Peru: An interview with Ollanta Humala

Excerpt from a July 8 Washington Post interview with Ollanta Humala. Humala will officially become Peru’s president today, July 28.

You just met with top U.S. officials today in Washington. What did you accomplish?

Today we met with Secretary of State Clinton, President Obama and his national security adviser, Tom Donilon. . . .

[We agreed on the importance of] respecting the environment, fighting drug trafficking, the importance of education and technology for transforming a country. It was a cheerful conversation in which we agreed that the best period for a president of a country is the electoral campaign.

A lot of businessmen were apprehensive about your election because of your previous economic plan, which advocated state intervention. Now I understand you have a different economic plan, which is more friendly to business. Why should businessmen believe you are friendly to business?

First, Peru has changed. It is no longer the Peru of 2005. It is the Peru of 2011, and it is different from when I campaigned in 2005. Obviously, we politicians have to adapt to these changes.

In other words, you have to be more friendly toward business?

In 2005, we didn’t have free-trade agreements. Now we have more than 15 free-trade agreements. In 2005, many [foreign] businesses that are now operating in the country had not signed agreements. What hasn’t changed is that economic growth in the country continues to create more inequality. The problem in Peru is not so much poverty — it is inequality. The essence of the discourse in 2005 and 2006 is the same one that we have maintained in 2010 and 2011. My macroeconomic policy is to strengthen and ensure economic growth, but with social inclusion.

Last year there was a growth rate of nearly 9 percent in your country. This year it is estimated to be between 6 and 7 percent. How do you make the policies more inclusive without killing the growth rate?

National elections have shown the model as it was being applied by the [current] government was not approved of by the population. That’s why the Peruvian population has punished the current government by reducing its participation in the next government to four parliamentarians out of 130. The Peruvian population has put its trust in the proposal by my party, Gana Peru, the nationalist party, on the subject of inclusion through public policies. For example, we have a school dropout rate between 20 to 25 percent. We are creating social programs so that families commit themselves to taking their children to school.

Like President Lula’s program, Bolsa Familia, which has lifted so many out of poverty and into the middle class?

It is similar to that. We have a program called Juntos [Together], but we have to improve it. We have to focus on the women heads of households, not the fathers. We have to create economic incentives for those who save money, and incentives for those who invest in productive businesses or to those who have children that get good grades in school. We are going to have a child school-nutrition program including breakfast and lunch at school. We are going to create a non-contributing pension scheme for people over the age of 65. We have to create an infrastructure connecting different parts of the country to incorporate rural people into the market.

The mining sector in Peru has been enormously profitable. You talked about a windfall tax on the mining companies in your campaign. What do you intend to do?

What we want to do is to get on well with the mining companies, but we also want them to get on well with the country.

What does that mean?

Today, a large part of Peru’s revenues come from mining. Many big mining companies only pay income tax, but they extract minerals, they pollute the water. They don’t give any form of compensation to the regions where those minerals are extracted and where they do the damage, forcing the state to help those regions. What we are stating is that the mining companies will have to pay that compensation, that is called a royalty.

How much?

The state is paying for the mining companies; it is doing a favor to the mining companies for the last 10 years, equivalent of half the income tax the companies pay. The income tax is 30 percent of the profit. The state collects that amount, and half of that returns to the region. That is why we have 12 states that are rich in the sense that they receive money from the state, another 12 states that are poor.

Because there are no mines?

They have no mines, and also because the state has to spend 50 percent of the income tax on compensating the regions for the damage done by mining companies, instead of building hospitals and schools. The windfall tax is different. That consists of seeing the level of profits that they have and having a technical conversation with the mining companies so as to preserve their competitiveness.

As president, will you have that conversation yourself?

Yes, yes. I am going to meet with the owners of the mining companies to have that conversation. It is one thing to talk to the managers of the mines, who are not the owners and it is not their money. It is quite different to talk to the people who are the owners. It is easy to speak to them because they understand. They have investments in Africa, Asia — they understand cash flow. It’s an issue of corporate social responsibility.

Continue reading interview