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New Peruvian president takes power today

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New Peruvian president takes power today

Talks of nationalization a few months ago raised concerns in the investment community over what the election of Ollanta Humala would mean for Peru, along with its growing agricultural sector. Since then he has promised an open economy and vowed to respect international conventions, but also mentioned a revision of the country's free trade agreements (FTAs) with various countries. Today he officially takes on Peru's top job, while the jury's still out on what that will exactly entail.

Peruvian President Ollanta Humala

More than a decade ago Humala led an uprising against former president Alberto Fujimori, which ended up pushing him into hiding until the leader was impeached over corruption scandals.

Today Humala opens a new chapter of public life and influence, but this time the battleground is to prove he can run a country. In establishing himself in this role he has tried to distance himself from the political policies of Venezuelan president and old friend Hugo Chávez, with many predicting he'll go down a similar path to that taken by former Brazilian president Lula de Silva.

Markets responded positively to his choice of Cabinet, which includes his predecessor's finance minister Luis Miguel Castilla as Minister for Economy, while he also kept Julio Velarde as president of the central bank.

For Fernando Cillóniz, who heads up of market consultancy Inform@cción, these two decisions are an important signal that Humala wants to keep Peru on the path as one of Latin America's fastest growing economies.

"(The) future is very promising for the economy of the country. I'm sure that, after a period of uncertainty and waiting, the country will resume the path of growth of recent years," he says.

For the agricultural portfolio Humala has selected Miguel Caillaux, who was the president of the National Peruvian Agri Convention (Conveagro) in 2007 and has recently served as National Dairy Cattle Association chairman.

Cillóniz says this appointment shows Humala is committed to rural policy and will enable the farming sector to follow the growth of recent years.

"He is an intelligent person and is knowledgeable about the sector. I expect he will put close attention on the precarious agriculture in the mountains and the jungle areas of the country, primarily on the issues of training, technology transfer and infrastructure construction.

"What we expect is that businessmen in Peru's agriculture will respect free trade agreements which have brought such good results, both from the point of view of fruit and vegetable trade in the international market, and from the point of view of investment attraction."

But south of the border, Chile was already under fire yesterday from Peru's upcoming and now official chancellor Rafael Roncagliolo for its 'disproportionate' military spending - this did not come as a positive sign for one of Peru's biggest investors, with Chilean businesses holding significant stakes in the country across sectors ranging from agriculture to mining to tourism, and its analysts are not yet convinced that a 'centralist' cabinet will mean conservative policies.

Universidad de Chile economics professor Joseph Ramos recognizes the cabinet choice as positive but believes investors will take a 'wait and see' approach.

"We must recognize that his election has caused doubts and uncertainties, while this uncertainty clarifies that it is possible the Peruvian economy will not show the same vitality it has had in the last five years," he says.

"Obviously, a lot depends on what he does this first year, but the truth is that if he meets the predictions in terms of the Cabinet, I believe it will easily return to that 6% growth in the future.

"Obviously, to wait and see tends to lower the strength of the economy - in this moment the main thing is that people are watching what's going to happen, and until they see his performance in the government I believe investors will still be cautious."

Ramos is also upbeat about Velarde's continuation as president of the central bank, but is unsure what tune Humala will play with the 'guitar' at his fingertips.

"Unfortunately, from his speeches in the past, especially in his first campaign four years ago which generated an image of closeness to Chávez - more populist, nationalist, and that could reverse or jeopardize this important economic advancement that Peru has obtained in recent years."

Figures released yesterday show Peru's agricultural exports grew 2.7% year-on-year during the first half of 2011.

Photo: Agencia Latina

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