Peru

Peru: Will The Real José Pedro Castillo Please Stand Up?

A source of major concern for investors and the economic and political elite, Peru's freshly-inaugurated leftist president is now trying to make nice. What happens next, though, is anybody's guess.

-Analysis-

LIMA — Forty three days after the last votes were cast in Peru's presidential runoff, the country's electoral authority officially proclaimed as president-elect José Pedro Castillo Terrones, a socialist schoolteacher from Cajamarca in northern Peru. His inauguration, on July 28, coincides with the 200th anniversary of Peru's independence.

This was a narrow victory that had to ride a wave of challenges and calls to recount votes from Castillo's rival, Keiko Fujimori.

The 51-year-old Castillo is a Catholic and the spouse, for 21 years, to Lilia Paredes, also a teacher though evangelical. He has three children. In his youth, he was a member of the village "patrols' or rondas that kept the peace in the countryside and later resisted the violent Shining Path insurgency in the 1980s. He represents a break, in other words, from the country's ruling elite, established parties and dominant economic groups, and reached the presidency on the back of the votes of the Andean peasantry.

Castillo is giving representation to a sector of the population that has mostly been excluded from the country's socio-economic system.

Castillo is giving representation to a sector of the population that has mostly been excluded from the country's socio-economic system, and his discourse offers them hope of inclusion finally in a country that is often reluctant to give them visibility and recognition. His message centers around simple declarations such as "No more paupers in a rich country," statements directed at all those who have for decades felt sidelined and unseen, and that raise considerable social and welfare expectations.

While campaigning, the president-elect promised reforms to healthcare, education and farming, but also a million jobs a year. Above all, he has vowed to call a constituent assembly to write a new constitution within six months. The current one, he claims, unduly favors the free-market economy.

Castillo" in Peru's capital Lima on July 20 — Photo: EC/GDA/ZUMA

But Castillo also vowed, once his victory was confirmed, to reject "any bid to bring a model of hate. We shan't permit any imported model. This constitution remains in force until the people decide otherwise." Furthermore, he has promised juridical and economic stability for businesses, responding to the conservative Fujimori's calls not to "put up more obstacles' to the economy.

The president-elect promised reforms to healthcare, education and farming, but also a million jobs a year.

Castillo needs to be moderate, something it appears he has begun to understand. Part of that is the need to emit reassuring signals, both to rating agencies and to investors waiting to see what his final postures will be on a range of issues including investments, employment, COVID vaccinations and pandemic management. His earlier declarations in favor of nationalizations and state interventionism alarmed big, foreign investors. And yet, in June, he insisted: "We're not Chavistas or communists. Nobody has come to destabilize this country. We're workers, fighters and entrepreneurs."

Moderation must transcend words, and requires an understanding of what confidence-building entails. It also means working with parliament. The executive and legislative branches cannot continue to be at loggerheads as they have in the past five years, a period in which Peru had five presidents. Parliament will likely closely observe any bid to reform the constitutional principle of presidential incapacity or parliament's powers to sack the president, as it has in past years.

In short, the new president will have to forge pacts and build alliances to implement his promises on health, welfare and jobs, and to build his vision of national dignity and a Peru free of class and ethnic prejudices.

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Peru Election: Democracy At Risk, Pick Your Poison For President

Peru's two presidential candidates are far from reassuring in their democratic commitments, but in a country that fought a civil war with Maoists, the communist-style Pedro Castillo may be the bigger threat.

-Analysis-

LIMA — On Sunday, Peru will choose its next president in the second round election runoff. Approximately two-thirds of voters have been forced to decide which of the two candidates constitutes the lesser evil, the arch-conservative Keiko Fujimori, or the schoolteacher with communist sympathies, Pedro Castillo.

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China's Future Gateway To Latin America Is A Mega-Port In Peru

Despite local opposition, Chinese investors are pumping billions into the Chancay project, a massive port complex north of Lima that will boost trade between China and Latin America as a whole.

-Analysis-

LIMA — China's most important trading terminal with South America is being built 75 kilometers to the north of Lima, the Peruvian capital. Known as the Chancay port complex, it has an initial investment of $1.3 billion and will turn this fishing and farming town into a regional hub that could redefine shipping lines in the entire southern Pacific.

The port can count on the use of 800 hectares of adjacent land where the operating consortium will develop a logistical and industrial complex, with total investment costs expected to rise to $3 billion. Since 2019, the project's main stakeholder is the Chinese state firm Cosco Shipping Ports (60%), with Volcan, a mining subsidiary of Glencore of Switzerland, holding a 40% stake.

Cosco is a partner in 52 port projects worldwide. But in the Americas, Chancay is the first being built with Chinese capital. The complex is expected to be fully functional by 2024, helping consolidate China's influence in South America, and in Peru especially.

Is another commodities "supercycle" on the horizon?

In the last decade, this country has become the regional crux of China's economic and geopolitical interests. So far, Chinese firms have invested more than $30 billion in Peru, a figure exceeded only by money spent in Brazil. The principal sector is mining, which has absorbed more than half all these investments and has proven to be an excellent source for the mineral materials China needs to keep its industrial sector humming.

One of those materials is copper, which Peru produces in great supply. It is the world's second leading exporter of the metal, and exports two thirds of its total production to China, which controls two of Peru's main copper fields: Las Bambas (through MMG) and Toromocho (with Chinalco).

The two countries signed a Free Trade Treaty in 2010, which has reshaped Peru's trade balance. Since 2014, China has been its main trading partner, followed by the United States. In the past five years, Peru sent $58 billion worth of exports to China, compared to $33 billion to the United States. And in the coming years, given China's decisive mining interests, the gap could grow even more assuming, as some observers anticipate, that another commodities "supercycle" is on the horizon.

China is also pursuing a global integration strategy here through its Belt and Road Initiative, which promotes global infrastructures that favor its trade. Amid rivalries with the United States, it has signed agreements with 138 countries in spite of warnings from Washington that states risk becoming becoming over-indebted to China.

For its location, Peru is an important point on this New Silk Route. With its long swatch of Pacific coastline, it lies directly across from Asia, and can also become a link to Brazil and the Atlantic. In April 2019, the two states signed a memorandum of understanding for more investments within the Belt and Road Initiative.

Chancay is undoubtedly of great importance to China's global strategy to win itself markets. Indeed, Cosco Shipping Ports entered the port consortium two weeks after the said memorandum, paying $225 million to Volcan.

Other Belt and Road projects in Peru include the Amazonian Waterway, given to the Chinese state firm Sinohydro, which halted the project before numerous environmental objections, and the Transcontinental Railway, which would link Brazil's Santos port with Bayóvar in northern Peru.

All that glitters ...

Chancay's proximity to the port of Callao, which handles 71% of the country's shipped imports, would both reduce congestion there and develop economic activity outside Lima. Cosco estimates its initial investment would create 1,500 direct and 7,500 indirect jobs, and generate 300 new businesses locally.

In the first phase, the port would ship 6 million tons a year, though in response to local concerns, Volcan says Chancay would not ship out minerals — despite the fact that it's mining subsidiary and that China is the world's main copper buyer. The firm says it will instead redistribute goods arriving from Asia, and make Peru more competitive against Pacific rivals like Colombia and Chile.

Protest in Las Bambas, a mining zone in Peru — Photo: GDA/ZUMA

Nevertheless, people in and around Chancay are concerned by its impact on the local economy, which depends on far more than mining along. There is also farming and fishing, and civil society groups have questioned the project's construction standards and possible, environmental and social impact.

They say the complex will be inside the city of Chancay, and that explosions to reshape the bay have already damaged numerous residential buildings. The project is also expected to affect a local wetland, while dredging of the bay to allow the entry of the biggest container ships will ultimately impact fishing and marine life.

Peru owes a large part of its economic growth to China's enormous demand for natural resources.

The consortium made 89 environmental observations in its last diagnostic report on the project's environmental effects, though checking that document, non-governmental organizations observed omissions and mistaken methodologies to measure its effects. Still, Peru's environmental certification agency, SENACE, approved the project last December, overriding objections by civil society groups.

Peru owes a large part of its economic growth to China's enormous demand for natural resources. And yet, the latter's investments are leaving an indelible mark for many of the communities affected. These include social conflicts in mining zones like Morococha and Las Bambas, or native communities affected by the Amazonian Hydroway.

China is committed to more investments in Peru and its Belt and Road plans will intensify its activities. But the Peruvian state must insist on higher environmental standards, starting with the inclusion of an environmental chapter in current renegotiations of its Free Trade Treaty with China.

The two countries should commit to more than just economic interest. The also need to consider long-term sustainability and look to improve and protect the lives of people, especially with regards to the impact their projects have on local communities and the environment.

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Making Sense Of The Radical Right's Rise In Latin America

Across the region, hard-line conservatives use residual fears of communism and uproar over changing cultural mores to drum up support.

-Analysis-

LIMA — With the presidential candidacy of Rafael López-Aliaga, Peru joins the list of Latin American countries with an ascendant "radical right," as defined in my book El Eterno Retorno, la derecha radical en el mundo contemporáneo ("The Eternal Return: the Radical Right in The Contemporary World").

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Peru
Alidad Vassigh

Peruvian Farmers Plough Through 3,000-Year-Old Mural

First, the good news: A major archeological find has been discovered in the north of Peru. A ceremonial mound or temple that's thought to date back some 3,200 years, the site also contains a mural with a vaguely visible image of a giant spider and, for reasons yet unknown, a spoon. Cool, right?

This is a story that comes, however, with a caveat, because unfortunately, the precious, pre-Hispanic structure is partially destroyed — and not just due to the passage of time.

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Peru
Farid Kahhat

Biden On Trade: Trump-Like Protectionism, With A Smile

The Democrat Joe Biden may not sound as aggressive as Trump in protectionist policy to support American firms global competitors, but will broadly follow his policies.

-OpEd-

LIMA — I've written before that overall, there were reasons for believing that the new U.S. administration will be better for Latin America than the last one. Still, there is one big exception: international trade. Considering what President Joe Biden has said and done since his campaign began, we have sufficient reasons to believe that his too will be a protectionist administration.

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Peru
Farid Kahhat

What Joe Biden's Arrival Means For Latin America

The new administration isn't likely to prioritize relations with Latin America and the Caribbean. But after the Trump era, that's not necessarily a bad thing.

-Analysis-

LIMA — The United States is facing its biggest recession since the Great Depression. As I write, the coronavirus pandemic is killing more than 4,000 Americans a day. In foreign policy, the priority for the incoming administration of President Joseph Biden will probably be to repair transatlantic ties in order to forge a united western front against communist China. Latin America, on the other hand, is unlikely to be much of a priority.

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Peru
Gonzalo Sarasqueta

In Latin America, The Downward Spiral Of 'Digital Democracy'

In a time of public impatience and online mobilization, the region's governments are feeding frustrations with an outdated leadership approach.

-OpEd-

Latin America is shaking. Peru has had the most recent flareup in a region heaving with discontent. Since last year, the streets of Santiago, La Paz, Quito, Buenos Aires, Bogotá and Mexico City have all gone aflame with indignation. And while each country has its own particular gripes, there are also certain institutional, social and political trends that may help explain these complex, multi-faceted convulsions.

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Peru
Ángel Guillén*

How The Gray Economy Slows Down The Data Revolution

In Latin America, where half of all jobs are off the books, businesses can't tap into the vast and potentially valuable resource of data to usher in digital transformation.

-Op-Ed-

LIMA — Data is one of the driving forces in process of digital transformation that is underway all across the world. But what happens when there are no numbers? Such is the case of the so-called informal economy. And that, in turn, is why off-the-books employment is a major barrier to fully using data as the resource that it is.

This is a particularly big problem in Latin America, where half of all jobs could be described as informal. As a region, therefore, it lags far behind in terms of exploiting data use to add value to products and services sold to the 600 million people living there.

Traditionally, public policies have first sought to formalize work before using data through fiscal, regulatory and credit mechanisms. In spite of improvements, informality remains chronic in this region. Complicating matters even more is the coronavirus pandemic, which may wipe away whatever progress has been made in recent decades.

Is there another way? Consider three examples of how data can reduce the informal economy:

First, in South and Southeast Asian countries people commonly have a card or QR code to pay for transportation services or shopping in grocery or convenience stores. This is itself an incentive for shopkeepers to be in the banking system and to work above board. The information can then be analyzed to find consumption patterns, and improve the value proposition of businesses.

The more people are in the system, the greater its benefits when mass data are used.

Second, new open banking regulations in Europe have favored the rise of thousands of businesses that use the shared data of millions of bank customers to provide more competitive financial services. Crossing more information can provide a better risk profile. Again, a small business has an incentive to enter the banking system.

Third, the coronavirus pandemic has shown our healthcare systems to be highly precarious, with serious problems in providing coverage and primary attention. Electronic medical histories and transfers of operations between hospitals would improve this attention. Data could be used to create algorithms that emit early warnings of people's health risks. The more people are in the system, the greater its benefits when mass data are used.

Let us consider now a small business near a transport hub that gains customers for using QR for payments. Its cash till is used by a fintech company to provide it with cheaper loans or, counsel better nutrition and dieting for the owners when they go for a medical checkup. Seeing these benefits, they may no longer object to "the treasury's share" as Latin Americans gingerly refer to tax.

Perhaps we shouldn't think of formalizing work so much as "datifying" it, as one inevitably entails the other.

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Peru
Farid Kahhat

Don't Be Fooled By WHO Conspiracy Theories

The World Health Organization is far from perfect. But the WHO was never, as Trump and others suggest, involved in some sinister plot with China to hide the truth about COVID-19.

-OpEd-

LIMA — There are certain conspiracy theories making the rounds these days concerning the World Health Organization (WHO) and the current pandemic. Don't believe them. There's no credible evidence for these kinds of accusations and dark theories. And besides, even if the people who run the WHO did hatch some kind of master plot, they don't have the resources to actually implement it.

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Peru
Farid Kahhat

Apocalypse Fiction And COVID-19: Why Life Didn't Imitate Art

In the movie version, the contagion would lead to lawlessness and chaos. But in reality, institutions are encouragingly resilient.

-OpEd-

LIMA — The post-apocalyptic movie genre has done little to boost our faith in humankind's ability to cooperate in dire circumstances. It's worth noting, therefore, that in the face of the current real-life calamity — and with the exception of certain institutional problems (with the World Health Organization for example) — we haven't, by and large, seen a generalized, institutional collapse. What's more, this period of radical adversity has even produced episodes of empathy and cooperation.

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Peru
Farid Kahhat

Coronavirus And Us: Why We Ignore Other Infectious Diseases

The level of media attention given to the coronavirus compared to other maladies says a lot about the economic and political power of the countries affected.

-Analysis-

LIMA — The World Health Organization (WHO) has played a vital role in coordinating international actions against a range of infectious diseases such as the spread of the H1N1 or swine-fever virus a decade ago.

The task of responding to a transnational threat in a world governed by nation-states, while not being a state, has required WHO to weave together an institutional network and series of governmental processes that are followed by most sovereign states to provide a generally effective authority for confronting an international health threat.

Of course, when we talk about exercising government functions, we inevitably are also talking about politics. And as we know, political decisions tend to run on the negotiating power of the actors involved.

Let us consider the following for example. While there is ample media coverage of the spreading coronavirus in our region, the following development received far less coverage: In 2019, the Western Hemisphere saw more than 3 million cases of dengue fever, the largest number to date and well above the previous high of 2.4 million registered cases in 2015, according to the Pan American Health Organization (PAHO), which acts as WHO's regional office.

It's also worth noting that in 2015, some 1,400 people died of the illness in this hemisphere. In 2019, in spite of the increase in registered cases, the intense work done by countries to restrict the disease's lethal impact ensured a much lower death rate, 0.05% of all cases.

In 2017, Peruvian hospitals faced dengue cases — Photo: El Comercio/GDA via ZUMA Wire

We should highlight three points from this. First, according to this last estimate, more than 1,500 people died of dengue fever in 2019 on the American continent, while there were just 23 cases of coronavirus infection on the continent up to Feb. 18, 2020. None of these were in Latin America and the Caribbean and none had led to a patient's death.

Diseases spread through food cause 420,000 deaths a year, mostly in poorer countries.

Thus the level of media coverage is completely out of proportion to the relative gravity of this public health problem, at least so far. It's also worth noting that, in the case of dengue, collaboration of regional states had duly kept down dengue's mortality rate. The achievement then was due to collaboration between states, not the cooperation of international agencies (public, private, national and international), which had acted successfully against the spread of H1N1.

The third (and paradoxical) issue is that while WHO is tasked with coordinating international efforts on healthcare, it plays a relatively minor role against infectious diseases that mostly affect poorer populations in countries that are not world powers. This is even more the case with diseases spread through food, which WHO reports cause 420,000 deaths a year worldwide, and are concentrated in poorer African and Asian countries that have very little influence in the international system. The World Health Organization must work to truly live up to its name.

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Peru
Paulo Yvan Almeida*

Why Peru's Coffee Growers Can't Make Ends Meet

Peruvian coffee farmers desperately need help — from both the public and private sectors — to improve quality and bring down production costs.

-Analysis-

LIMA — For most of the approximately 220,000 families in Peru who grow and sell coffee beans for a living, things are going from bad to worse, and for a simple reason. Unlike for farmers in Brazil, Colombia or Vietnam, in Peru, coffee is no longer profitable.

The international price of conventional coffee hovers around $100 a quintal. But in Peru, it costs more than that (approximately $120) to produce that amount. Why? For starters, Peruvian cultivators produce less per acre than their peers in Brazil or Vietnam.

In those countries, farmers tend to have more land at their disposal, plus more advanced technology for the production and post-harvest phases. On top of that, the fertilizers and other chemical products needed for coffee farming are subsidized.

Numbers provided by the National Agricultural Census (CENAGRO) show that 95% of Peruvian coffee farmers have less than five hectares, which is not enough to produce any significant amount. Per hectare productivity is also a problem. The average productivity rate nationwide is below 15 quintals (840 kilograms) per hectare. Brazil's is twice that.

Peruvian coffee beans — Photo: Annerella

To improve the situation, farmers first need to produce more coffee in less space. That will require improvements in both crop management (sowing, fertilization, plant defenses and adequate pruning) and at the post-harvest phase (pulping, fermentation, washing and drying of grains). These kinds of skills and techniques can be shared and taught, through training sessions, for example, and in some places, farmers have already made strides: In production zones like Jaén or Moyobamba, growers are producing more than 50 quintals a hectare.

The higher the quality, the more markets will pay.

Another alternative for Peruvian cultivators is to produce specialty coffees, where the priority is cup quality. The higher the quality, the more markets will pay. A quintal of coffee with a cup quality superior to 88 points can reach around $1,000. Again, the key is in the rigorous approach and dosed application of efficient, technological and environmentally friendly farming inputs.

Producing significant quantities of quality coffee is very much a possibility, but for that to happen, the government, private sector, society and sector organizations need to lend a hand by sharing know-how and technology so that small and mid-sized farmers can adopt better farming practices and become more competitive.

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Peru
Farid Kahhat

What If Warren Buffett Were Peruvian?

In the race to succeed, talent can certainly play a role. But not everyone competes on the same playing field.

-Essay-

LIMA — As noted in my previous column, the United States — compared with some other developed countries — has low rates of social mobility. In other words, an American will find it harder to emerge from poverty than, say, a German. Relatively low social mobility rates also mean that high wealth and income levels are more likely to be inherited or patrimonial, rather than earned through work or personal merit.

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Peru

Watch: OneShot — Chronic Kidney Disease And A Grieving Mother

This last instalment of our three-part OneShot series, tells the story of Santos Felipa, who lost her son last year to Chronic Kidney Disease of undetermined causes (CKDu). Photojournalist and National Geographic storyteller Ed Kashi has traveled to rural Peru to document the effects of CKDu, which risks turning into a global epidemic and may be exacerbated by global warming.

Santos Felipa — ©Ed Kashi/OneShot

On the coast of Talara, Peru, Kashi met Santos Felipa Abad de Arismendis, a 57-year-old woman whose 33-year-old son Frank died from CKDu. Frank had to travel to Piura for his dialysis treatments — three hours away. During one trip, the rain was so heavy that the road was impassable, and Frank was unable to receive dialysis.

Watch Part I, Giving Voice To Kidney Disease Victims In Peru.

Watch Part II, Mary, When A Whole Family Faces Illness.

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Peru

Watch: OneShot — Mary, When A Whole Family Faces Illness

Photojournalist and National Geographic storyteller Ed Kashi has traveled to rural Peru to document the effects of Chronic Kidney Disease of undetermined causes (CKDu), which risks turning into a global epidemic and may be exacerbated by global warming. With this series of OneShot videos, we give voice for the first time to the subject of the featured photograph. Mary Marixa Pacherres Álvarez was diagnosed with CKDu eight years ago, and has been on dialysis ever since. She is raising four kids in the same house with her parents. Her 13-year-old daughter stopped going to school in order to care for her.

Mary — ©Ed Kashi/OneShot

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