Panic at Ayacucho Ranch

Well, as expected the Peruvian stock market crashed.  When it dropped by 8 points, they had to close it.  They reopened it and it went down further to 11 points.  I stopped following after that as some rebound surely must have come, one is a dirty capitalist speculator or one is not....  Sell at 100, buy at 89, resell at 92.....

Seriously now.  I am the first one to agree on Humala being a little piece of shit, a murderer and a racist, but Peru 2011 is not Venezuela 1998 and reasons to panic do not exist although reasons to be scared certainly exist.

First, his victory is a "default" victory, not of the kind that rouses masses as Chavez did in 1998 when he amply crossed the 50% mark at his first try.  He had a mandate, the opposition was totally disorganized and demoralized, he could force through an illegal constituent assembly that no one could oppose and that the country actually voted for with 90% (I was in the 10%).

Second Humala has only 47 seats in a 130 Congress.  He needs at least ALL of the Toledo 21 people to have the thinnest of majorities and this is far from a given considering that Toledo's first round stern defeat will kill his authority inside the party.

Third, if Humala were able to try some silly referendum on that matter (or another controversial one such as on pension plans), he could well lose and kill his "mandate" as Toldeo and Vargas Llosa would surely join the NO camp vigorously this time around.  Every controversial proposal that Humala will send to Congress will be an uphill battle that will weaken him as it did for Toledo and Garcia who saw their approval ratings fade fast, even though they were better politicians than Humala.

Humala is a vicious liar but he is not a fool and he knows he needs first to sustain his rule before he can launch some adventure for reelection, power through racial divide or whatever.  Not that he is not going to secretly work at it from day one, but wishing it is very different than achieving it.

The danger is not with Humala sucking up to Chavez: he will need discretion with that, assuming that he even would accept Chavez to tell him what to do.  The Chavez of today is certainly not the triumphant one of 2006 and no matter how ideologically close Humala might be to the racial neo-fascism of Chavez the results in Venezuela are there for all to see.  No, the danger for Peru is that Humala will surrender fully to his Brazilian advisers who are the ones that got him elected by managing the essence of his campaign.

What Brazil wants is a Peru that surrenders to the economical might of Brazil just as Venezuela did once again today as Chavez gave for nothing all the major public works of Venezuela to Odebrecht.  There was a time where some major works were shared between Venezuelan and foreign firms, but in those days still many major public works were directed and achieved, successfully, by Venezuelan groups.  Those days are over and cannot come back anytime soon because Chavez has succeed in destroying Venezuelan independent building capacity by giving for years all the major contracts to foreign firms.

Probably that will not happen to Peru but what Brazil wants is no more of that nonsense of FTA with the US, FTA with all sorts of Pacific Rim countries, economic alliances with Colombia, Chile and Mexico.  Peru must be in the economic sphere of Brazil, as gateway to the Pacific once Odebrecht builds a real trans-Andean heavy railway from Brazil's Amazon to some Peruvian harbor.  That is what Humala will be asked to do and he will probably oblige.  The apparent real winner today is not Chavez, or even Humala, the possible real winner might turn out to be Brazil.

Curiously with such a scheme the Lima stock market might do good, but the Sao Paulo one will do much better.