Commentary

Economic and Social Storms Threaten Peru

Perú’s economic future became murky recently. It has experienced strong growth over many years. It situated itself as an ally of free-trade advocates in the United States and of US foreign policy in the region. Now, with the election of Trump in the US, protectionism is coming to the northern behemoth and that will inevitably impact Peru.

While the US may be the most obvious and important ally of Peru to move towards removing itself from globalization as currently constituted, Europe also faces de-globalization and protectionist pressures since the Brexit vote.

If history is any key, this trend will spread to other countries. It will make for a world much less friendly to open borders and free trade, especially as manifested in the massive trade pacts that have been negotiated to bring regions together.

Their key player, the US, has an incoming president who has promised to “renegotiate” the free trade treaties to seek greater advantage for his country.

They are now unlikely to be implemented in their current form. Earlier pacts, such as those with Peru and other Latin American countries, also face threatened cancellation and renegotiation.

Peru is taking a wait-and-see stance, for the moment. Its president, Pedro Pablo Kuczynski, claimed publicly that changes in the US would encourage it to seek stronger ties with China, and other Asian countries. Nevertheless, protectionism may well strike there too.

This protectionist storm will hit the export industries most strongly, including those based on agricultural export. It comes at a time when demand for raw materials has also declined.

Nevertheless, something else from the US threatens the large mining concessions in the country.

These large patchworks of investors and companies depend on a network of financing and legitimacy enshrined in free trade protections for investment and the good will of banks to loan large sums of money to them.

Up to the moment, they have been able to rely on those gain support of Peruvian security forces who protect, often violently, their investment against local movements challenging their use of indigenous land and their contribution to environmental degradation.

Social movements against large mines and petrochemical exploitation presented strong problems and threatened instability over much of the last decade, but the governing consensus in Lima has been able to ride them out.

That may be changing, even though the US has a new president who has invested heavily in these enterprises and is generally in favor of raw material extraction.

The point of change may be the Dakota Access Pipeline in the US. Native peoples across the country have come together to fight it against overwhelming odds.

In association with urban and non-indigenous allies, using social media, and relying on regular media who were willing to buck the lack of reporting by mainstream media, they have brought shame on the corporation and the police and military forces that repressed the protest. They have caused them to lose political support and to potentially face prosecution.

And, the protests brought stigma to the banks who finance the operation. Their financial support is starting to fragment

The pressures on the US government have led to a slowing down of the building and an increased recognition of consultation rights guaranteed indigenous communities in international treaties. The project may not be able to wait for the new US government to support it, as it sees its wall of bank support crumble and faces economic deadline it now cannot meet.

This is not in Peru, but the same combination of forces takes place there.

If the Peruvian protests against mining and petroleum internationalize, they might be able to take advantage of fragility in financing and political support to make serious problems for the investments on which Peru’s extractive government depends.

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