Bloomberg News

Humala Claims Victory in Peru Vote After Edging Out Fujimori

June 06, 2011

June 6 (Bloomberg) -- Ollanta Humala claimed victory in Peru’s presidential runoff as voters overlooked his past support for Venezuela’s Hugo Chavez and rallied behind pledges to stamp out corruption and extend a mining boom to the nation’s poor.

Congresswoman Keiko Fujimori had yet to concede defeat after Humala, who led by 20,000 votes when the first results were announced six hours after polls closed yesterday, saw his lead widen as ballots cast in rural areas were tallied. With more than 84 percent of ballots counted, Humala had 50.7 percent to 49.3 percent for Fujimori, the daughter of the jailed former president Alberto Fujimori. A quick count at polling stations nationwide gave him a lead of three percentage points.

“The people have been waiting a long time for change,” Humala, 48, told thousands of supporters at a midnight rally in downtown Lima. “It’s not possible to say that the country is progressing when 12 million people are living in extreme poverty without electricity or running water.”

Peruvians, fearful of reviving the political trauma associated with the authoritarian rule of Fujimori’s father, opted for a former army rebel who advocates greater state control of the country’s natural resources. Many voters doubt the sincerity of his transformation from a one-time ally of Chavez to a defender of policies that have made Peru the fastest-growing economy in Latin America over the past decade.

‘His first duty will be to heal the wounds that this polarized election has caused,” said Cesar Perez-Novoa, a Peruvian who is chief economist at Santiago, Chile-based brokerage Celfin Capital. “No one in the financial community trusts that he won’t make Peru the next Venezuela.”

Market Selloff

Investors dumped Peruvian assets after Humala topped the field in the first round of voting April 10.

The cost of insuring Peru’s debt against default with credit-default swaps jumped to a five-year high of 176 basis points on April 27. The sol dropped to a 10-month low of 2.834 per dollar on May 2 and the Lima General Index plunged to a six- month low on concern Humala’s policies would freeze $50 billion of mining, energy and infrastructure investment that the government expects will fuel 6.5 percent growth over five years.

Like Chavez, who as a paratrooper in 1992 led a coup attempt, Humala as an army lieutenant colonel in 2000 led 50 soldiers who seized and occupied for a week one of Phoenix-based Southern Cooper Corp.’s mines to protest corruption in Fujimori’s government. His brother, Antauro Humala, is in jail for killing four policemen during the takeover of a highland town in 2005.

Broader Appeal

To broaden his appeal to Peru’s growing middle class, the Nationalist Party candidate abandoned rhetoric against foreign mining and natural resource companies used during the 2006 campaign, when he lost the presidency to Alan Garcia by five percentage points.

Last night, as supporters chanted “Keep the Gas in Peru,” Humala said he would seek broad backing for his policies and form a government comprised of the most-qualified people independent of their political affiliation.

As his campaign gained momentum, he set aside a platform that included pledges to the rewrite Peru’s constitution to allow the state to run telephone companies and airlines, and renegotiate free trade agreements with the U.S. and other nations covering 90 percent of the country’s exports.

In the final days he stepped up attacks on Fujimori, accusing her of turning a blind eye to the corruption and human rights abuses when she served as first lady during her father’s decade-long government, which ended in 2000.

Proving Himself

Instead of looking to Chavez, he now says he’d emulate the pro-market policies of former Brazilian President Luiz Inacio Lula da Silva, and hired two of Lula’s aides as campaign advisers.

Investors will be seeking immediate reassurances that he’ll maintain existing economic policies and respect contracts, said Jaime Valdivia, who helps manage about $1.4 billion of emerging- market assets at Bluecrest Capital Management in New York.

“Humala has to prove himself,” said Valdivia. “The market will have little patience for abrupt announcements.”

Humala’s about-face became more credible after he picked up the endorsement of former President Alejandro Toledo, a Stanford University-trained economist who finished fourth in the first round. Several Toledo aides, including former deputy finance minister Kurt Burneo, may be invited to join his government.

Thwarting Fujimori

Nobel Prize winning novelist Mario Vargas Llosa, who earlier compared a runoff between Fujimori and Humala as a choice between cancer and AIDS, rallied a group of intellectuals who said they were reluctantly voting for Humala to prevent a return of the Fujimori “dictatorship.”

Humala’s candidacy ignited the hopes of a third of Peru’s population that hasn’t benefitted from the economic boom. While a decade of growth averaging 5.6 percent has spurred employment and doubled per capita income to $5,224, as many as 80 percent of homes still lack running water and sewage in the state of Huancavelica, according to a United Nations study last year.

Humala pledges to curb tax evasion and raise mining taxes to finance higher social spending, and says he’ll resolve conflicts between farmers and mining companies that have caused companies including Southern Copper to shelve investments.

Peru is the world’s biggest silver producer, and third in copper and zinc. Mining investment helped bring in $7.3 billion in foreign direct investment last year and helped fuel growth above 7 percent for the past 13 straight months.

Metal Prices

Humala’s victory could lead to a near-term jump in gold, zinc, and copper prices as foreign mining firms reconsider investments in Peru, Win Thin, global head of emerging markets currency strategy for Brown Brothers Harriman & Co. in New York, wrote in a note to clients last night.

“I don’t think a leopard can change its spots,” Jim Roberts, a Peru analyst at The Heritage Foundation, a pro- business group based in Washington, said in a phone interview before yesterday’s vote. “Over time, the spots will show again.”

Many Peruvians voted for Humala simply to thwart Fujimori amid fears her victory could revive the corruption and authoritarian rule associated with her father, Coletta Youngers, a senior fellow at the Washington Office on Latin America.

Humala, in the single head-to-head televised debate with Fujimori, accused Fujimori of standing by as her father’s government forcibly sterilized 300,000 women.

The elder Fujimori, after slashing 7,650 percent inflation, saw his government collapse after his intelligence chief, Vladimiro Montesinos, was caught on videotape in 2000 bribing lawmakers. He’s now serving a 25-year prison sentence for directing a paramilitary death squad that killed civilians during a war against the Shining Path, a Maoist insurgency.

“Many who had been reluctant to endorse either candidate opted for Humala to prevent the return of a political movement responsible for the most corrupt government in Peruvian history,” said Youngers.

--With assistance from Andrea Jaramillo in Bogota, Eduardo Thomson in Santiago and Alex Emery in Lima. Editors: Joshua Goodman, Patrick Harrington

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net Helen Murphy in Lima at hmurphy1@bloomberg.net;

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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