher, leftist congresswoman Veronika Mendoza, who held 20 percent of the popular vote after the first round of elections. Mendoza was the protagonist of a massive anti-Fujimori demonstration on the build up to the second round of elections, the likes of which Peru hasn't seen since the turbulent end of Fujimori's rule 16 years ago. 

Challenging presidency ahead

Kuczynski faces a difficult term in office, starting July 28. The demographic distribution of the vote shed light on the continued class and race cleavages that plague Peru. Kuczynski will have to work on mitigating conflicts that will stem from a bitterly divided society. The drop in commodity prices has put a dent in the Peruvian economy, however GDP growth has bounced back in the first two quarters of 2016.

Kuczynski’s greatest challenge will come from the deteriorating security situation given the dominance of the drug trade. Peru holds the dubious title of largest cocaine producer in the world. As drug controls have tightened in Colombia and Mexico, cocaine producers have shifted their operations to Peru and their exports to emerging markets in Asia and Brazil. This shift has brought to Peru the violence and instability that is associated with other places that have fallen prey to the global drug trade. During his acceptance speech the morning after elections on June 6, Kuczynski warned that Peru is on the verge of becoming a narco-state.

In order to pass much-needed reforms, the septuagenarian will have to square off against an opposition-controlled congress. Despite calls for unity across the floor, Keiko’s party holds 73 out of 130 seats in the unicameral legislature and it is likely that the Fujimoristas will be calling the shots; the president’s party holds only 18 seats.

Kuczynski’s success will depend on a balancing act between the left, as represented by Mendoza and her Frente Amplio party, and the Fujimoristas. If PPK fails to consult the left, he’ll most likely face mass protests from well-organized grassroots movements. This is a particular concern in mining regions, which are deep Frente Amplio territory and have seen violent protests against large-scale extraction projects. Moreover, PPK will have to work with Keiko to push through any legislation. Fujimori has so far kept a frosty relationship with the administration and has reportedly rebuffed efforts to reach her by phone, let alone meet with the new president. 

What can Canada expect under Kuczynski?

Peru is Canada’s second-largest bilateral trading partner and third-largest destination for Canadian direct investment in South and Central America. Global Affairs Canada has managed a bilateral development program – with an annual budget of $25 million – in Peru since 1968. Canada and Peru have a Free Trade agreement in place since 2009 and Peru is a signatory of the Trans-Pacific Partnership and the Pacific Alliance, both trading blocs in which Canada has vested interests. Most notably, a large number of Canadian mining companies have projects in Peru. Canada’s ties to the Inca nation run deep.

Kuczynski is a pro-trade economist with strong connections the private sector and the extractives industry. He is not expected to change course on Peru’s various trade agreements. The Fujimori-controlled legislative will likely ratify the TPP without objections.

Kuczynski is also a former minister of mines, and mining will probably be one of the issues at the top of his agenda. As an industry veteran, PPK is well positioned to foster growth in the mining sector, but with consideration for social and environmental issues. As PPK owes his presidency to the left and Mendoza, the Frente Amplio will use their influence to push for legislation akin to their vision for Peru. Most likely, the left will find spaces regarding labour and environmental regulations in mining communities. Given the mass social upheavals in the past two years regarding large-scale projects and PPK’s relatively weak hold on power, his presidency cannot afford to ignore those central issues.

Whilst Kuczynski’s pragmatism might be harmful for the profit margins of large Canadian mining conglomerates on Bay Street, it offers opportunities for Prime Minister Justin Trudeau’s government and his vision for Canada’s role in the Americas.

During the recent North American Leaders’ summit, Canada made a point of championing human rights, gender equality and peacekeeping in the region. President Kuczynski might prove to be a crucial partner in these matters.

Canada might collaborate in regulating the mining sector, for example. Trudeau voted for legislation regulating Canadian mining activities abroad during the Harper era. The Liberal leader stood side by side with Elizabeth May and Thomas Mulcair during debates regarding Bill C-584, which sought to create an Ombudsman office regulating extractive industries activities in Canada and abroad. It also attempted to require corporations to report to it on their extractive activities. The Conservatives struck down the bill in the House of Commons.

Given Canada’s deep ties to Peru and Kuczynski’s positive disposition, Prime Minister Trudeau now has the chance to further position Canada as a leader on international trade, environmental protection and human rights.