Tuesday, February 28, 2006

Humala and his economic vision permanent link   1 comments
Ollanta Humala, if elected president, would service Peru's $30 billion debt and maintain a small fiscal deficit despite generous welfare plans, Gonzalo Garcia, his top economic adviser, said today.
With his plans to increase state control of the economy, he would finance his overhaul of decaying hospitals and schools with bonds issued on local markets and higher royalties in key industries such as mining, Garcia said.
Humala has scared investors with his plans to force foreign-owned projects into taking a state partner if elected, sending the stock market tumbling in late December. Inspired by Peru's 1970s military government, which kicked out foreign companies, Humala says he is "anti-imperialist".
But Garcia said Humala also was mindful of the 20-year economic decline which started during those years. "We've got to be radical to correct Peru's woes, but we can't go and destroy everything. A Humala government will mean low inflation, low country risk, a stable exchange rate and a low deficit," said Garcia, 59, a director of Peru's central bank on leave, who is running as Humala's vice president.
"We're not looking to past policies," he told reporters.

Foreign investment and economic stability under outgoing President Alejandro Toledo have been crucial to Peru's strong economic growth since 2002 and Peru is home to Latin America's largest gold mine, Yanacocha, which is owned by U.S.-based Newmont Mining.
But many Peruvians, half of whom live on around $1.25 a day, complain they have seen few benefits, are unable to find stable jobs and do not have access to clean drinking water.
Humala, who has won support from Peru's poorest in remote rural areas, has promised to pull 1 million Peruvians out of poverty by 2011 and create a fund for social projects, despite empty government coffers due to low tax hauls, corruption and often misdirected public spending. Ninety percent of Peru's budget goes to pay debt and public sector salaries, leaving little room for social spending.
The scenario could be a worry for foreign bondholders, as a deficit of over 2 percent of gross domestic product raises the specter of more government borrowing and less money for debt service. Peru reported a deficit of 0.4 percent of GDP in 2005.

Garcia, a left-leaning academic who joined the campaign to reassure investors and draw up a credible economic plan, said there was plenty of demand for more government debt issuance in Peru's developing capital markets, which would allow Humala to give educational grants and fund agricultural programs.
"We're considering a windfall tax on companies that generate high profits, and higher royalties,". Garcia said Humala's comments that he would seek a "review" of Peru's foreign debt payments had been misinterpreted. "Bonds are bonds and we have to service them. But we want to move most of the debt into the local sol market. We believe there's plenty of demand."

(reported by Robin Emmott, Reuters)

see also: Ollanta Humala - The Big Unknown
see also: Humala officially charged


At 3/01/2006 01:04:00 AM, Blogger Maria wrote...

Humala is very quick to judge the economic problems that Peru faces, but I have never heard him talk about a platform that he will implement if elected president. The media is literally killing his reputation, and I doubt that he will be elected.


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