Peru offers taste of what Covid can do to politics

If still-incomplete returns are correct, a straw-hat-wearing, giant-pencil-carrying candidate for a Marxist party has just narrowly won Peru’s presidential election. It’s a razor-thin margin that points to deep rifts and spells lasting instability for a country that is not only the No. 2 copper producer today, but has also been seen — until now — as a key source of future supply for the metal that will underpin a greener global economy.
It’s a warning too. Post-Covid
political upheavals are only just
beginning — in Latin America and beyond.
With 96% of votes counted, former school teacher Pedro Castillo is ahead with 50.3%, just a few tens of thousands of votes ahead of right-wing rival Keiko Fujimori’s 49.7% — a shock for Lima’s established political elites. The daughter of jailed former president Alberto Fujimori, she has yet to concede and has instead denounced irregularities in the vote.
Even by the standards of a continent devastated by Covid-19, Peru has been battered, thanks to political instability, high numbers of casual workers and an underfunded healthcare system. It has the worst per-capita mortality rate globally. The harsh lockdowns that failed to save its citizens still battered an economy that has been a regional leader, but shrank just over
11% last year, the sharpest drop since 1989.
Nearly a third of the population now lives in poverty. Add in the depth of resentment in rural areas, a huge number of young voters and its not hard to see why the Andean nation is now on the edge of the unknown.
Castillo, who rose to prominence during a teacher’s strike in 2017, has certainly been radical in his pronouncements on the stump, in keeping with his image as a man of the hard-up countryside and with the official platform of the Free Peru party. He has promised to rewrite the constitution and to press for higher taxes and royalties on the mining sector, with an eye on neighbouring copper-producing giant Chile, where lawmakers are considering what could become one of the heaviest levies in global mining. It’s less clear, given his brief track record, how that will play out in reality, whether pragmatism or calls from hardline supporters gain the upper hand.
Extreme steps like Venezuela-style nationalisation are unlikely, despite opponent Fujimori’s campaign warnings, not least because such a tight outcome and a fragmented congress will make even basic governing a headache. There are also examples in the region and elsewhere — among them, Peru’s one-time Hugo Chavez fan Ollanta Humala — of leaders who have turned moderate once at the helm.
But popular demands are loud and with copper prices at $9,900 a metric ton — not too far off record highs touched last month — mining companies should prepare for a squeeze.
In fact, there’s no guarantee that won’t happen even if Fujimori stages a last-minute surge. She is keenly aware of the need to placate rural residents of mining regions where wealth has not spread widely. Hence, in part, the sharp drop in the country’s stock market and currency weakness.

—Bloomberg