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Center for Latino and Latin American Studies

"Floods in Peru are just the latest blow to its economy" -- The Economist

 
 
 
 

Floods in Peru are just the latest blow to its economy

To rebuild his own support, President Pedro Pablo Kuczynski must rebuild shattered villages

 

 

 

 

 

 

 

 

 

 

 

 

 From the print edition | The Americas

| LIMA
 
MORE than 75 people have been killed, and more than 100,000 left homeless, as Peru’s coast has been battered by the strongest rains seen in decades. Millions are without running water; more than 2,000km of roads and at least 175 bridges have been destroyed. The devastation has been caused by a “coastal El Niño”, a localised version of the global El Niño weather cycle that brings warm currents from Australia to the Pacific coast of the Americas. Peru had been braced for a big El Niño in 2016, but it did not arrive. It was not expecting a coastal version, especially of such magnitude.

But even if it had known what was coming, it would not have been prepared. “This is not a natural disaster, but a natural phenomenon that has led to disaster because of the informal way this country has developed,” says Gilberto Romero, the head of the Centre for Disaster Research and Prevention, a local NGO. “We need to re-think and re-engineer our cities.”

Pedro Pablo Kuczynski, the newish president, has pledged to work with mayors to stop homes from being rebuilt in vulnerable areas, and wants hydrological studies along river basins to reduce the risk of similar damage in future. The government has set up a fund of 2.5bn soles ($770m) to help victims and begin reconstruction, on top of a stimulus package that will pump 5.5bn soles into infrastructure.

But the flooding is just the latest problem in Mr Kuczynski’s in-tray. Last year, the government had forecast growth of 4.8% for 2017. In January it cut that prediction to 3.8% as the scale of a scandal involving Odebrecht, a big Brazilian construction firm, became clear. The floods will cut it further. In December Odebrecht admitted in a court case in the United States that it had paid bribes to win contracts across Latin America, including in Peru. It said it had paid $29m in Peru between 2005 and 2014 to secure concessions.

 

Initial investigations have landed five people in jail, and in February an arrest warrant was issued for Alejandro Toledo, Peru’s president between 2001 and 2006, for allegedly taking $20m from the firm. Prosecutors are also investigating his two successors, Alan García and Ollanta Humala. All three have denied wrongdoing.

The government has passed new anti-corruption laws and told Odebrecht to pull out of Peru. But many voters expect further revelations. A poll by Datum Internacional, a research firm, found that two-thirds believe that Mr Kuczynski was involved in the Odebrecht bribery scandal. He has denied any link. Congress plans to question the transport minister, Martín Vizcarra, about a contract for a new airport in Cusco, Peru’s main tourist destination. He denies any wrongdoing, and laments that the “Odebrecht effect” has made all political decisions suspect.

Mr Kuczynski’s approval rating has fallen steeply since he took office eight months ago. It stands at just 32%, according to Ipsos Peru, a pollster. And Popular Force, led by Keiko Fujimori, his main rival in last year’s elections, has a majority in congress. It is watching closely for any opportunity to damage the president. It intends to propose a bill to have Peru renounce its hosting of the 2019 Pan-American games, saying the money saved should go on reconstruction.

Mr Kuczynski says Peru can afford both, and that pulling out would tarnish the country’s image abroad. That increases the pressure on him to manage the reconstruction well. If he succeeds, it would help to persuade Peruvians that his administration deserves its technocratic billing—and to rebuild his own image, too.

 
 
 
 

 

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