Perspectivas de la Alianza del Pacífico frente a la llegada de gobiernos de izquierda al poder

 

1. Introducción

La Alianza del Pacífico, para abreviar AP, ha sido considerada el grupo de países más atractivo de América Latina para inversionistas internacionales y países de otras regiones. Está formada por los cuatro países de más rápido crecimiento en la región, México, Colombia, Perú y Chile, y es por eso por lo que otros quieren convertirse en estados asociados de la Alianza del Pacífico. Pero para algunos eso podría cambiar con el surgimiento de gobiernos de izquierda en esos países, como el que surgió en el Perú. En este artículo se analizará la probabilidad de que eso también suceda en Chile y Colombia, que enfrenta elecciones generales a fines de este y el próximo año, y las implicaciones en el atractivo de la AP.

2. Análisis de los hechos

La Alianza del Pacífico es considerada el grupo de países más atractivo de América Latina para los inversionistas internacionales y países de otras regiones. Sus cuatro miembros concentran el 38% del PIB, el 50% del comercio total y atraen el 45% de toda la inversión extranjera directa a la región[1]. Su principal atractivo es que está formada por países con economías abiertas y de ambiente liberal de inversión para empresas extranjeras. Además, estos países tienen muchos tratados de libre comercio, TLC, con las principales economías del mundo (por ejemplo, todos, excepto México, tienen TLC con Corea del Sur) y una creciente relación económica con los países asiáticos.

La Alianza del Pacífico se estableció en abril del 2011 con los objetivos, entre otros, de avanzar hacia la libre movilidad de bienes, servicios, recursos y personas, y “convertirse en una plataforma de articulación política, integración económica y comercial y proyección al mundo, con énfasis en la región del Asia Pacífico”[2].

Los países de la AP tienen una población combinada de 225 millones de personas y un PIB per cápita promedio de USD 18,000. Se ha logrado una zona de libre comercio entre ellos, con la integración de sus mercados de valores y la libre movilidad de las personas dentro de la región. La AP es atractiva para otros países, 59 países ya son estados observadores en el grupo, y cuatro de ellos, Australia, Canadá, Nueva Zelanda y Singapur están en negociaciones para convertirse en miembros asociados. Con Singapur ya concluyeron las negociaciones para lograr el Acuerdo de Libre Comercio Alianza del Pacífico y Singapur (PASFTA por las siglas en ingles) y tienen previsto firmar el acuerdo a finales de este año. De este modo, Singapur se convertirá en el primer Estado Asociado de la Alianza del Pacífico[3].

Pero la elección de un gobierno de izquierda en Perú en junio de este año, que se comprometió en la campaña electoral a renegociar contratos con empresas extranjeras en los sectores extractivos, renegociar Tratados de Libre Comercio e incrementar la presencia del Estado en la economía, ha levantado algunas dudas sobre el atractivo futuro de la Alianza del Pacífico. No solo eso, Chile a fines de este año y Colombia el próximo enfrentarán elecciones generales para elegir un nuevo presidente, y las probabilidades de que partidos de izquierda ganen las elecciones son altas. Veamos en detalle que puede suceder en esos tres países.

Empezando por Perú, el 28 de julio Pedro Castillo asumió el cargo por un período de cinco años. Castillo, un maestro de escuela sin experiencia previa en cargos públicos, fue elegido representando al partido político “Perú Libre”, partido de izquierda (cuyos principales dirigentes son marxista-leninistas) y que en la campaña electoral se comprometió a cambiar las reglas del juego en la economía, aumentando el papel del Estado, poniendo límites a la participación de la inversión extranjera, y cambiando la Constitución para hacer que eso sea posible. Castillo ha expresado su admiración por Cuba y Venezuela, y esto hizo que los inversionistas privados desconfiaran de él, incluso dijo que buscará revisar los tratados de libre comercio que firmó el Perú.

Pero, luego de un mes y medio en el cargo, parece que Castillo, al menos en lo que respecta a la inversión extranjera y los TLC, no aplicará sus políticas radicales. Parece que el presidente Castillo está tomando conciencia de la importancia del comercio exterior y la inversión para el crecimiento económico del Perú. Las exportaciones de bienes del país han sido el principal motor del crecimiento económico en los últimos 30 años desde que Perú inició en 1990 la apertura de su economía al comercio exterior y la inversión extranjera. Por eso por ejemplo las exportaciones de bienes pasaron de 7 mil millones de dólares en el 2020 a 47 mil millones de dólares en 2019 y este año probablemente podría registrar una cifra histórica de 55 mil millones de dólares[4]. Eso es posible por los altos precios del cobre (el 30% del valor de las exportaciones peruanas son de cobre) y por las exportaciones de su pujante sector agroindustrial (como aguacate, uvas, arándanos, etc.). Y la inversión extranjera ha sido la principal razón por la que se incrementó la producción de esos bienes. La mayoría de las minas son de propiedad de extranjeros y la inversión del exterior también es un actor importante en el sector agroindustrial.

Un ejemplo de esta nueva actitud de Castillo es también su acercamiento a China, país que es el principal socio comercial del Perú (en los primeros 7 meses de este año China fue el destino del 35% de las exportaciones peruanas, y Estados Unidos, el segundo principal destino, representó solo el 12%[5]) y también es el principal inversor en los últimos años en el sector minero. Castillo visitó la Embajada de China el 15 de julio, incluso antes de ser declarado oficialmente ganador en las elecciones. Y tras las elecciones varios ministros de su gobierno se han reunido con el Embajador de China y ejecutivos de empresas chinas, dándoles la seguridad de que Perú seguirá haciendo negocios con ellos como de costumbre. La inversión china representa alrededor de una cuarta parte de toda la inversión extranjera acumulada en Perú. Y las empresas chinas producen alrededor del 25% del cobre, 100% del mineral de hierro y 30% del petróleo del país[6].

En el caso de Chile, que fue el primer país de América Latina que comenzó a abrir su economía a partir de la década de 1970 al comercio exterior y la inversión extranjera en la región, convirtiéndose en la economía más abierta (con más TLC firmados en la región[7]), las protestas de 2019 parecen haber producido un cambio de actitud. Hay tres señales de eso. Primero, el Congreso de Chile no ha ratificado el Tratado Integral y Progresista de la Asociación Transpacífica, CPTPP por sus siglas en inglés, aunque Chile fue sede de la ceremonia de firma de este acuerdo en el 2016. Segundo, se está redactando una nueva Constitución y parece que se pondrá más énfasis en la participación del Estado en la economía. Y tercero, Gabriel Boric, un exlíder estudiantil, que ganó una elección primaria de la coalición de izquierda (derrotando a un candidato comunista), es visto como el favorito para las próximas elecciones de fin de año[8].

Pero Chile, junto con México, son dos de las economías más abiertas de América Latina, con muchos TLC vigentes y donde el comercio exterior tiene una alta participación en sus economías, 51.7% del PIB para Chile y 75.4% para México, cerca al nivel o más alto que en Corea del Sur, por ejemplo, que es un país que se ha desarrollado en parte importante gracias al comercio exterior. Ver Tabla 1. Asimismo, se puede ver en la misma Tabla que para Chile, al igual que para México, Colombia, y como se dijo antes para Perú, la Inversión extranjera directa juega un papel importante en sus economías, mucho más alto que en Corea, por ejemplo. Entonces, por estas razones es probable que, aunque un gobierno de izquierda como el de Gabriel Boric gane las elecciones, sería uno de izquierda moderada, y probablemente no cambiará mucho la orientación de Chile hacia una economía abierta, incluso si aumenta la presencia del Estado en la economía.

Tabla 1: Indicadores económicos de los países de la Alianza del Pacifico y Corea

Paises	Exportaciones de bienes y servicios (% del PBI) Año 2020	Comercio de bienes (% del PBI) Año 2020	Inversión extranjera directa, entradas netas (Balanza de Pagos, US$) millones Año 2019	Inversión extranjera directa, entradas netas (% del PBI) Año 2019	PBI (US$) millones Año 2020	PBI per cápita (US$) Año 2020
Chile	31.5	51.7	12,586	4.5	252,940	13,231
Colombia	13.7	27.5	14,313	4.4	271,346	5,332
Mexico	40.1	75.4	29,375	2.3	1,076,163	8,346
Peru	22.3	38.9	8,891	3.9	202,014	6,126
Corea del Sur	36.9	60.1	9,634	0.6	1,630,525	31,489

Fuente: Datos del Banco Mundial, https://data.worldbank.org/indicator/

Con respecto a Colombia, las protestas masivas contra el gobierno considerado de derecha de Iván Duque en los primeros meses de 2021 también parecen haber cambiado el estado de ánimo del país hacia la izquierda. Un candidato, Gustavo Petro, es visto con posibilidades de ganar las elecciones de mayo de 2022. Él no es de izquierda radical, por lo que también parece que no tomará el camino de apartar la economía de Colombia de su integración a los mercados mundiales. Incluso si en Colombia la participación del comercio exterior en su economía no es tanta como en Perú, Chile, o México, juega un papel destacado, y la inversión extranjera es importante en un nivel comparable a los otros países de la AP.

Entonces, incluso si para el próximo año existe la posibilidad de que muchos países de América Latina, como se ve en el Mapa 1, puedan tener gobiernos de izquierda (color rojo), al menos en los países de la Alianza del Pacífico es probable que la actitud hacia el comercio exterior y la inversión extranjera no cambiará.

Mapa 1: ¿Mas gobiernos de izquierda en América del Sur en el 2022?

Fuente: Macroconsult: Alianza del Pacifico: Viraje a la izquierda https://sim.macroconsult.pe/wp-content/uploads/2021/07/Reunion-Macroconsult_90721.pdf 9 Julio 2021

 

3. Expectativas e implicaciones futuras

Entonces, aun con gobiernos de izquierda en control en el 2022 en Chile y Colombia, además del que ya está en Perú, la probabilidad de que eso impacte negativamente en el atractivo de la AP parece no ser alta. Quizás el ejemplo de lo que está sucediendo en México sea una guía. En este país también hay un presidente que es considerado por muchos como de izquierda, Andres Manuel López Obrador, quien asumió el poder en el 2018. Pero la política de México hacia la Alianza del Pacífico, la inversión extranjera, o los varios TLC firmados no ha cambiado con él en el poder.

México, por ejemplo, también es miembro del T-MEC, el Acuerdo México-Estados Unidos-Canadá, un tratado de libre comercio originalmente vigente desde 1994, pero renegociado en nuevos términos y vigente desde 2020. Esto hace que, para México, por ejemplo, más del 65% de su comercio exterior es con Canadá y Estados Unidos (y el 80% de las exportaciones de México van a Estados Unidos[9]). Y la inversión extranjera juega un papel vital para México. Entonces, no es fácil para el gobierno de México cambiar las cosas. Quizás lo mismo podría suceder también en el resto de los países de la AP, incluso si gobiernos de izquierda toman el poder en ellos.

En todo caso, de todos los países de la Alianza del Pacifico quizás el que podría presentar mayor incertidumbre para inversionistas extranjeros y su atractivo como país es Perú, pues aunque como se dijo Castillo parece estar convencido de la importancia del comercio exterior y la inversión extranjera para la economía del país, lideres de su partido siguen insistiendo en llamar a elecciones para una Asamblea Constituyente, lo que si creara incertidumbre en los actores económicos nacionales y extranjeros. Además, los cuestionamientos a varios de sus ministros crean un ambiente de inestabilidad y enfrentamiento con el Poder Legislativo.

En todo caso, la actitud de un país hacia el comercio exterior e inversión extranjera, su posición frente a los TLC es parte de la política exterior del país. Y si la política interna de un país cambia respecto a la inversión privada, nacional y extranjera, eso impactaría en su actitud frente a los tratados de libre comercio, y la inestabilidad interna también lo hará poco atractivo al exterior. Como se dice, al final la política exterior es un reflejo de la política interior.        

 

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[1] Ver página web de la Alianza del Pacifico: “What is the Pacific Alliance?” https://alianzapacifico.net/en/what-is-the-pacific-alliance/

[2] Ver página web de la Alianza del Pacifico: “What is the Pacific Alliance?” https://alianzapacifico.net/en/what-is-the-pacific-alliance/

 

[3] Ver pagina web de la PA: “Pacific Alliance and Singapore conclude negotiations for the Free Trade Agreement (PASFTA)” https://alianzapacifico.net/en/pacific-alliance-and-singapore-conclude-negotiations-for-the-free-trade-agreement-pasfta/

[4] Ver diario Gestión: https://gestion.pe/economia/exportaciones-este-ano-superaran-niveles-precovid-y-marcaran-record-historico-nndc-noticia/

[5] MINCETUR: Reporte Mensual de Comercio Exterior, Julio 2021  https://cdn.www.gob.pe/uploads/document/file/2152327/RMC_Julio_2021.pdf

[6] Ver América Economía, Asia Link: Maria Osterloh: “Empresas mineras chinas: contribución al crecimiento económico del Perú” https://asialink.americaeconomia.com/columna/empresas-mineras-chinas-contribucion-al-crecimiento-economico-del-peru

[7] Chile tiene 30 TLC vigentes, comparado con 23 para México, 20 para Perú, y 15 para Colombia. Ver WTO: Participation in Regional trade Agreements,  https://www.wto.org/english/tratop_e/region_e/rta_participation_map_e.htm

[8] Ver Financial Times: “Chiles´s social upheaval leaves presidential race wide open” https://www.ft.com/content/bcd2b8d3-02dc-4bd9-a2f6-78e090924ce9

[9] International Trade Center: Trade Map: https://www.trademap.org/Country_SelProductCountry.aspx?nvpm=1%7c484%7c%7c%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c1%7c%7c2%7c1%7c%7c1

Sobre las actividades del CEAS

 https://www.slideshare.net/carlosalbertoaquinorodriguez/sobre-las-actividades-del-ceas

The new government in Peru: Perspectives of its economic and foreign policy

 

                                                                                                                                          Carlos Aquino*

On august 26^th the first cabinet of President Pedro Castillo will present itself in Peru Congress to get an approval vote for its policies. But there are some doubts about it getting the approval from the Congress because several members of the cabinet are being questioned by the opposition parties and the public opinion. A Minister of Foreign Affairs was asked to resign from the government following criticism by several sectors of society for what was called his “apology of terrorism”. So, even if the cabinet is confirmed, it will have a low approval rate among the public, and the possibility of Ministers being censured later by the Congress is high, and this will create political instability and uncertainty in the economy.

Peru suffered a lot with the COVID-19 pandemic, having accumulated up to now more than 197 thousand deaths, in a population of 32 million people. Its economy was hard hit last year, declining at an annual rate of 11.1%. And there is a high probability that a third wave of contagion of COVID-19 will hit the country perhaps at the end of next month. Given the fact that the vaccination rate of the population is less than 25% of the total, and there are doubts about the public health system being able to cope with that, the effects in the society and the economy also could be troublesome. 

An analysis of the new government of President Pedro Castillo will be provided in this article. It will focus in the economic and political aspect, and the perspectives of its economic and foreign policy.           

1. Political situation of the country. -

Pedro Castillo was elected in a runoff and won by a margin of just 44 thousand votes of a total of 17.5 million votes (he got 50.125% of the total). In the first round he got only 19% of the total votes. His triumph was due more to people voting for him to avoid electing Keiko Fujimori, whose father, a former President, was sentenced for corruption and human rights violations (and she herself has also been accused of corruption). Castillo, a schoolteacher with no previous experience in public office, was elected in the ticket of the political party “Peru Libre”, a left party whose main leaders are Marxist-Leninist. 

In a one chamber Congress of 130 members, Peru Libre has only 37 representatives, it is the largest party in the Congress, and together with its political ally, “Juntos por el Peru”, a leftist party which has 5 votes, the two have 42 votes. There are two political parties, “Somos Peru” and “Partido Morado”, that are considered close to the government, and this two together has 9 representatives, for a total of 51 votes for the government.

Of the remaining parties, the second biggest party in Congress is “Fuerza Popular” of Keiko Fujimori, which has 24 votes. With the party “Avanza Pais” that has 10 votes and “Renovacion Popular” with 9 votes, the three are considered right leaning parties and of strong opposition to the government, having them a total of 43 votes. There are three additional parties considered in the center of the political spectrum: “Accion Popular”, with 16 votes, “Alianza para el Progreso” with 15 votes, and “Podemos Peru” with 5 votes.

As can be seen there are ten political parties in Congress and the biggest, the governing party, with its ally has just 42 votes in a total of 130, around 32% of the total. The two parties must get votes from other parties to pass a law that usually requires more than half of the total votes, around 66. To get the approval of the new Cabinet it also needs 66 votes.   

The governing party has already suffered defeats in the Congress. It presented a list to win the Congress Board of Directors but got only 50 votes, being defeated by one of the lists presented by the opposition, who got 69 votes. Also, the Congress elects 24 Committees and the most important ones, as Budget, Constitution, and Oversight, are in the hands of the opposition.

In the presidential period July 2016-july 2021 Peru Congress impeached a President (and another resigned to office before being impeached) and given the strong opposition of some parties to the government, there are talks about the possibility of impeaching also President Castillo. For this to happen a total of 87 votes are needed.  

Getting 87 votes are not easy so now some opposition parties are talking about questioning or censuring some cabinet ministers. The new cabinet that will present on August 26 to the plenum of Congress has several Ministers that are being criticized and probably could get censured. Even the President of the Cabinet is being criticized, and he, with at least 5 Ministers: Defense, Culture, Labor, Internal Affairs, and Transport and Communications, are said to be unfit for office because of their lack of experience in the field, or for having legal problems, or for being apologists of terrorism[1]. The first named Minister of Foreign Affairs, Hector Bejar, was forced to resign with less than 3 weeks in office because he was accused of apology of terrorism and for blaming the Peru Navy of having initiated the terrorism in the country. He even said that the Shining Path movement (Sendero Luminoso), that brought terror to Peru in the 1980s and beginning of the 1990s, was in part a creation of the Central Intelligence Agency (CIA). Bejar himself, an 85-year person, spent several years in the 1960s in jail for committing terrorist acts.

So, the political situation in Peru is not stable. With weak political parties, a divided Congress, and strong opposition to the Castillo government, even if the new Cabinet is approved, the possibility of Ministers being questioned and censured by the Congress is almost certain. To question and censure a Minister 79 votes are needed. The opposition certainly could get those votes.

The opposition to the government is not only because some Ministers are accused of being unfit for office but mainly because the governing party Peru Libre wants to change Peru’s Constitution and aims for a model like in Venezuela and Cuba, where government role in the economy is strong and there are limits to the activity of the private sector. Also, the opposition said that the real aim of changing the Constitution through the election of a Constituent Assembly, as Peru Libre wants, is to change the rules of political elections and allow the President and the governing party to stay in office forever, like in Cuba and Venezuela.

Some analysts even think that what the government wants is to close the Congress and call a Constituent Assembly. For this, it is aiming for the Congress not to approve two Cabinets, and then the President can dissolve the Congress and call for new elections.   

That’s why the governing party has been accused of being communist. At least its main leaders, as the General Secretary of the party, Vladimir Cerron, have shown their admiration for the Cuba and Venezuela regime. Cerron influence in the party is strong, and many analysts think that he is the real power behind the throne, and Castillo will yield to him. Cerron created the party Peru Libre and Castillo was called to be its candidate for the Presidency.  

Precisely the call for changing Peru economic system advocated by Cerron, and other party leaders, is bringing a lot of instability and affecting the economy. A look at this situation is given below.             

2. Economic situation. -

As was said before, Peru experienced one of the worst economic performances in the world in 2020, with the economy declining 11.1%. The poverty rate increased in the country from 22% in 2019 to around 30% at the end of 2020.

Peru is a middle-income country, with around 6,500 dollars income per capita. But its economic structure is weak, with a low industrialization rate, and dependent on the export of natural resources, that has in abundance, and on inflows of foreign investment. But from the year 2000 to 2019 the economy grew without interruption and was considered a star in the Latin American region (See graph 1 below). Its macro-economic figures were impressive. A low inflation rate, low or nearly zero budget deficit, high international foreign exchange reserves, and low level of external debt. Its exports of goods increased from a value of 7 billion dollars in 2000 to around 46 billion dollars in 2019.

Source: Peru Central Bank: Annual Report 2019; https://www.bcrp.gob.pe/eng-docs/Publications/Annual-Reports/2019/annual-report-2019-1.pdf

That was possible because from 1990 onwards Peru implemented economic reforms to open more its economy to foreign competition, lowering import tariff rates, welcoming foreign investment, making more flexible the labor market, and diminishing the role of the state in the economy. State owned companies were privatized, and many of them were bought by foreign investors, and Peru embarked in a string of free trade agreements (FTA) with its main trade partners. Also, the country put more emphasis in the Asia region, joining the APEC forum in 1998, and establishing FTAs with China, South Korea, Japan, and recently ratified the CPTPP agreement.

As a result, now Asia is the most important market for Peru exports. In 2010 only 26% of Peru exports went to Asia, but in 2020 around 46% went to that region. China has become the main market, with 29% of total in 2020, and in a second and distant place with only 13% of the total is the United States. And Asia importance is bound to increase as it is the most important market for Peru exports that in a 70% are mainly mineral, natural gas and petroleum, and fishmeal. Already in the first 6 months of this year China accounted for 35% of Peru exports and US only 12%[2].    

But, despite the impressive economic growth and good export performance, Peru economy suffered a lot in 2020 because of a combination of factors. First, the country was in lockdown for many months because of the pandemic, paralyzing the economic activity; second, as the economy has a high level of informality, with employment calculated to be around 70% informal, many people lost their incomes; and third, because of high income inequality, many people could not live and consume with the economy paralyzed. To this it could be added the incompetence of the government in managing the pandemic (for extending the lockdown of the economy without taking the necessary measures to control the pandemic and avoid its propagation), and the poor state of public health system that could not cope with the pandemic, resulting as said before in more than 197 thousand deaths. Peru has the highest COVID-19 deaths per capita in the world[3].

The economy was supposed to recover and achieve pre pandemic levels this year or the next, due, among other things, to a recovery of the world economy, as Peru depends on a lot of this for its exports, but the situation began to change when in the first round of elections in April Pedro Castillo came first in the ballot. His party plans to change the rules of the game in the economy, by increasing the role of the state, putting limits to the foreign investment participation, and especially his plans to change the Constitution and its admiration of Cuba and Venezuela, made private investors wary of him.

So, the Peru currency, the Sol, began losing value against the dollar, the Lima stock exchange also decreased in value, and many people began taking its money from the bank and changing it to dollars, or taking it outside the country. It is estimated that around 8 billion dollars has left the country in the last months. Peru foreign exchange reserves at the beginning of the year were about 73 billion dollars. Peru GDP is about 200 billion dollars. As Castillo won the Presidency in the runoff elections in June this trend began to increase.

Besides the called “socialist agenda” of its economic policy, what make investors also wary of Castillo’s regime is the sense that his government is not filling public offices with capable people. As said before, many Ministers are being questioned for that, and the proposal to lower salaries of high public officers (already its Ministers have said they will receive only half of their salaries) and the fact that several posts have been filled by people with no previous experience and of low qualifications, is creating more economic uncertainty. Already several of them have resigned following criticism that they were not suitable for office (several Vice ministers and high-level officers for example had to resign).

Peru has a problem specially because of a lack of a meritocratic system in government, and with each change of administration, governments posts are filled with people belonging to the winning party (regardless of their merits). This is particularly troublesome now, because the Peru Libre party has never been in office before, and its General Secretary Vladimir Cerron was the Governor of a region in central Peru, but his record of government is dismal (he was dismissed from office accused of corruption).

Corruption is an endemic problem in Peru, and present at every level. According to Contraloria General de la Republica (Comptroller General of the Republic), the state lost 22 billion soles to corruption in 2020. This amount was equivalent to 12% of the general budget that year[4]. All 6 formers Presidents of Peru has also been accused of corruption, and several were or are in jail.    

To calm the markets and investors Castillo named an economist, Pedro Francke, who is seen as center left and worked before in government. But the pressure to spend more to implement a populist agenda is already in force. The government announced that it will give subsides to poor families, for a total of 5.145 billion soles. This amount is equivalent to 0.6% of Peru GDP[5], and around 2.8% of the public budget of 183 billion soles in 2021. Also, the government has announced that it will give subsidies to lower the price of the natural gas used by families[6].

Annual inflation rate in Peru has been very low in the last years, of around 2%, but has increased in the last month, to around 4%, fueled by uncertainty in the markets for the economic policies that will implement Castillo government. The sol has depreciated in the last months, from a level of 3.63 soles per dollars at the beginning of this year to 4.09 soles on august 24^th[7]. Peru is a net importer of petroleum and natural gas, and of wheat, corn, meat, and all this is impacting in the higher cost of food and living expenses.         

But a brighter side of Peru economy is that several commodities that the country exports are achieving high prices. Copper, which alone account for 30% of Peru exports are in a historic high price, even higher that the level achieved during the super cycle boom for commodities prices that began in 2003 and finished in 2011-2012. Already taxes paid by mining companies during the first 6 months of this years are higher than the amount they paid in the whole of 2020 or 2019. In the first 6 months of 2021 Peru exported for a value of 24.3 billion dollars and it is estimated it will register a historic record of 50 billion dollars for the whole year. Strong exports are the result of not only higher prices for commodities but also of higher exports of agroindustry products, of which Peru is becoming very competitive.

At the beginning of this year the economy was forecasted to grow around 10% in 2021, but political uncertainty is refraining investors and the projection is for the economy to growth 9% or less this year and less than 3% the following two years. But all this could be more complicated and the environment for foreign companies in the mining sector will became bleak if Castillo proposal to tax them more as he said during the election campaign is carried on. The mining sector is the main engine for Peru exports (60% of Peru exports are of the mining sector: copper, gold, silver, iron ore, and others) but investment for more production is being halted in several projects because of protests by local communities. And Castillo also promised these communities that mining projects will not get approval if he is elected.

So far Castillo government has refrained of taking measures against mining companies and said that mining projects will be feasible if they are “socially acceptable”. What that does mean is still not clear.

In addition to the above mentioned, if Castillo government insist on changing the Constitution through the election of a Constituent Assembly, this will create more uncertainty to the whole economy and the prospects for economic growth will become more somber.

3. Foreign policy. -

Regarding the foreign policy of the new government, President Pedro Castillo did not mention anything about it in his inaugural address in Congress on July 28th. Some analysts estimates that a change in Peru foreign policy could happen under Castillo regime. For example, his first Ministry of Foreign Affairs, Hector Bejar, showed strong support for the Cuba and the Venezuela regime. He met on July 30th with Venezuela Minister of Foreign Affairs with whom he talked about “reestablishing relations to the highest level”.

As is known, Peru was one of the creators of the “Group of Lima”, a group of Latin American countries that opposed the present Venezuela regime. The Group was created in 2017 by 12 countries but have not achieved tangible results. Peru, and several of those governments, cut diplomatic relations with the Venezuela regime of President Maduro. But as several leftist parties assumed power in Latin America, some of the countries left the Group of Lima, like Argentina. Under Minister Bejar also that could have happened in Peru.

Bejar had to resign his post and the new Foreign Minister is Oscar Maurtua de Romaña, a career diplomat and former Minister of Foreign Affairs. Perhaps under Minister Maurtua de Romaña Peru foreign policy will not change, but within the Peru Libre party there have been criticism of Maurtua de Romaña designation. Vladimir Cerron, the leader of the party, said that Maurtua de Romaña cannot represent a party of the left. Cerron wants a foreign policy independent of US and rejects foreign interference on the affairs of Latin America[8] .

When Castillo was campaigning for the Presidency, he and leaders of his party also criticized the FTAs signed by Peru. They talked about achieving an integration of the Latin American region instead of searching FTA with countries in other regions. They even talked about the possibility of renegotiating some FTAs because they said it has not benefited Peru.

It has been told, and when Bejar was Minister even said it, that under a Castillo government Peru will put more emphasis in working with countries of the UNASUR, a group of countries that in 2007 created this organization looking to achieve an integration of the region. The Constitutive Treaty of UNASUR entered into force in 2011. Most of its members where countries that at the time had leftist governments, but in 2018 several countries decided to suspend their membership (among them Peru) and even some withdrew from the organization.

Also, under Castillo government Peru participation in the Alianza del Pacifico, a group of 4 countries in the Latin America region with liberal economic policies and open to foreign trade and investment, could change according to some analysts. Countries in this group, Peru, Mexico, Chile, and Colombia have the most open economies in the region and have signed many FTAs with countries outside Latin America. But besides Peru that have now a leftist government, it is probably that in next year elections also Chile and Bolivia could elect leftist governments. The South America region could by next year have more leftist governments, in addition to the ones in Peru, Venezuela, Bolivia and Argentine. See next Map.         

More leftist governments in South America in 2022?

Source: Macroconsult: Alianza del Pacifico: Viraje a la izquierda

There is a possibility that regarding policies about FTAs for example, Castillo government could adopt a pragmatic approach, as the one adopted by President Lopez Obrador in Mexico. The Mexican President is also a person of leftist ideas but given the fact that Mexico economy is highly integrated to the North American market, he has kept its country economy integration under the USMCA. Peru´s economy is also becoming more integrated in the international economy. The external trade represents around 40% of GDP, and accumulated foreign direct investment is around 60% of GDP. So, the stakes are high. The problem with Castillo is that his party is Marxist-Leninist, and several leaders of its organization have criticized FTAs.

It seems President Castillo is aware of the growing importance of Peru main trade and business partners as China. He visited the Chinese Embassy on July 15^th, even before he was officially declared the winner in the election. And after the elections several Ministries in his government have meet the Chinese Ambassador and executives of Chinee companies, giving them assurance that Peru will continue business with them as usual. China is not only the main trade partner of Peru but is also one of the main investors in the country. Chinese investment represents around a quarter of all accumulated foreign investment in Peru. And Chinese companies produce around 25% of copper, 100% of iron ore, and 30% of petroleum of the country. If Castillo government put more taxes to foreign companies in the mining sector, Chinese companies will be among the affected.            

But as it is said foreign policy reflects domestic policies, so special attention must be given to how Castillo government implement domestic policies. In this regard, next presentation of the Cabinet on August 26th in the National Congress has a special meaning.

 

 

 

 

 

                                                                                                                              August 24^th, 2021

 

 

 

*Carlos Aquino is Director of the Center for Asian Studies, San Marcos National University

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[1] The last one being accused is the Minister of Labor. See RPP: https://rpp.pe/politica/gobierno/iber-maravi-niega-responsabilidad-en-actos-terroristas-y-afirma-que-buscan-condenarlo-con-atestados-policiales-noticia-1354062

[2] See Promperu statistics: https://exportemos.pe/promperustat/frmRanking_x_Pais.aspx

[3] See RCP Coronavirus Tracker: https://www.realclearpolitics.com/coronavirus/?fbclid=IwAR0ZgG-ghP_Xp9rXMPN07jiPIisIr_dggoLyDaUSYg1k27aqqMS3YTt8n0w

[4] RPP: https://rpp.pe/economia/economia/corrupcion-genero-perdidas-de-s-22000-millones-al-estado-en-el-2020-segun-la-contraloria-noticia-1346152

[5] Semana Económica: https://semanaeconomica.com/economia-finanzas/politica-fiscal/bono-de-s700-empujaria-el-deficit-fiscal-al-limite-fijado-para-el-2021

[6] Gestion: https://gestion.pe/economia/precio-del-balon-de-gas-bajaria-hasta-s-39-en-promedio-con-fondo-de-estabilizacion-glp-minem-ivan-merino-mef-noticia/

[7] Investing.com: https://es.investing.com/currencies/usd-pen

[8] Gestion: https://gestion.pe/peru/politica/vladimir-cerron-nuevo-canciller-oscar-maurtua-no-representa-el-sentir-de-peru-libre-nndc-noticia/