Great Political Comeback in Peru

This is a guest blog post by Ivan Rebolledo, managing partner of TerraNova Strategic Partners.

Sunday’s election pitted the two versions of the Peruvian right against each other: the populist, Keiko Fujimori of the Fuerza Popular party, and the liberal, Pedro Pablo Kuczynksi (PPK) of the Peruanos por el Kambio party, with the latter’s win confirmed Thursday afternoon.

In 2011, Ollanta Humala eventually won the second round, over Fujimori, with votes from the liberal right and center. PPK did it with votes primarily from the left, including important support from Veronika Mendoza and her Frente Amplio party.

Since then, Fujimori has attempted to clean up her party’s image by removing the more controversial leaders and selecting better congressional candidates. Her 40 percent win in the first round showed this strategy’s success, as she garnered support from all socioeconomic classes. However, during the second round campaign, Fujimori campaign insiders were secretly taped and allegedly linked to drug trafficking, reminding the electorate of similar scenarios during her father’s presidency. She failed to quickly distance herself from the intrigue, which in the end thwarted her campaign. Though PPK was trailing due to his lackluster second-round campaign performance, close affinity to the United States including one-time U.S. citizenship, and years in the international banking sector, Fujimori’s problems became his successes, swaying the popular vote in his favor.

This is the first time that the liberal right has won a democratic election in Peru. And it is the first time a candidate wins without espousing leftist rhetoric to then govern from the right. Clearly PPK is a free-market reformer (Peru sovereign bonds rallied yesterday after his confirmed victory). No one should be surprised when he implements liberal economic policies, as so many were with Humala’s turn to the right. The left knows this and still they voted for him.

PPK’s tremendous gains between the first and second round create real weaknesses for his administration. He won just 21 percent of first-round votes, the other 30 percent “borrowed” from those opposing Fujimori. He also comes in with just eighteen representatives, or 14 percent of Congress. Few leaders have such meager parliamentary support.

Now PPK’s biggest dilemma will be how to consolidate political power, which will probably mean working with Fujimori and her party. His top priorities should be crime and security; dealing with immense government corruption; accelerating economic growth by shrinking the informal sector; diversifying the economy away from extractive to manufacturing industries; and fortifying Peru’s role regionally and globally.