Unrest threatens financial stability that Peru has long taken for granted

CUSCO, Peru — Marco Gonzales ventured to the Andean city of Cusco from his home in the Peruvian Amazon in 2007 with just over $20, some English and a change of clothes ill-suited to the freezing mountain air.

He started offering walking tours of the ancient capital of the Inca Empire in exchange for tips. Along the way, he fell in love with a British backpacker, Nathalie Zulauf, and together the couple built a travel business and a family.

But now all of that is in danger of collapsing, along with much of Peru’s once-enviable economic stability.

The couple’s company, Bloody Bueno Peru, which mainly caters to overseas tourists from Britain and elsewhere, has not seen a customer since December, when protesters demanding the resignation of interim president Dina Boluarte practically cut off access to the ancient ruins of Machu Picchu. . Groups have canceled reservations months in advance, forcing the couple to dip into savings already depleted by the coronavirus pandemic.

“We’re waiting until March to see if the situation improves,” said Gonzales, 38, looking at a calendar he no longer bothers to update. “If not, we will have to explore other options, like closing the business and emigrating. At least in England we have Nathalie’s family.

Others in Cusco have much less to fall back on.

The city of 450,000, normally a polyglot mecca for foreign travellers, is a ghost town these days. The Plaza de Armas, where women dressed in colorful Andean textiles used to pose for snaps, now attracts protesters playing tag and mouse with heavily armored riot police.

Political unrest is nothing new in Peru, which has had six presidents in the past five years. In 1969, with a military dictatorship in power, Nobel Prize-winning author Mario Vargas Llosa posed this now iconic question to begin his novel “Conversations in the Cathedral”: “At what precise moment did Peru ?

For a long time, the dysfunction was contained and did not interfere with the hallowed cornerstones of the free market economy like the key mining industry. Since 2000, Peru’s economy has grown at an average annual rate of 4.4% – more than any country in South America – with low inflation and a stable currency. Until the pandemic hit, poverty had been halved.

But the scale of the violence following the impeachment and arrest of President Pedro Castillo on December 7 for a clumsy effort to shut down Congress – unrest that left 57 civilians dead and hundreds more injured – has reignited class and racial divisions and left many Peruvians wondering if the long period of precarious stability has run its course.

“This dichotomy couldn’t last,” said Steven Levitsky, a political scientist at Harvard University and co-author of the 2018 book, “How Democracies Die.”

Signs of the economic fallout are everywhere.

By December – as the political crisis began – the number of foreigners arriving in Peru had already fallen to the lowest level since 2009, apart from the two years lost due to COVID-19. Activity at three major copper and tin mines had been suspended because highways were blocked or their facilities attacked by protesters.

Peru is the world’s largest exporter of grapes and the protests erupted at the height of the harvest. According to Darío Núñez, whose company, Uvica, has been unable to meet orders from US retailers such as Costco and Sam’s Club, shipments to a major growing area represent just 4% of a year ago. year.

“Peru’s credibility as a brand is starting to suffer,” Núñez said. “I see no light at the end of the tunnel.”

Peru’s democratic dysfunction, which has been brewing for years, accelerated with Castillo’s surprise election in 2021. A rural teacher, he rose from obscurity to fill a void left by a broken political system, corruption widespread and deep-rooted racism.

His journey from an adobe house in one of Peru’s poorest regions to the presidential palace was fueled by fury in the long-neglected Andean highlands. But once in office, he shuffled his cabinet almost weekly and was plagued by corruption allegations that underscored his inexperience.

Congressional elites, though even more discredited than Castillo, went on the offensive, using obscure constitutional power to seek his removal for “moral incapacity.” This triggered Castillo’s decision to shut down Congress, which backfired with his arrest for rebellion – and Vice President Boluarte’s rise to power.

The current revolt has gathered around an urgent demand: the departure of Boluarte. Congress could act by ordering a snap election, but has so far refused because lawmakers are, in fact, reluctant to fire themselves.

Harvard professor Levitsky said it was too early to know how the Peruvian crisis would play out. One of the demands of the demonstrators is that the constitution adopted under the authoritarian regime of Alberto Fujimori in 1990-2000 and which reinforced free market reforms be revised.

But whatever happens, Levitsky does not see a return to the status quo.

“A state that does not work will sooner or later fall into crisis,” he said. “They’ve had 20 years to build a state and they’ve failed miserably.”

Monuments to this failure are everywhere in Cusco: an unfinished highway that was supposed to divide the city in two and the crumbling facade of Hotel Cusco, a historic monument owned by the city government.

But perhaps the biggest white elephant is Antonio Lorena Hospital.

Soaring above the city’s red-tiled rooftops, the sleek glass and steel structure was meant to be the most modern in southern Peru when construction began in 2012. But after three years, the Brazilian builder dropped the project amid an investigation into cost overruns fueled by alleged bribes paid to the governor of Cusco and the wife of then-Peruvian president Ollanta Humala.

Today, the half-built skeleton is covered in graffiti amid peeling paint, exposed electrical cables and shattered glass. On December 7 – the day Castillo was arrested – a groundbreaking ceremony was held to mark the start of a 730-day, $244 million bailout for the project by a new foreign consortium with the assistance technology from France.

Jorge Zapata, the head of Peru’s construction lobby, blames greedy politicians for the blockage. Nationwide, more than 2,500 state-funded infrastructure projects worth $7 billion are stalled due to mismanagement, he said.

Meanwhile, instead of guiding tourists, Gonzales now spends his days roaming Cusco in search of a canister of propane gas to cook and bathe the couple’s 5-month-old daughter, Willow.

At an industrial depot, dozens of desperate residents lined up this week in hopes that protesters blocking highways would stop their pickets long enough to let trucks delivering propane reach the beleaguered city.

“It’s really scary,” Zulauf said, as she bounced her baby in her lap as she watched the long queue from her car. “In Cusco, people live day to day. If they can’t work, I don’t know how they survive.

Among those queuing was Fredy Deza, who spent the night in a sleeping bag on the sidewalk.

Deza, 40, said the night vigil recalled another dark period in Peru’s history, when he and his mother waited in long lines for bread, sugar and other staples for the chaotic 1985-1990 presidency of Alan Garcia.

“It’s like stepping back in time,” said Deza, who worked as a guide at Machu Picchu until he was fired in December.

Prices for propane and other scarce items in Cusco are skyrocketing due to inflation which jumped to 8.7% in January, near the highest level in a quarter century. A black market emerged, with canisters costing three times the listed price.

Adding to the insult, the cooking gas that many can no longer afford is pumped by a foreign consortium from the resource-rich department of Cusco and transported by pipeline to the capital, Lima, where most of it is then exported. A projected second pipeline, which would deliver it to Cusco and other southern cities, remains a pipe dream.

“It’s sad,” Deza said, as he braced himself for another cold night, “that as owners of our gas we have to put up with this.”

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AP writers Daniel Politi in Buenos Aires, Argentina; Franklin Briceno in Lima, Peru, and Frank Bajak in Boston contributed to this report.

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Follow Goodman on Twitter: @APJoshGoodman