Peru News Summary: July 2011

31 July 2011

Humala Assumes Office

On 28 July Ollanta Humala was inaugurated as the 94th president of Peru. During his first speech as president, Humala reiterated campaign pledges to ensure the ‘social inclusion’ of Peru’s poorest groups. To this end, he announced an incremental increase of Peru’s minimum wage, the introduction of public pensions for 65 year olds, a hospital construction programme and a scheme to provide free preschool education in the country’s poorest areas. He also confirmed that part of these new social benefits would be financed by a new windfall tax on extractive firms operating in the country.

The new president was careful to also reassure Peru’s business community and foreign investors by reiterating his commitment to the continuation of the country’s economic model and to existing free trade agreements. Such groups reacted positively to the recent appointment of Luis Miguel Castilla - deputy finance minister under outgoing President Alan García – as Humala’s finance minister and the reappointment of Julio Velarde as head of the central bank.

Though Humala’s inaugural speech contained few surprises, the ceremony itself was not without incident. Members of the political faction allied to Keiko Fujimori, whom Humala narrowly defeated in a run-off vote in early June, disrupted the ceremony with shouts of disapproval when Humala swore to uphold the principles contained in the 1979 constitution (as opposed to those in the 1993 document written by disgraced former President Alberto Fujimori, one year after shutting down Congress, sacking Supreme Court judges and dissolving the previous constitution). Shortly after, Fujimorista Congresswoman Martha Chávez alleged that by referring to the 1979 constitution Humala had invalidated his swearing in ceremony and left Peru with ‘no president’. However, this argument was dismissed by Carlos Mesía, head of Peru’s Constitutional Court, who confirmed the legality of the inauguration.

The inauguration was attended by 11 presidents from the region. Breaking with tradition, García chose not to attend, believing he would not be warmly received by members of the new Congress. In his final speech of his first administration (1985 - 1990) García was jeered by congressmen who disapproved of his mishandling of a series of economic, political and security crises.


Transition team identifies political ‘time bombs’

A few days prior to his inauguration, Humala’s transition team announced the results of its policy and performance review of the energy and mining, economy, education, environment, justice, health, transport and communications ministries. They concluded that the García government had left the new administration a series of political ‘time bombs’ in the following areas:

  • Energy and mining: The transition team identified as a serious concern the approximately 120 ongoing socio-environmental conflicts bequeathed by the García administration. Their report also stated that 95% of extractive concessions awarded to private individuals had been granted despite inaccurate or misleading information in their applications. The team further reported that parts of the country faced an environmental emergency, with the Amazon region believed to face a particularly large threat from illegal mining and logging activities.
  • Justice: The García administration enjoyed little success in recovering public funds embezzled under former President Alberto Fujimori (1990 – 2000). Of a total £40m (US$ 65m) recovered since 2000, less than £500,000 (US$ 815,000) were recovered over the past five years. At the same time, the report highlighted concerns over the roughly 5,000 pardons and amnesties issued by the outgoing government to those convicted of offences including corruption and drug trafficking.
  • Transport and communication: The state may shortly be obliged to pay £180m (US$ 300m) to Lima Airport Partners, the private consortium in charge of the expansion of Jorge Chavez International Airport, for breach of contract. The government had committed to relocate residents currently living on the proposed site of the airport, but with the deadline fast approaching little progress has been made.
  • Public finances: A dramatic expansion in the size of the public sector over the past five years, during which time an additional 300,000 civil servants were employed, has led to a sharp increase in the government’s wage bill. The transition team reported this will put real strain on public finances over the coming five years (Humala has pledged not to make redundancies). The team also highlighted that Congress has approved the creation of 15 new universities, but has failed to adequately explain how they will be financed. This could lead to conflicts of the type seen at the Universidad Autónoma de Tayacaja in Huancavelica last month.

The new administration has committed to use the transition team’s findings to identify key areas for reform over the coming months.


‘Butcher of the Andes’ extradited from the United States

Telmo Hurtado, dubbed ‘the Butcher of the Andes’, was extradited last week from the US to face human rights charges for his role in the Accomarca massacre in 1985. Hurtado is accused of commanding the military patrol which tortured and killed approximately 70 members of a peasant community, including 23 children, during counter-insurgency operations in southern Peru.

The lawyer for the victims’ relatives, Karim Ninaquispe, claims that Hurtado has already accepted responsibility for the violations during a military investigation in 1985. Though Hurtado was sentenced to six years imprisonment by a military court at this stage, he was convicted only of the relatively minor offence of ‘abuse of authority’. He was not dismissed from the armed forces and was even subsequently promoted to the rank of major.

Under Fujimori, he was granted immunity under amnesty laws which prevented prosecutions of military officers involved in counter-insurgency operations. When the amnesty was repealed in 2002 Hurtado fled to the US, where he later lost a civil case brought by two survivors of the massacre and was ordered to pay £22m (US$ 37m) in damages.

Human rights campaigners hope Hurtado’s trial in Peru, 26 years after the massacre, will provide further insight into military operations under the first administration of Alan García (1985 – 1990). This could potentially lead to advances in investigations against those responsible for other abuses around the same period.

Bear Creek hits back on Puno concession cancellation

Canadian mining firm Bear Creek this month filed an appeal against the Peruvian government’s decision to cancel its Santa Ana project in Puno following recent protests. CEO Andrew Swarthout claims Supreme Decree 032-2011-EM, issued by García on 25 June and which revoked Bear Creek’s concession, was unconstitutional. The firm further argues that:

  • It fulfilled all legal and environmental requirements and held all necessary public consultations before starting exploratory operations.
  • The project performed to international standards of environmental protection. Any risk of pollution to Lake Titicaca was offset by the fact the project was located in a separate drainage basin.
  • The project would contribute nearly £200m (US$330m) in royalties, mining canon and taxes to the central and regional governments.

Under Peruvian legislation the Constitutional Court is able to review any governmental decision that might affect one or more constitutional rights of individuals and legal entities. If legislation is deemed unconstitutional it can subsequently be reversed by the court.

For Bear Creek to regain its concession in Puno it must persuade the court to revoke the above decree as well as a separate measure, passed the same day, which suspended all extractive and exploratory activity in the region for 36 months.

Swarthout declared the firm hopeful that a ‘political solution’ to the dispute could be reached. Within hours of announcing legal action against the government Bear Creek’s share price increased by over 4%.


Supreme Court rejects Fujimori Appeal

On 26 July the Peruvian Supreme Court rejected an appeal by the legal team of former President Alberto Fujimori against a 2007 conviction for fraud and embezzlement.

The court upheld the sentence of seven and a half years imprisonment for Fujimori, who had admitted illegally paying his former intelligence chief Vladimiro Montesinos £9m (US $15m) from state funds in November 2000.

Along with co-defendants Carlos Alberto Boloña Behr, Carlos Bergamino Cruz and Luis Federico Salas Guevara Schultz, all former government ministers, the ex-president was ordered to pay the state nearly £675,000 (US$1.1 million) in compensation.

In December 2007 Fujimori was sentenced to seven years imprisonment for ordering an unlawful search of the house of Montesinos’ wife, Trinidad Becerra. In April 2009 he was also sentenced to 25 years imprisonment for a series of human rights violations. Under Peruvian law all sentences are served concurrently.

Fujimori’s defence team has repeatedly petitioned the Constitutional Court to quash the last conviction, arguing that senior judges had already decided on Fujimori’s guilt before the trial started. A final ruling on their submissions is anticipated in the next few months.

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