Peru's Wise-Man President Toppled by Graft He Had Pledged to End
(Bloomberg) -- When Pedro Pablo Kuczynski announced two years ago that he was running for president of Peru, he seemed an improbable candidate. Already 77, he had spent much of his life abroad in finance and the World Bank. He was a tepid campaigner who looked awkward in a poncho. He focused on clean government and foreign investment and had little street charisma.
And he was running against the fiery daughter of a former president who’s spent years building a populist electoral machine across Amazonian villages and Andean towns.
But Kuczynski united the opposition against her candidacy by presenting himself as the forward-looking alternative to a corrupt family dynasty driven by a man who trampled human rights and ended up in prison -- Alberto Fujimori. Kuczynski accused Fujimori’s daughter, Keiko, of planning to free her father and allow him from behind the scenes to return Peru to a dark, corrupt time. Kuczynski squeaked out a victory and was hailed around the globe for his worldliness and professionalism.
So it’s an enormous and cruel irony that Kuczynski, faced with near certain impeachment amid a ballooning set of corruption scandals, offered his resignation on Wednesday. Vice President Martin Vizcarra will be sworn in as Peru’s new president on Friday.
His consulting firm was accused of taking nearly $800,000 from the graft-spreading Brazilian construction firm Odebrecht SA more than a decade ago (part of it when Kuczynski was finance minister) and loyalists were seen recently on tape apparently promising all kinds of things to opposition politicians if they voted against impeachment scheduled for Thursday.
An earlier attempt to impeach him, in December, failed after a handful of devotees of Alberto Fujimori surprisingly abstained. Kuczynski, known as PPK, then freed him from prison in what he called a humanitarian act but which many viewed as a tawdry tit-for-tat and a betrayal of their trust.
“Once again, somehow, Alberto Fujimori comes out on top,” John Polga, a political scientist who studies Latin America at the U.S. Naval Academy, wrote on Twitter. “You have to wonder if PPK regrets granting a pardon in exchange for three extra months in office.”
Kuczynski denies all wrongdoing. He said he wasn’t aware of the Odebrecht payment to the firm in which he was a shareholder and the tapes had been doctored to make it look like contract cuts and access could be traded for voting against impeachment.
The truth is that Kuczynski, a graduate of Oxford and Princeton, the son of Europeans and married to an American, never lived up to his promise of bringing a new style of governing to his country with its long history of scandal and in desperate need of infrastructure and foreign investment. Peru’s previous four presidents have been under investigation for money laundering, corruption or human rights abuses. Kuczynski promised to be -- and was supposed to be -- different.
He came into office saying he had “a lot less baggage” than leaders in Argentina and Brazil as growth stalled in South America’s major economies. He ended up swallowing his own words.
While Peru is still expected to grow the third-most among South American nations this year, Kuczynski failed to deliver on major campaign promises like repairing inefficiencies with the country’s infrastructure projects. The market optimism during his brief term seemed less because of him than in spite of him.
And there was some good news. The percentage of foreign investors holding Peru’s local debt climbed to 45 percent from 27 percent in Kuczynski’s first full year in office, the biggest increase among 14 developing nations analyzed by Morgan Stanley. Peruvian investor anxiety, as measured by the sol’s one-month implied volatility, has actually decreased the second-most in the world over the past year.
Still, with less than two dozen seats in Congress, Kuczynski struggled to get his footing. His first finance minister, Alfredo Thorne, a former executive at JPMorgan Chase & Co., resigned amid allegations of influence peddling. His second, Fernando Zavala, was ousted months later as part of a large cabinet reshuffling.
On Wednesday, it was Kuczynski’s turn.
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