Why Peru Is Always Just One Step Away from Chaos

(Bloomberg) -- With the ouster of Martin Vizcarra, Peru has extended a spate of governmental instability that few countries can match, with every president since 1985 but one either impeached, imprisoned or sought in criminal investigations. Amid public outrage, which quickly drove Vizcarra’s successor from office, and investor angst, the question is what lies behind this record: Is corruption worse here than elsewhere in Latin America, or party rivalry more vicious? Or is there a flaw in Peru’s constitutional arrangements?

1. What triggered all this?

Vizcarra came to power in 2018 when his predecessor, Pedro Pablo Kuczynski, resigned amid allegations he bought votes to avoid impeachment. Vizcarra was soon clashing with lawmakers himself over his proposals to stamp out graft in the judiciary and politics. With his public approval ratings high, he dissolved Congress 13 months ago. But the warring continued with the replacement legislature. The president had no party to defend him when prosecutors began investigating allegations from construction executives that he’d taken about $638,000 in kickbacks when he was a regional governor. He stepped down after lawmakers voted 105-19 on Nov. 9 to impeach him.

2. Was the ouster constitutional?

Peru’s constitution allows for the president’s impeachment on the grounds of “permanent moral incapacity.” Lawmakers cited that article to justify starting proceedings against Vizcarra for allegedly lying when he denied the accusations. The Constitutional Court may reinterpret that article when it rules on a lawsuit filed by Vizcarra’s administration during a first impeachment effort in September. The Organization of American States said it expects the court to opine on the “legality and legitimacy” of Vizcarra’s impeachment.

3. Where does that leave the political situation?

It’s tense. Vizcarra is still popular and his ouster triggered ever-larger street protests, mainly by young Peruvians who saw the impeachment as an illegitimate power grab by self-serving politicians. In an Ipsos poll, 78% were opposed to his ouster and 54% approved of his government. Just 22% approved of the head of the Congress, Manuel Merino, who assumed the presidency when Vizcarra left but resigned six days later after two people were shot dead during protests. He was replaced by Francisco Sagasti, whose party was the only one in Congress to have voted against Vizcarra’s ouster. A former World Bank official, Sagasti will lead an interim government until July, following a general election in April.

4. How widespread is corruption?

Graft is pervasive at many levels. In recent years scandals have revealed rampant corruption among the country’s elites. In 2018, anti-narcotics police threw the justice system into crisis when they uncovered a judicial corruption ring with contacts in Congress. The case came hot on the heels of the Carwash bribery scandal, in which it was revealed that the Brazilian construction firm Odebrecht had been paying off leaders across Latin America. The scandal came to implicate four of Peru’s presidents. Corruption has displaced crime as Peruvians’ biggest concern in recent years.

5. Have political battles always been so bitter?

Yes. Leaders have been overthrown, mostly by force, during the almost 200 years of the Peruvian republic. The current political establishment is fractured and presidents rarely win a strong mandate from voters. The country’s 130-seat, single-chamber Congress has nine parties, some of which are also divided. In the 2016 general election, Vizcarra’s predecessor, Kuczynski, won just 18 seats, leaving him vulnerable to opposition attacks.

6. Why have the Congress and the presidency been at such odds?

This Congress has been proposing populist legislation, such as capping interest rates on bank loans, since it took office in March amid the pandemic. The government has opposed many of the bills. Vizcarra passed a constitutional reform in 2018 banning re-election for lawmakers, following a referendum. In the minds of some observers, that gave them one less reason to take a responsible, long-term approach to lawmaking.

7. What impact does this instability have?

The sol and local currency government bonds fell after Vizcarra’s ouster sparked civil unrest. Yet the longer-term impact of political turbulence on Peruvian assets is often muted. Peru has some of Latin America’s strongest economic fundamentals, which reassures foreign investors. But its instability is damaging for local business sentiment, which weighs on growth.

8. How bad has the epidemic been?

Almost as bad as it gets. Peru’s per-capita death toll is among the highest in the world, despite a severe lockdown early in the pandemic that crushed the economy. The government estimates about a third of the population has had the coronavirus. Daily infections and deaths have been falling sharply since August.

The Reference Shelf

• An Americas Quarterly article explaining recent events.
• The view from the OAS’s Inter-American Commission on Human Rights.
• A rundown on the graft scandals embroiling recent presidents.
• Bloomberg Opinion’s Mac Margolis on Peru’s ugly politics.

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