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The President of the Congress, Javer Velázquez Quesquén, has denounced that Venezuelan President Hugo Chávez is trying to intervene in Peru’s domestic issues through his operators. He said that such interference is occurring by means of disguised moves, such as the so-called Bolivarian Alternative to the Americas (ALBA, in the Spanish acronym) houses.
Ever since these centres appeared in the south of the country, the government of Alan Garcia has been observing Chávez supporters in Peru. The ALBA houses are located in the Puno region, near the Bolivian border. The government was warned after similar houses started appearing in other localities.
Despite such reports, Hugo Chávez denies that he’s been sponsoring these centres. A congressional committee has conducted investigations, but no evidence of any Venezuelan participation has been found. Suspicions of interference in Peru have existed since the latest presidential election, when nationalist leader Ollanta Humala was publicly supported by Chávez.
Economist Alejandro Indacochea believes that, because of the imminent slowdown in the world’s economy resulting from the current US financial crisis, the Peruvian government should revise next year’s budget, as it was drafted under “other conditions”. To Indacochea, such a change is needed so that decisions can be made backed with caution and prudence.
According to the consultant, this crisis will affect the domestic economy on the export side, as the US is one of Peru’s main business partners. Even with the warnings about how the crisis may affect the country, the government is keeping a cool attitude.
Up until now, there has been no signal of budgetary changes. According to Jorge del Castillo, who chairs the Council of Ministers, a high GDP growth rate, the international reserves and the diversification of exports (the country no longer relies on mining only) help prepare to face turbulences.
However, the inflation rate as measured by the National Institute of Statistics and Informatics (INEI) in September is a reason for concern. It reached 0.57%, below August (0.59%), but above the analysts’ projection (0.40%). Therefore, annual inflation reached 5.29%, compared to official forecasts between 1% and 3%.
To prevent international price rises from causing more inflation, the Central Bank has increased interest rates six times. It is currently at 6.50%. Last year, inflation reached 3.93%, and the economy grew by 8.99%.
Representatives from the Peruvian Ministry of Tourism and Foreign Trade and the Department of Commerce from the United States will meet from today until Friday in Washington aiming to settle the Free Trade Agreement (FTA) between both countries.
The FTA with the US is highly expected in Peru. President Alan Garcia sees the agreement as an opportunity to boost his popularity, which is very low in the moment. Economically, the country is doing very well, with a yearly growth of over 6% in the past eight years. Nevertheless, politically, Garcia has not been able to bring the same positive results.
He’s got an immense difficulty in dealing with the opposition and negotiating with Congress. Also, Garcia rarely leaves Lima to visit the rest of the country. This is not good for his image, especially since the mayor of Lima, Luis Castaneda, has a very positive image in the city. At the end, Garcia does not explore the possibility of having “safe political zones” and is stuck with good results in economy to maintain his administration functioning.
Inflation will start falling in 2009. The forecast was made by the IMF executive director for Latin America, Javier Silva Ruete.
According to him, inflation hikes are not related to domestic issues, but rather to food and oil price increases in the global market. Thus they are uncontrollable phenomena.
However, he said that there must be improvements in infrastructure, trade and job creation. Even if García resists on trailing a more socially-minded path, he will have to face a debate on income distribution. If he doesn’t, the opposition will seize the moment to build up a discourse.
Not surprisingly, former presidential candidate Lourdes Flores Nano has been saying that the current president governs for the rich and is a conservative.
As he celebrated his second anniversary in office, Peru’s president Alan García promised better income distribution and a fight against inflation. He highlighted his economic achievements, but would not comment on social conflicts and human rights.
With approval rates below 30%, he believes that such discontent is related to an increase in the cost of living. Over the past 12 months, inflation has risen by 7%. The main factors behind it include higher food and fuel prices in the global market. As he assessed the current scenario, García focused on favourable economic figures, hinting that he does not intend to shift his agenda.
Even faced with pressure to reduce people’s dissatisfaction, the Peruvian president promised to ‘severely control price increases as well as public expenses’. In spite of an adverse global scenario, he signalled that international reserves have now reached $35 billion. García also emphasized that risk assessment agencies have awarded the nation investment grade due to responsible management of the economy.
He acknowledged problems in healthcare, agriculture and security, but presented no social proposals – just promises. He said that poverty will have seen a 30% drop by the end of his term in 2011.
At least in the short run, García will maintain an orthodox economic policy, even if it causes him political damage. Within the government, there is fear that shifting the agenda will not be highly welcomed in the international community and might cause the country to lose the credibility it has earned. In view of this scenario, issues such as state reform will have secondary priority.