Good news for now in Peru

Peru Overturns Decrees That Insighted Protests

Peru’s Congress on Thursday overturned two decrees by President Alan García that were aimed at opening large areas of the Peruvian Amazon to logging, dams and oil drilling but set off protests by indigenous groups this month in which dozens died. [...]

The decrees, issued by Mr. García as part of a regulatory overhaul for a trade deal with the United States, were intended to open parts of jungle to investment and allow companies to bypass indigenous communities to attain permits for petroleum, biofuels and hydroelectric projects. [...]

The repeal of the decrees and the apology by Mr. García open a new phase of uncertainty in Peru, where economic growth is sharply declining amid a decline in commodities prices.

Well, their economy had been growing like crazy without opening the Amazon up to timber and fossil fuel exploration.

In recent years Peru has been the economic star of Latin America, and has become an important destination for foreign investment, particularly in the mining and energy sectors. The economy has grown uninterruptedly since July of 2001. Only recently in April did the economy finally slow, reporting a 2.01% contraction when compared to April of last year. Decades on, poverty levels have finally started to come down thanks to almost 20 years of responsible, pro market economic policies that have held strong despite a coup d'état that overthrew parliament, a scandal over the corrupt national intelligence system, the fleeing and resignation by fax of a president and the installation of a transitional government, among other serious political crises.

However, Peruvian economic success has not been accompanied by the institutional strengthening that's necessary to sustain such long-term economic growth. Political parties are weak and public institutions are considered highly untrustworthy. In the latest study by Barómetro de las Américas from Vanderbilt University, Peru was listed as one of the countries where citizens least trust their institutions (congress, central government, the supreme court and municipal governments) in all of Latin America, coming in at 19 out of 22 nations. With so little trust, holding successful dialogues and reaching effective consensus is nearly impossible, while developing personality cults is all too easy. Peru, it could be said, has become a hyper-democracy where those who scream loudest are the only ones heard.

...and with a new highway linking two of the worlds fastest growing economies through Lima, one might conclude that it's not the lack of oil and timber resources souring Peru's economy (though commodities prices are in fact down currently), but rather that is might be due to the current and past President doing what he does best. Ruining Peru's economy:

Despite his initial popularity among Peruvian voters, García's term in office was marked by bouts of hyperinflation, which reached 7,649% in 1990 and had a cumulative total of 2,200,200% over the five years, thereby profoundly destabilizing the Peruvian economy. Owing to such chronic inflation, the Peruvian currency, the sol, was replaced by the Inti in mid-1985, which itself was replaced by the nuevo sol ("new sun") in July 1991, at which time the new sol had a cumulative value of one billion (1,000,000,000) old soles. During García's administration, the per capita annual income of Peruvians fell to $720 (below the level of 1960) and Peru's GDP dropped 20%. By the end of his term, national reserves were a negative $900 million.

This time around he's apparently bent on messing up the economy and the environment at the same time:

For Peruvian President Alan Garcia, in an editorial in El Comercio, the jungle is currently just a big waste: "There are millions of hectares of timber lying idle, another millions of hectares that communities and associations have not and will not cultivate, hundreds of mineral deposits that are not dug up and millions of hectares of ocean not used for aquaculture. The rivers that run down both sides of the mountains represent a fortune that reaches the sea without producing electricity."

But why did he back down? Was it really because of navel-gazing self-reflection on the negative effects of globalization on Peru's people? Maybe not:

The protests have disrupted oil production and pipelines, blocked commerce on roads and waterways, and halted flights at remote airports. While shortages of fuel and food have been reported in some jungle areas, the real concern is that the protests will succeed in cutting energy supplies to major coastal cities.

So next time they'll secure the pipelines before debating legislation to disown indigenous people of the rain forests they inhabit. We shall see. For our part, we might best hope that the Obama Administration clarifies some of the free trade agreement with Peru so that scenes like this can be avoided.