Over the past decade, Peru has been one of the most stable and fast growing countries in Latin America. With an average GDP growth of almost 6% since the early 2000s, low inflation, growing rates of employment and a significant reduction in poverty—of approximately 6.5 million people from 2005 to 2015—Peru is seen as one of the most attractive Latin American countries in which to invest and do business. Peru has actively championed democracy internationally, heading the “Grupo de Lima” initiative in an attempt to solve the crisis in Venezuela.
But Peru’s success story has been threatened by the same Odebrecht scandal that has engulfed Brazil and several other countries. The scandal has tainted President Pedro Pablo Kuczynski (PPK), opening a space for PPK’s opponents to push, almost successfully, for the president’s impeachment. The relative political stability that has facilitated Peru’s sustained growth is now under serious threat.
This essay, by two veteran Latinamericanists who have each been following Peru for 50 years, puts Peru’s current crisis in the perspective of five challenging decades.
The 60s and 70s: The fall of the “established” order
In the late 1960s, a powerful, mainly white, landowning oligarchy and exploitative foreign corporations had long stifled Peru’s progress. These interests, supported by the armed forces and the Roman Catholic Church, controlled the economy, politics and media, preserved the country’s exclusionary political order, free market economy and conservative social policies, and shaped policy debates. Foreign corporations, particularly U.S.-based companies in the mining, petroleum, agricultural and financial sectors, reinforced the ruling elite. Peru resisted import substitution industrialization and other socioeconomic reforms that had gained ground in several other Latin American countries.
Additional repositories of power in Peru in the late 1960s were the American Popular Revolutionary Alliance (APRA party) and to a lesser extent other political parties, various newspapers—especially La Prensa and El Comercio—and the U.S. Embassy. Intellectuals and technocrats were mostly marginal, except in the Central Bank, which had by then become an island of competence and authority.
In the Cold War context of the mid and late 1960s, the main perceived threat to this power structure was the Marxist left, inspired by Cuba and backed by the Soviet Union. The traditional economic elite, the Church, the armed forces, the foreign corporations and the U.S. government all sought to counter leftist appeals, and kept them largely in check.
But in October 1968, Peru’s power structure was shattered after the overthrow of the elected democratic president—Fernando Belaunde—by the armed forces under General Juan Velasco Alvarado. The coup unleashed a process that quickly upended Peru’s established order. Within a week, the Revolutionary Government of the Armed Forces nationalized the International Petroleum Company (IPC), a subsidiary of the American petroleum giant Standard Oil. Soon the government decreed a major agrarian reform, displacing the landed oligarchy with one stroke, and approved a host of other reforms dealing with education, labor, concepts of property, a greater role for the state in strategic sectors of the economy, worker participation and self-management, and urban policy. As Fidel Castro put it, it was “as if fire had broken out in the firehouse.”
The military government designed and tried to implement innovative “third way” policies, while curbing the previous centers of power. The military systematically weakened the APRA and other political parties, who lost space as the military concentrated decision-making in the Presidency and established a structure for controlled political participation (SINAMOS), staffed by leftist ideologues and their partners within the armed forces, mostly trained at the Military Center for Higher Studies (CAEM). U.S. companies lost clout through nationalization processes and regulation. Major newspapers were expropriated, deliberately undermining the media sector.
The military government sought in vain to energize new entrepreneurs, but largely failed, as business groups made deals to gain income but generally did not meet the government’s expectations for investment and entrepreneurship. Foreign investment also shied away and the U.S. Embassy lowered its profile, as it coped with the military government’s hostile Third World, nationalist ideology.
Fearing the example of Chile’s socialist government under Salvador Allende more than the unorthodox approach of the Peruvian Armed Forces, U.S. officials quietly compensated U-S. companies seized by the military rather than insisting on confrontation with the Peruvian government.
The military government began a transition process in 1975, when an internal coup led by General Francisco Morales Bermudez ousted the physically ailing Velasco Alvarado, whose personalist approach had eroded consensus among key officers. The Armed Forces eventually returned political authority to an elected civilian government, again under Fernando Belaunde, in 1980.
The 80s and 90s: Democracy in the making?
The return of democratic governance restored some power to a group of sectors pushed aside by the military—notably the landowning oligarchy—but not to others. Most previously dominant private sector economic groups never regained their full stature after the military period. They were battered by the debt crisis of the 1980s and the disastrous heterodox policies of Alan García, a young “aprista” with major oratorical skills and a volatile personality, who was elected president in 1985.
The growing threat from the expanding guerrilla insurgency in the 1980s, Sendero Luminoso—a violent group led by intellectuals from the highlands and influenced by Maoist ideology—combined with hyperinflation late in the decade, led to the 1990 election of outsider Alberto Fujimori, Rector of the National Agrarian University. A Japanese-Peruvian agronomist whose appeal was anti-political, Fujimori was elected on a platform resisting “orthodox” or “neoliberal” economic reforms. Once elected, however, Fujimori reversed course on the advice of international financial institutions, Peruvian technocrats and the losing presidential candidate, Mario Vargas Llosa. Instead, he implemented a “shock” program of austerity and opened Peru’s economy to greater international investment and trade, beginning a revamp of the Peruvian economy.
Fujimori also shook up Peru’s political system. With little political organization but considerable popular support, Fujimori initiated a “self-coup,” closing Congress and then (under international pressure) calling a constituent assembly and new elections. His efforts to secure a constitutionally questionable third term in 2000 succeeded, but soon thereafter he left office in disgrace, faxing his resignation from Japan after video tapes that showed his main strategist and “fixer,” Vladimir Montesinos, bribing elected officials and heads of newspapers. The scandal revealed the sordid underside of his regime: clientelism and blackmail; the use of various powers of the state, including its tax authority, against Fujimori’s political enemies; and a cynical disregard of law and institutional constraints.
Despite its ignominious rule and end, Fujimori’s government put in place economic reforms that attracted new foreign capital and stimulated domestic investment. Peru’s annual growth rate has averaged over 5% ever since. Fujimori also strengthened several state institutions, including the tax collection agency (SUNAT) and the Ministry of Economics and Finance, creating what even his critics call “islands of excellence” within the Peruvian bureaucracy. Fujimori increased the power of technocrats, including many educated in Peru, not just those who attended universities in the United States and Europe. In addition, he reached out into “Peru Profundo,” traveling throughout the country and directing over $4 billion to rural projects.
During Fujimori’s rule, the Catholic Church lost some of its power and legitimacy while evangelical Protestant groups gained substantial “market share.” Both groups remain relevant. An alliance between Catholics and evangelicals defeated the government’s attempt to modernize school curriculums in ways that would have included issues of gender and sexual orientation, for instance.
Although a few courageous journalists played key roles in opposing Alberto Fujimori (Gustavo Gorriti and others continue to break important stories to this day), the print media is generally less influential, though more concentrated—in business terms—than it was a generation ago. La Prensa, which in many ways defined the agenda of the 1960s, has altogether disappeared. The El Comercio group continues to have substantial, albeit reduced, influence. The electronic media, television and especially radio, are much more widely followed, but they do not have a coherent or authoritative role, concentrating much more on tabloid issues than on shaping politics. Social media is just beginning to take off in Peru (for example, it is said to have played a role in bringing out the vote against Keiko Fujimori, Alberto’s daughter, in the 2016 election).
Contemporary Peru: Extreme fragmentation
Political power in contemporary Peru is highly fragmented. The U.S. Embassy remains important, but concerns itself mostly with anti-narcotics activities. Decentralization has redistributed resources and authority to regions by means of the “canon”—a percentage of mining receipts paid to the regional governments (and to municipalities and districts within those regions), depending on the region’s export earnings. A large majority of the 25 regional governors are local figures who have no connections to national parties. As regional governors are elected in single round votes, they are often backed by a small fraction of the region’s electorate and thus lack an effective mandate. Several regions are receiving funds beyond their ability to use them effectively. Twenty-one of 25 regional governors have been indicted or are already in jail for corruption.
Peru’s disintegrated national political parties now serve almost entirely as highly personal vehicles for individual candidates, their ranks larded by “transfugas”—individuals willing to change parties to follow the highest bidder. They help elect presidents, but cannot provide them majorities in congress.
Although Fuerza Popular, the loose coalition led by Keiko Fujimori, gained 73 seats in the 130- seat congress, most parties remain small. APRA has only five seats today, and current president Pedro Pablo Kuczynski’s PPK party had a mere 18 seats to start with and has lost several more recently. The socially conservative platform and authoritarian image of Keiko’s party, and the widespread concern that if she were elected she would free her father from prison (he’s been pardoned by President Kuczynski anyway), have kept her from the presidency, despite the party’s commitment to social welfare. In Peru’s two round electoral system, the anti-fujimorista vote has twice given the presidency to candidates who had come in second to Keiko in the first round: Ollanta Humala in 2011 and Kuczynski in 2016.
Over these decades, significant national power has never accrued to the left. Some leftist groups even joined together as Izquierda Unida in the 1980s, but were undermined by Alan García’s victory in 1985 and by Sendero’s negative impact on support for even the non-violent left. Leftist candidates have on occasion won election as mayors of Lima and other cities, but have never succeeded in retaining and leveraging that support nationally.
No substantial indigenous-based party has emerged in Peru, despite the large population that still speaks Quechua, Aymara and other Amerindian languages. The lack of an indigenous party has often been attributed to the fact that rural to urban migration and “cholification” (integration into the mestizo class) have provided an effective alternative to identity politics, and that rural development and increases in rural-urban commercial and cultural ties have made individual economic integration (and local resistance) more promising paths for progress than organizing nationally on the basis of indigenous identity. The conflict initiated by Sendero and violently repressed in the 1980s diminished the prospects for the kinds of ethnic parties that were forming in Bolivia and Ecuador at that time.
Since Alberto Fujimori, one Peruvian president after another has governed, as he did, from the center-right. Presidents Alejandro Toledo (2001-2006) and Ollanta Humala (2011-2016) ran on moderate leftist platforms but once elected turned quickly to centrist economic and social policies. Alan García, elected to a second term (defeating Humala who campaigned in 2006 on a quasi-chavista platform), was a strong convert to neoliberalism. All three presidents—Toledo, García and Humala—are under investigation for significant corruption, but the economic reforms Fujimori initiated—and that they maintained—have contributed to Peru’s continuing economic success, with their implementation firmly in technocratic hands.
Economic power in Peru today is also diffuse. Many on the Peruvian left think that CONFIEP—the industrial/commercial peak organization—still holds great power. Many CONFIEP members in turn still fear the supposed power of unions. But both groups exaggerate. Neither trade unions nor companies alone control Peru’s political agenda; they have become veto groups to be bargained with rather than shapers of national policy.
The Fujimori period was good for the private sector. The old families largely disappeared, but new groups have emerged: the Romeros, the Brescias, the Hochschilds, the Belmonts and Carlos Rodriguez Pastor, along with the Wong (supermarket) and Ikeda enterprises of Asian origin and a number of “cholo capitalists” from modest backgrounds. Some of these new economic titans are very wealthy, and some have direct influence on the communications media, but no Peruvian business group can yet rival in wealth and political power their counterparts in Chile, Brazil, Colombia or even Ecuador, nor can they be considered an overweening power structure to which all other groups in Peru are necessarily subservient.
Foreign investment now comes from a larger number of countries—including China, Chile, Brazil, Colombia, Spain and Australia as well as the United States and Canada—particularly in mining, banking and telecommunications, traditional and non-traditional agriculture, fishing, construction and consumption of goods for domestic markets.
Financial power has shifted: two of the four largest banks in Peru are based on Peruvian capital. Extractive industries, largely financed from abroad, are strong, but must contend with labor and indigenous pressures reinforced by international NGOs, mainly from Europe, that focus on human and indigenous rights and environmental issues. Although the mining companies are often adept at negotiation, these conflicts raise important issues, including air and water pollution and water scarcity; several important investments have consequently been delayed.
Peru’s institutional weakness
Peru has spawned many noteworthy political ideas and movements in the past century, but has done poorly at building enduring political institutions. José Carlos Mariátegui was one of Latin America’s most acute social and political analysts in the early 20th century, but no lasting political movement derived from his approach. APRA, established in Peru in the 1920s by Victor Raúl Haya de la Torre, contributed importantly to building social democratic movements in Bolivia and Venezuela, but was never able to gain national power in Peru. Fernando Belaunde’s Acción Popular was regarded by Washington as its ideal ally for progress in the 1960s, particularly on land reform, but he and his party were not up to the challenges he faced, nor were they effective when he returned to office in the 1980s.
The Revolutionary Government of the Armed Forces, Latin America’s most important innovative attempt at a military government committed to social and economic reform, apparently inspired Hugo Chávez of Venezuela. But it failed badly in Peru within less than a decade and the experience left the Armed Forces weakened and discredited. Alan García’s two terms as president further undermined APRA as a national political force.
In the 2016 elections, Peruvians turned to Kuczynski, an experienced technocrat and financial expert, with long-held political aspirations, who gave up his U.S. citizenship to facilitate his long-shot electoral campaign. He won his place in the runoff election very narrowly, and then won the runoff by a tiny margin—39 thousand votes out of over 17 million cast. APRA played the role of spoiler, succeeding before the first round in getting a promising outsider candidate (Julio Guzmán) disqualified on technical grounds.
PPK’s victory was widely attributed to many voters’ rejection of Keiko, which was sufficient to gain the support in the second round of leftist Veronika Mendoza, who had won much of the “anti-Lima” vote of Peru’s south and center in the first round. Lack of strong enthusiasm for Kuczynski, his economic orthodoxy, and his technocratic solutions to Peru’s problems constrained his mandate. As president, Kuczynski has been largely hamstrung: by Keiko Fujimori’s control of Congress, popular apathy toward his administration, a lack of a real party that can support his leadership, and evidence that companies with which he was involved received illicit funds from Brazil’s Odebrecht construction firm, which nearly led to his impeachment in December 2017.
A path forward
Peru’s progress today is hindered not by powerful economic, social or political interests, domestic or foreign, but rather by the relative absence of state authority and capacity as well as the weakness of political institutions more generally. The main challenge in Peru is not to limit power but to create and channel it. The collective potential of the oft-changing individuals who are considered powerful in Peru to help transform the nation depends less on individual prowess than on building institutions able to provide more effective representation, assure accountability, curb corruption, and improve the quality of public services, including health and education.
The past few years have shown that Peru has the physical and human resources to achieve impressive economic growth while also addressing poverty and inequality. There is significant entrepreneurial ability in both the business and informal sectors, and there is increased awareness of and responsiveness to social issues. Poverty was reduced from 55.6% in 2005 to 20.6% in 2017, and the Gini coefficient has also improved, gains that resulted both from economic growth and from effective redistribution. Peru has diversified its exports and made peace with its neighbors. Its democratic institutions have functioned resiliently, if unevenly, for several decades. Although international comparative polling data shows very high public rejection in Peru of politics, politicians and parties, support for democracy has increased somewhat over the past decade.
Peru still lacks strong institutions, however, in part for reasons that we think are captured by our observations of auto traffic in Lima. Cars, trucks and motorcycles all jockey for position, at every intersection and between, darting in and out, inches from each other, competing for very small advantages that drivers hope will accumulate. Lima’s drivers illustrate Peru’s highly individualistic, intensely competitive society of emprendedores, who have helped create the country’s growing economy but who resist projects that require solidarity, trust and courtesy, and who often operate outside the rules.
Alienation from politics is the norm in Peru. No institution or social sector commands broad popular respect. Some worry that the growing success of Keiko’s party and the close vote in the last election provide evidence that she could run—and win—on a right-wing populist platform, promoting nationalism and traditional values and promising crackdowns on crime and delinquency.
Peru’s main problem today is not lack of resources, nor that it is being held back by one power center or another. What Peru needs to achieve sustained economic growth, improved social equity and effective democratic governance are better educated citizens; improved physical infrastructure; and, especially, stronger and more representative political institutions: parties and civil society organizations, able to make connections, articulate interests, build coalitions and design, develop support for, and implement reforms. These are Peru’s biggest challenges today.
Jane S. Jaquette, professor emerita at Occidental College, did her doctoral research for Cornell in 1967-68 on the political economy of Peru and has published widely on Peru, on women’s movements and democracy and on reconciling feminism and liberalism. She was president of the Latin American Studies Association in 1995-97.
Abraham F. Lowenthal was a Ford Foundation official in Lima from 1969-72 and has published on Peru, democratic governance and U.S.-Latin American relations. He was founding director of the Latin American Program at the Wilson Center, the Inter-American Dialogue and the Pacific Council on International Policy. The government of Peru awarded him the Orden del Sol in 2017.