The EconomistJuly 25th 2020 The Americas 312
Bello The Inca trail leads to populism
I
n march whencovid-19 first appeared
in Peru, the government’s response
seemed exemplary. President Martín
Vizcarra imposed a swift lockdown.
Taking advantage of Peru’s strong fiscal
position, his economic team launched
the most ambitious aid package in Latin
America, worth 12% of gdp. Four months
on, the outcome is disappointing. With
more than 350,000 cases and at least
13,000 deaths, Peru has suffered griev-
ously from the pandemic. In April its
economy contracted by 40% compared
with a year earlier.
What went wrong? Covid-19 exposed
weaknesses that strong economic
growth in this century had concealed.
Even by Latin American standards, Peru’s
health system is flimsy. Total spending
on health care per person is only two-
thirds of the regional average; the system
is fragmented between public and priv-
ate and between national and regional
authorities; and there were only 276
intensive-care beds for 33m people in
March. Some 70% of the workforce toil in
the informal economy, many living in
dense shanty towns and travelling on
overcrowded buses.
For all these reasons, the government
opted for one of the world’s strictest
lockdowns. It extended to shutting down
most big mines, although many are
naturally isolated. All this amounted to
an induced coma for the economy. The
government did its best to compensate. It
has guaranteed Central Bank emergency
credits worth 8% of gdpto businesses.
The bank auctioned them, which drove
down interest rates. María Antonieta
Alva, the economy minister, points out
that as well as big companies, 156,000
small and micro businesses got credits
worth $515m.
The government also gave an emer-gency payment of $220 to more than 6.5m
households. Yet getting the money to
people was hard: only 40% of Peruvians
have bank accounts. Some of the payments
were made via mobile phones but had to
be collected from the state bank, which
has fewer than 1,000 cash machines.
The lockdown did slow the spread of
the disease, and the government has ex-
panded health facilities. But the virus has
not been defeated and as Peru opens up
again cases are rising. In Arequipa, the
second city, patients are dying in tents in
the street. Having been too strict, Peru’s
health restrictions now look too lax.
Mr Vizcarra is better at the grand ges-
ture than at follow-up, negotiation or
delegation. Official information has often
been confused. On July 15th he reshuffled
his cabinet, sacking the health minister
and bringing in Pedro Cateriano, an expe-
rienced politician, as prime minister. “We
will have better political leadership from
this cabinet,” says Carolina Trivelli, a
former minister. But she adds that the
underlying problem is the frailty of the
state and its lack of connections to or evenknowledge of citizens.
At least economic recovery may be
swifter than elsewhere, thanks partly to
the injection of credit. Mines are now
operating again, and electricity con-
sumption is on the way back to normal.
Ms Alva has allocated an extra 1% of gdp
for public works. If all goes well the
economy may end the year having con-
tracted by less than 10% and could make
up much of that in 2021.
But this depends in part on business
confidence, which is being undermined
by a legislature bent on populist mea-
sures ahead of a general election due in
April. In September Mr Vizcarra dis-
solved the congress elected in 2016,
which was dominated by supporters of
Keiko Fujimori, the daughter of an auto-
cratic former president. It was obstruc-
tive and had many corrupt members. Its
replacement is as bad. Many of the new
lot on both the right and the left are
inspired by a crude anti-capitalism.
Congress has suspended tolls in road-
building contracts; it has allowed pen-
sioners to withdraw up to 25% of their
private pension funds and threatens to
refund some workers’ contributions to
the state pay-as-you-go system, which
would bankrupt it. It wants to impose
price controls and freeze loan repay-
ments although banks have already
offered grace periods to many debtors.
The crisis has exposed shortcomings
in Peru’s economic policies, as well as in
its state. There are too many de facto
monopolies. But they need intelligent
regulation, not persecution. “For the first
time in 20 years populism is gaining
strength to the point that it could govern
the country after the election,” fears
Carlos Basombrío, a political consultant.
Preventing that will require more effec-
tive leadership from Mr Vizcarra.Unless Peru’s government can check the pandemic and revive the economycertainly their kin, feel more attached to
their American surroundings than to their
Mexican homeland. In Palo Alto, a village
of 50, Nicolás Galdez Navarro sits alone in-
side his stone house. He grew up so poor
that he had to make his own underwear out
of old sugar sacks. Now a flashy flat-screen
tvadorns his wall. But so do photographs
of grandchildren he has never seen. Of his
13 children, ten live in the United States.
“They used to visit every year, but now they
say it’s complicated,” he says.
What will the young left in Zacatecas
do? Mr Saldivar’s granddaughter, Italia, wasraised in Jerez and studies automotive en-
gineering in Zacatecas city, the state capi-
tal. The state has no car factories. To use her
studies, she says she will need to move.
José Luis Ureño, a 22-year-old peach farmer
from El Cargadero, ponders the future in
his kitchen. His older sister lives in Califor-
nia but without legal status, so she cannot
come back for a visit. “The people there
work too hard and then sleep. Here you can
relax and enjoy nature,” he says.
And yet Mr Ureño covets a slice of such a
life. He is studying business administra-
tion in Jerez, and wants to go to Californiawhen he finishes. He wants a garage for his
car and a house like his neighbour’s. “It’s
sad” that so many kids want to leave, his
mother explains. “But it’s what we do.”
Some communities may just disappear.
Back near Los Haro, Ms Nava parks her
truck at Los Huertas, the village where her
late husband grew up. It has been entirely
abandoned since the 1980s. Trees grow
where bedrooms once stood. Bees fly about
a hive in an old living room. Ms Nava bends
down and plucks a fork hidden beneath the
weeds. “Stainless steel,” she says. “From
the United States.” 7