Finance:Lima Consensus

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The term 'Lima consensus' (created by analogy of the term Washington Consensus) refers to a set of economic policies that have been predominant in Peru since the presidency of Alberto Fujimori. These policies are characterized by their neoliberal, deregulatory, primary-exports-based model of economic growth, and free-market orientation. They are staunchly supported by the country's economic elite.[1] The nomenclature 'Lima Consensus' was attributed to Steven Levitsky, a professor of government at Harvard University.[2][3]

These measures have been instrumental in making the country an appealing destination for foreign portfolio investment. Critics point to a rise in economic inequality, an increase in crime rates, and the perpetuation of corruption as some of the negative consequences. Additionally, labor rights have suffered,[1] often being sidelined in favor of market liberalization and capital interests.[2][3]

Proponents of the Lima Consensus are often labeled as free-market fundamentalists. They typically resist any form of economic interventionism, quickly branding such measures as socialist or communist in nature.[2][4] The Lima Consensus is considered a more radical iteration of free-market policies due to its aggressive promotion of liberalization, coupled with a minimal—and frequently ineffective—level of state regulation or institutional reinforcement.[1]

In contrast to the broader Latin American trend during the early 2000s, known as the 'pink tide,' which saw the ascent of several left-wing governments, the Lima Consensus has faced no substantial political opposition since its inception in the early 1990s. The presidencies of Pedro Castillo[5] and–to a lesser extent–Ollanta Humala[6] are often cited as exceptions, although the Consensus continued to prevail afterwards.[6][7]

Background

According to José Carlos Orihuela, the belief of limited state intervention held by the elite is due to frequent commodity booms, the weakness of the government, social disparities and the lack of national economists.[8] The Government of Peru displayed little interference in the public sector throughout the nation's history since Peru frequently experienced commodities booms that benefitted white elites on the coast instead of the indigenous majority in rural areas, with businesses focusing on bringing commodities from inland Peru to export on the coast.[8] The persistence of this model prevented development in Peru, hampered progressivism movements and made the establishment of a national economy impossible.[8] Peru experienced limited government interaction in the public sector until 1968 when the military junta leadership of General Juan Velasco Alvarado began, with state capitalism and heavy spending instituted that resulted in large national debt.[8][9][10] Political scandals resulted in the end of the junta and the Lost Decade of the 1980s began, with President Fernando Belaúnde Terry failing to develop an effective economic policy and his successor Alan García experienced the complete deterioration of the state due to corruption, hyperinflation and the internal conflict in Peru.[9]

Plan Verde

Main page: Social:Plan Verde

The Peruvian armed forces grew frustrated with the inability of the García administration to handle the nation's crises and began to draft a plan to overthrow his government.[11][12] According to Peruvian sociologist and political analyst Fernando Rospigliosi, Peru's business elites held relationships with the military planners, with Rospigliosi writing that businesses "probably provided the economic ideas which [the military] agreed with, the necessity of a liberal economic program as well as the installment of an authoritarian government which would impose order".[13] Thus, Plan Verde was drafted at the end of the García presidency; the objectives evolved into establishing a civilian-military government with a neoliberal economic policy, the genocide of impoverished and indigenous Peruvians in an effort to remove a drain on resources and the control or censorship of media.[14][15][11]

During his campaigning for the 1990 Peruvian general election, Alberto Fujimori expressed concern against the proposed neoliberal policies of his opponent Mario Vargas Llosa and promised not to use shock therapy on Peru's economy.[8][16] Peruvian magazine Oiga reported that following the election, the armed forces were unsure of Fujimori's willingness to fulfill their objectives outlined in Plan Verde and it was reported that they held a negotiatory meeting with him to ensure that Fujimori followed their direction.[17][12][13] Fujimori would go on to adopt many of the policies outlined in Plan Verde.[12][13]

Implementation

The Lima Consensus as established by the Fujimori administration focused on deregulation and privatization with the goal of establishing a neoliberal economy.[2][8] Fujimori and the Consensus experienced support as the public began to distrust left wing groups following the Velasco dictatorship and due to actions of communist guerrillas during the internal conflict.[2] As the Fujimori government began to implement their economic policy, his administration attempted to rewrite Peru's economic history, with Minister of the Economy Carlos Boloña inaccurately stating "during the three decades that preceded to date, populist, socialist or mercantilist ideas and governments exercised almost absolute predominance in our country".[8] Fujimori then instituted economic shock therapy policies described as "Fujishock"; Peru experienced macroeconomic stability though millions of Peruvians were instantly sent into poverty.[2][8] The dismantling of political parties in the 1990s resulted with weaker newcoming politicians into the twenty first century since technocrats that existed in Fujimori's government would go on to promote the Consensus and dominate politics in Peru.[18]

As the Washington Consensus lost popularity in the 2000s, a more defined Lima Consensus began to emerge in Peru simultaneously as the economy improved during the 2000s commodities boom.[4] The economic boom Peru experienced did not develop a stronger government however, with deregulation and privatization becoming more established due to the Consensus following the fall of the Fujimori government while elites supporting the Consensus gained veto power in the government.[2][4][18] Governments in the early twenty first century also prevented funding for social programs such as education, healthcare and poverty programs, with Peru spending much below the Latin American average.[18][19] Alejandro Toledo continued to promote the decentralization of Peru,[8] while the former social democrat Alan García took implementation of the consensus even further, adopting policies similar to Augusto Pinochet and combatting with indigenous groups opposed to mining in their communities, events culminating with the 2009 ¿political crisis that saw civilians against an oil development in the Amazon rainforest massacred.[2][4] The Consensus effectively paralyzed the government of Ollanta Humala.[4] Keiko Fujimori, the daughter of Alberto Fujimori, has been a major proponent for the Lima Consensus, utilizing the support of neoliberal economist Hernando de Soto to support her position during her elections.[20] In 2020, the Congress of Peru refused to ratify the Escazú Agreement regarding environmental rights due to the beliefs surrounding the Lima Consensus, arguing that it would violate the sovereignty of Peru.[2]

Following the 2021 Peruvian general election that saw leftist candidate Pedro Castillo elected into the presidency, Fitch Solutions warned that his election posed "substantial risks to the 'Lima Consensus', the investor-friendly economic policy framework that has persisted over the last 20 years".[7]

Analysis

The majority of the growth that occurred following the Lima Consensus occurred due to commodity booms, not due to deregulation and free trade.[2] Consensus policies are supported by the economic elite and some of the middle class, with supporters advocating for deregulation, privatization and the removal of social programs.[19] Successful Peruvian politicians often espouse center-left ideas while campaigning to gain the electoral majority and later turn to support the powerful right-wing elites after taking office.[4]

This lack of state intervention as promoted by the Consensus has resulted with a weak government with poor performance, with many Peruvians experiencing insufficient basic services such as education, justice and security.[18] The lack of state intervention has also resulted with the increase of corruption, crime, crony capitalism and inequality, with many political officials frequently moving between business and government positions without oversight.[2] Regarding organization, Peru's weak government has also caused poor urban planning throughout the nation.[3] The Consensus has also resulted with environmental degradation as businesses take advantage of deregulation in order to attain more growth.[2][19] Such shortcomings of the government – promoted by the economic elite – result in a cycle of citizen dissatisfaction with the weak government while the government remains weak due to poor political support.[18]

References

  1. ↑ 1.0 1.1 1.2 Sanchez-Sibony, Omar (2022), "How a Democracy without Parties Malfunctions", Democracy without Parties in Peru (Cham: Springer International Publishing): pp. 429–505, ISBN 978-3-030-87578-7, http://dx.doi.org/10.1007/978-3-030-87579-4_6, retrieved 2024-01-02 
  2. ↑ 2.00 2.01 2.02 2.03 2.04 2.05 2.06 2.07 2.08 2.09 2.10 2.11 Tegel, Simeon. "How Peru Laid the Groundwork for an Oil Spill Disaster" (in en-US). https://foreignpolicy.com/2022/02/15/peru-oil-spill-environmental-disaster-pacific-repsol-development-model-economy/. 
  3. ↑ 3.0 3.1 3.2 Tegel, Simeon (8 May 2020). "The Health Crisis is Changing Peruvian Politics" (in en-US). https://www.americasquarterly.org/article/the-health-crisis-is-changing-peruvian-politics/. 
  4. ↑ 4.0 4.1 4.2 4.3 4.4 4.5 "El Consenso de Lima" (in es). 2013-05-11. https://larepublica.pe/archivo/710401-el-consenso-de-lima/. 
  5. ↑ "Peru's Election Of Pedro Castillo Will Pose Substantial Risks To Policy Continuity" (in en). 2021-06-11. https://www.fitchsolutions.com/bmi/country-risk/perus-election-pedro-castillo-will-pose-substantial-risks-policy-continuity-11-06-2021. "Castillo’s presidency will threaten [...] the ‘Lima Consensus’." 
  6. ↑ 6.0 6.1 "Police Repression Legalized as Mining Protests Grow in Peru" (in en). https://nacla.org/blog/2014/2/13/police-repression-legalized-mining-protests-grow-peru. "Despite the fact that Ollanta Humala’s administration has sometimes sought more political and negotiated means, [the Lima consensus] remains in place" 
  7. ↑ 7.0 7.1 Peru country risk report - Q4 2021. London: Fitch Solutions. 2021. pp. 45. 
  8. ↑ 8.0 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 Orihuela, José Carlos (January–June 2020). "El consenso de Lima y sus descontentos: del restringido desarrollismo oligarca a revolucionarias reformas estructurales". Revista de historia (Concepción, Chile) 27 (1): 77–100. https://scielo.conicyt.cl/scielo.php?script=sci_abstract&pid=S0717-88322020000100077&lng=en&nrm=iso. 
  9. ↑ 9.0 9.1 Gutiérrez Sanín, Francisco; Schönwälder, Gerd (2010). Economic Liberalization and Political Violence: Utopia Or Dystopia?. International Development Research Centre. pp. 256–284. ISBN 978-0745330631. 
  10. ↑ "Commanding Heights: Peru". https://www.pbs.org/wgbh/commandingheights/lo/countries/pe/pe_full.html. 
  11. ↑ 11.0 11.1 Burt, Jo-Marie (September–October 1998). "Unsettled accounts: militarization and memory in postwar Peru". NACLA Report on the Americas (Taylor & Francis) 32 (2): 35–41. doi:10.1080/10714839.1998.11725657. "the military's growing frustration over the limitations placed upon its counterinsurgency operations by democratic institutions, coupled with the growing inability of civilian politicians to deal with the spiraling economic crisis and the expansion of the Shining Path, prompted a group of military officers to devise a coup plan in the late 1980s. The plan called for the dissolution of Peru's civilian government, military control over the state, and total elimination of armed opposition groups. The plan, developed in a series of documents known as the "Plan Verde," outlined a strategy for carrying out a military coup in which the armed forces would govern for 15 to 20 years and radically restructure state-society relations along neoliberal lines.". 
  12. ↑ 12.0 12.1 12.2 Alfredo Schulte-Bockholt (2006). "Chapter 5: Elites, Cocaine, and Power in Colombia and Peru". The politics of organized crime and the organized crime of politics: a study in criminal power. Lexington Books. pp. 114–118. ISBN 978-0-7391-1358-5. "important members of the officer corps, particularly within the army, had been contemplating a military coup and the establishment of an authoritarian regime, or a so-called directed democracy. The project was known as 'Plan Verde', the Green Plan. ... Fujimori essentially adopted the 'Plan Verde,' and the military became a partner in the regime. ... The autogolpe, or self-coup, of April 5, 1992, dissolved the Congress and the country's constitution and allowed for the implementation of the most important components of the 'Plan Verde.'" 
  13. ↑ 13.0 13.1 13.2 Avilés, William (Spring 2009). "Despite Insurgency: Reducing Military Prerogatives in Colombia and Peru". Latin American Politics and Society (Cambridge University Press) 51 (1): 57–85. doi:10.1111/j.1548-2456.2009.00040.x. 
  14. ↑ Rospigliosi, Fernando (1996). Las Fuerzas Armadas y el 5 de abril: la percepción de la amenaza subversiva como una motivación golpista. Lima, Peru: Instituto de Estudios Peruanos. pp. 46–47. 
  15. ↑ Gaussens, Pierre (2020). "The forced serilization of indigenous population in Mexico in the 1990s". Canadian Journal of Bioethics 3 (3): 180+. doi:10.7202/1073797ar. "a government plan, developed by the Peruvian army between 1989 and 1990s to deal with the Shining Path insurrection, later known as the 'Green Plan', whose (unpublished) text expresses in explicit terms a genocidal intention". 
  16. ↑ "La frugalidad de "Cambio 90" y el derroche de Fredemo" (in es). El Proceso. 14 April 1990. http://www.proceso.com.mx/154825/la-frugalidad-de-cambio-90-y-el-derroche-de-fredemo. 
  17. ↑ "El "Plan Verde" Historia de una traición". Oiga 647. 12 July 1993. https://www.scribd.com/document/310286817/El-Plan-Verde. 
  18. ↑ 18.0 18.1 18.2 18.3 18.4 Levitsky, Steven (Fall 2014). "First Take: Paradoxes of Peruvian Democracy: Political Bust Amid Economic Boom?". https://revista.drclas.harvard.edu/book/first-take-paradoxes-peruvian-democracy. 
  19. ↑ 19.0 19.1 19.2 Holland, Lynn (30 July 2014). "The House on the Mountain: How Mining Corrodes Democracy in Peru" (in en-US). https://www.coha.org/the-house-on-the-mountain-how-mining-corrodes-democracy-in-peru/. 
  20. ↑ Peru Country Risk Report - Q3 2021. London: Fitch Solutions. 2021. 



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