The limits of technocratic government

THEY might not have realised it, but Peruvians got three presidents for the price of one when they narrowly voted for Pedro Pablo Kuczynski in an election in June. Over a long career, Mr Kuczynski has been an investment banker, a multinational business manager and a public servant. These identities have each been on display in his first 100 days in office.

The investment banker is a libertarian who wants to cut taxes. The business manager has shown energy and drive in trying to cut through red tape holding up infrastructure projects worth some $19bn. The public servant has promised stronger democratic institutions and a “social revolution” in a country which, for all its recent progress, is still marked by poor public services that require higher tax revenues to fix. Seemingly missing in the new president is the political guile to reconcile these contradictions.

Mr Kuczynski is still enjoying a honeymoon. Coming after a lacklustre predecessor, Ollanta Humala, he is a refreshing change. He cracks bad jokes, is transparently decent and well intentioned, and he often speaks his mind. While other Latin American presidents have been pusillanimous, he has publicly condemned the “interruption in the democratic and constitutional order” in Venezuela, for example. Later this month he will host a score of heads of state, from China’s Xi Jinping to Barack Obama, at an Asia-Pacific Economic Co-operation summit in Lima. Fluent in English, with a bulging international contacts book, Mr Kuczynski is likely to shine at the event.

Peruvians will judge him on his promise, at his inauguration, to create “a modern, more just, more equitable” country in his five-year term. That will be hard work. The Peru he inherited features public concern about corruption and rising crime, and an economy whose slower underlying growth is flattered by two big new copper mines. Lacking a majority in congress, the government managed to extract from it power to issue laws by decree on these matters for three months.

With the fiscal deficit at 3.4% of GDP, Mr Kuczynski has dropped earlier plans to slash value-added and corporate taxes. Instead he will shave one point from value-added tax and trust in raising revenues by pressing informal businesses to register and pay taxes. That looks optimistic. The government aims to get investment growing again by boosting business confidence with a simplification of taxes and a revival of big projects, such as a second runway at Lima’s congested airport, a metro line in the capital and a gas pipeline.

But rather than taxes, it is red tape and a dysfunctional state that hold back growth. For example, there is no sign that the government has found the political operatives needed to rescue mining projects stalled by local opposition. A demonstrator was killed last month near Las Bambas, a Chinese-owned copper mine, during a protest against the trucking of ore through villages.

The government has started to shake up the police force, and plans to create a new unit to tackle organised crime. Unexpectedly, Mr Kuczynski has been tripped up by scandal. Carlos Moreno, his former doctor, whom he appointed as a health-care adviser, was taped apparently encouraging the fraudulent diversion of patients from the public health service to a friend’s private clinic (he denies wrongdoing). In response, the president promised to bar corrupt officials from public service for life; days later, he revealed that the government had consulted one who had been convicted of fraud.

These missteps have cut Mr Kuczynski’s approval rating from the mid-60s to the high-50s. That matters. He only won the election because two other candidates were disqualified and because the campaign of Keiko Fujimori, his defeated opponent, was hit by a last-minute scandal. Since his party holds just 18 of the 130 seats in congress, he is dependent on public support to get things done.

Surprisingly, Mr Kuczynski chose a cabinet in his own image, with few experienced politicians. The result is that the government has wavered in its approach to Ms Fujimori’s party, which has a majority in congress. It broadly agrees with Mr Kuczynski on the economy, but not on creating the strong, independent institutions Peru needs. The president did little to prevent congress from making controversial appointments to the ombudsman’s office and the central bank board.

“It’s a government with an identity crisis,” says Alberto Vergara, a Peruvian political scientist at Sciences Po, a university in Paris. “They are modernising technocrats who suspect that the country needs more than that, but don’t quite know what.” When the honeymoon ends, that is likely to be a problem.