Peru's Humala seeks to revive presidency

President announces boost to state spending in Independence Day speech

Peru's Humala seeks to revive presidency

World Bulletin/News Desk

Peru’s Ollanta Humala has announced boosts to state spending and further economic stimulus in a bid to win support for his beleaguered government.

Humala vowed to prioritize health, education and public security in his Independence Day address to the nation on Monday, and set out the third installment of a 6.5-billion sol ($2.3 billion) package to reverse Peru’s sliding economy.

The speech came as the 52-year-old center-left leader experiences his worst period in office, three years into a five-year term, with approval ratings at 25 per cent and a split in his ruling Nationalist party curbing his authority.

Peru’s $200 billion economy is slumping under weaker mining output and a widening trade deficit.

Keynote address

The central bank cut GDP growth forecasts to 4.4 percent from 5.5 percent earlier this month after the economy expanded by 1.9 percent in May - its slowest rate for five years.

Humala in his keynote address to Congress: “In spite of the still uncertain international economic context, our country has sustained growth for 60 months.

“At the close of our government, it will continue being the country of greatest growth and least inflation in the region (Latin America).”

Congress passed an ‘urgent’ set of economic measures in June to streamline bureaucracy in a bid to drive slumped private investment, easing conditions for permits in mining and the oil industry and reducing labor costs.

'Populist and shameless'

Monday’s additional measures comprised one-off handouts to police and military workers, and an increase in state pensions of at least 270 soles.

The government will swell education and health budgets by four billion (3.5 per cent of GDP) and 2.5 billion soles respectively, through lifting teachers’ wages and widening health coverage, it said.

Opposition lawmakers said the measures were deceptive and financially unviable.

“I can’t remember a presidential message more populist and shameless,” tweeted Alberto Beingolea, speaker for the PPC-APP parliamentary group.

Diversification plan

Humala underlined as “unprecedented” Peru’s $19 billion series of large infrastructure projects, which include Lima’s second metro line, a state-owned oil refinery on the north Pacific coast and a natural gas pipeline.

The government also published a plan to diversify Peru’s economy from extractive industries, which position it as the world’s third copper and zinc producer, in favor of petrochemicals and agriculture.

But business confidence has apparently not been assured.

Lima’s Chamber of Commerce said in a July report that 77 percent of its 13,000 members rated the government’s management in the first half of 2014 as "average to bad" while only eight per cent said it was “good”.

'Process of deterioration'

While the streets of Lima were festooned with red-and-white national flags and Peruvians reveled in the four-day national independence holiday, Monday's announcements may not garner Humala the goodwill he sought.

“It’s a natural process of deterioration that governors enter,” political analyst Luis Benavente told the Lima-based daily La Republica.

Humala, a former military officer, appointed his sixth cabinet chief in three years last week after Rene Cornejo resigned after less than five months in the post.

Six congressmen splintered to form their own parliamentary group on Thursday, leaving Humala’s party with one legislator more than the main opposition group.

First Lady Nadine Heredia, who is said to frequently interfere in presidential matters and enjoys a higher approval rating than her husband, is touted to run in the next elections in 2016.

Güncelleme Tarihi: 29 Temmuz 2014, 13:09