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Issue #592

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2014 Media Kit

Peru’s Garcia seen changed, more market-friendly

By: | at 08:00 PM | International Trade  

After a deeply flawed term in the late 1980s, Peru’s Alan Garcia has a good shot at becoming president of the Andean nation for a second time and possibly redeeming himself.

A recent opinion poll shows the leader of the social democratic Apra party with a lead over nationalist Ollanta Humala in a second round likely to take place in little more than a month.

While the vote count isn’t quite finished from the April 9 general elections, Garcia’s lead over third place Lourdes Flores is considered strong enough to allow him to pass to the run-off vote.

With Garcia knocking on the doors of the presidential palace again, political analysts, bankers and ordinary Peruvians are all wondering if the 56-year-old father of five has really changed.

His first term was racked by hyperinflation, rising terrorism, food lines, a debt moratorium, and a failed nationalization of the banks - to name just a few setbacks.

In a recent television interview Garcia admitted to making errors in his first term, noting that when took power as a 36-year-old former member of Congress, his Apra party had been trying to gain power for some 50 years.

This time, he says, they would take a more mature, responsible approach.

While many Peruvians want to believe the charismatic lawyer, others are clearly reticent, and polls show a large number of people who say they would never vote for Garcia.

On a wall on the Javier Prado freeway in Lima someone has written in large letters: “Alan hasn’t changed.”

The road to a possible second term hasn’t been easy.

Garcia fled Peru in 1992 after troops surrounded his home in Lima during a military coup led by now-jailed ex-President Alberto Fujimori.

He returned from exile in Colombia and France in early 2001 and has been campaigning almost endlessly since then.

As in 2001, when he barely lost to President Alejandro Toledo, Garcia has again been promoting a few carefully crafted themes, aiming to transmit an easily understandable message to the middle-classes, workers and farmers.

His party promises among other things, lower electricity rates and reduced insurance costs for drivers.

Garcia builds a case for “social justice,” a key theme for the well-organized Apra party, which began in the 1930s as a middle-way between capitalism and communism.

His work as leader of the Apra since his return has convinced many observers.

Peruvian political scientist Julio Carrion, of the University of Delaware, says the Apra has stuck by Toledo during tumultuous moments, believing that democracy in Peru, and probably the Apra, would be better serviced by allowing him to finish his term.

Garcia has built bridges to other parties, and has acknowledged that the market has a central role to play in the economy while mentioning that there are many market failures that the state needs to address.

“Last but not least, I think Garcia is driven by the need to change his legacy and atone for his past mistakes as president. I think he will be more careful this time if elected president since he will be closely watched by both Congress and the public,” Carrion added.

Garcia has also convinced many investors that he wouldn’t want to repeat past errors, While the Apra 28-member bloc in the outgoing Congress has generally supported market-friendly policies over the last five years.

“Garcia won’t want to be remembered for the absolute chaos and hyperinflation and crisis, so we expect he will do things differently and be much more careful in maintaining what works,” Lehman Brothers debt strategist Gianfranco Bertozzi said.

Peru’s economy has expanded strongly in recent years, with the expansion of gross domestic product reaching 6.67% last year, on the back of booming exports. The fiscal deficit is well under control, foreign reserves are solid and inflation remains tame.

UBS Investment Research noted in a recent report that, “If Garcia were to become Peru’s next president, we would expect him to behave responsibly, sending a strong signal early on about a strong commit