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[Mac Margolis] President’s narrow survival is good news for Peru

By Bloomberg

Published : Dec. 27, 2017 - 17:52

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Given the notoriously glacial pace of Latin American justice, Peruvian President Pedro Pablo Kuczynski’s fall from grace and, almost, from power was dizzying. Barely a week after being accused of lying about taking money from a tainted contractor, he was hauled before congress and narrowly escaped impeachment late Thursday -- an inquisitorial zeal that might make the old school generalissimos look slack.

Kuczynski’s survival is good news for Peru, which thanks to its sensible policies and market-friendly rules has been one of the region’s best performing economies, outpacing Brazil, Argentina and even Chile. Hence the resurgent Peruvian sol, which corkscrewed through the political storm.

Less encouraging is how Peru’s fragile democratic pact has fared, and the eagerness of the country’s carping political factions to leverage legitimate public concerns over misgovernment and graft for rank partisan advantage. “Flagship construction projects which depend on public contracts and private-public partnerships are under a lot of scrutiny,” said Fernando Freijedo, a Latin America analyst at the Economist Intelligence Unit. “That’s going to hold Peru back.”

Playing the corruption card is an old move in Latin America. Half a century ago, the mercurial Brazilian caudillo Janio Quadros made the broomstick his campaign icon and was swept into power (to disastrous results, it’s worth adding). Many a political challenger in the region since then has taken up the now predictable clean-up meme “Que se vayan todos”: Out with them all!

What’s new is the scope of the rot -- consider Brazilian contractor Odebrecht, which bought politicians from Angola to the Andes -- and more worryingly, the hair-trigger response by voters fed up with thieves in high office. Just the whiff of graft is enough to mobilize keyboard armies and send protesters to the street. The danger for Peru, and its democratic neighbors, is that in extreme times, shove easily comes to putsch. “The ghost of corruption is all over, and it’s ravaging the political scene,” Jaime Aparicio Otero, a former Bolivian ambassador to Washington, told me. “It seems everyone thinks all officials are tainted, and in countries with weak institutions, corruption is a political tool.”

Of course, Peruvians are a famously regicidal lot: The country’s last three presidents all are battling corruption charges, one of them from exile and another from jail. Kuczynski was especially vulnerable. Not only was he elected after a tight and bitter runoff, he soon saw his approval ratings collapse. All the better for his archrival and presidential runner-up Keiko Fujimori, who never quite swallowed her ballot box defeat. Fujimori’s Popular Force coalition controls 71 of the 130 seats in congress, to Kuczynski’s 17, a crushing advantage that she has wielded relentlessly. After losing a no-confidence vote to her allies in congress in September, Kuczynski was forced to fire his cabinet, significantly weakening his hand.

The former Wall Street banker made his situation measurably worse by flip-flopping on his earlier dealings with Odebrecht, first denying he’d done business with the Brazilian contractor, then admitting under pressure that Odebrecht had indeed paid a company he owned some $800,000 in consulting fees when Kuczynski served a former government as finance minister. Kuczynski allowed that he’d received “some money” from the arrangement, but denied he ran the company at the time or had any knowledge of its dealings.

All that surely warrants scrutiny, and maybe censure, but hardly the “Gotterdammerung” the Fujimoristas meant to provoke. For all the fury, Kuczynksi has not been charged with taking a bribe or favoring Odebrecht in public tenders. The failed attempt to unseat him -- “an express coup,” according to his boosters -- is in part a cautionary tale about those who would weaponize corruption.

Although Peru’s political forces are unevenly matched, the government’s foes know that exploiting graft can cut both ways. The prospect that Kuczynski’s ouster could clear the way for new elections, in which opposition politicians -- not least Fujimori herself -- would be called out for their own suspected misdeeds apparently was enough to stop his impeachment. Even caudillos, it seems, know that when the swell of public outrage is running high, it can sink all boats.

By Mac Margolis

Mac Margolis writes about Latin America for Bloomberg View. -- Ed.