Strikes in Peru

In this recent note I noted (to some people’s displeasure) that things in Peru weren’t all as wonderful as the macroeconomic numbers make out.

Less than a month later, my adopted home town is about to enter its 6th day of teacher and transport strike. My wife has been too nervous to leave the house, and quite rightly too when one hears the reports of hundreds of protesters holding 6 policemen hostage less than 2 miles away from our front door. But less of my anecdotals, because eyewitness reports by people living in Peru do not seem to count as much as official figures and opinion pollsters who never bother to leave the capital city of Lima. According to the BBC:

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The protesting teachers object to a new proficiency test law

“Nationwide protests and a general strike have brought Peru to a near standstill over the last week.

Thousands of people in every major town and city took to the streets, and three people are reported to have been killed in clashes around the country.

The protests are widely seen as a show of disapproval with the government of President Alan Garcia.

They come just a fortnight before President Garcia completes his first year in office.

Mass arrests

In a country where street protests are something of a national pastime, this last week has vastly exceeded expectations.

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In the biggest demonstration since Mr Garcia became Peru’s president, there was a national show of discontent with his government.

It began as a national strike by the left-wing Peruvian education workers’ union. But as construction workers, farmers and miners joined, it grew in size and became more widespread.

There have been running battles with the police in the centre of Lima, and the authorities have detained more than 100 union leaders.

In the southern region of Puno, protestors stormed an airport and a railway station, and three people have been killed in different clashes across the country.

On Friday, a tourist train on its way to Machu Picchu was pelted with stones, and in the city of Trujillo striking teachers tried to throw eggs and tomatoes at President Garcia and clashed with his supporters.

Several police officers were held hostage by angry demonstrators in the same city but later released.

‘Left-wing radicals’

The protesting teachers object to a new law which obliges them to take a proficiency test and says they will be sacked if they repeatedly fail it.

The test is part of the government’s attempt to reform the appalling standard of Peru’s state education.

But union leaders say it will mean hundreds of arbitrary sackings.

President Garcia appears to have inflamed the protests by launching insults at union leaders and dismissing them as left-wing radicals.

But the opposition leader, Ollanta Humala, and several MPs have also joined the demonstrations.

They accuse Mr Garcia of reneging on his campaign pledges and say social development and working conditions have not improved, despite Peru’s booming economic growth.”

9 Responses to "Strikes in Peru"

  1. JohnH   July 16, 2007 at 9:55 pm

    Meanwhile, the universally reviled Hugo Chavez sails along with a 71.1% approval rating after 8 years in office (eat your heart out, George Bush!): http://www.aporrea.org/actualidad/n98020.html  PS-Don't tell anyone. No one is supposed to know. The news is a closely guarded secret that the corporate media refuses to disseminate.  And don’t dismiss Chavez popularity as just oil. Peru is in the midst of a resource boom, too. The difference is that in Venezuela the nation’s good fortune is being shared. Venezuelan economic growth outpaces all other major petro states, so Chavez is clearly doing something right.

  2. Guest   July 17, 2007 at 10:24 am

    I do not fully get the sense from your post of the causes of this social unrest in Peru. Is it that the benefits of the higher – resource driven – growth rates are not widely shared by the masses? That Garcia disappointed his base by being too centrist? Something else? What is happening?

  3. JohnH   July 17, 2007 at 11:01 am

    Guest: The last sentences read, “the opposition leader, Ollanta Humala, and several MPs have also joined the demonstrations.  They accuse Mr Garcia of reneging on his campaign pledges and say social development and working conditions have not improved, despite Peru’s booming economic growth.”

  4. Mark Turner   July 17, 2007 at 3:04 pm

    Guest, In my opinion the strikes are being called for ostensible reasons (teachers are agianst new laws, transport workers against fuel costs and new legislations, smallholding farmers against rise in fertilizer prices etc) but the underlying feeling of discontent has fuelled protests to a degree that the government didn’t expect. Both sides need to sit down and talk to each other.  I would like to clarify that all words under the line in the post are the BBC news report, not mine.  JohnH, You already have a track record of relating everything written about any country by any poster to Venezuela. Your one-track argument would carry more weight if you admitted occasionally that Venezuela is not some sort of paradise. You talk about the growth rate (good) but don’t mention the inflation rate (bad). You talk about political franchising (good) while ignoring the crime rate (bad). Oil revenues are on your agenda, public spending is not. Tell just one side of the story and you are no better than those who say Venezuela is the hub of all evil. It would be nice to have one corner of cyberspace where today’s Venezuela could be debated in a mature way. MHO.

  5. Nouriel   July 17, 2007 at 5:18 pm

    Mark, It looks like the new comparative advantage of Latin American economies is in resources: they can grow fast if they invest in such resources as commodity prices are now so high and expected to remain high. But such resorce intensive sectors are often capital intensive (mines, energy, etc.). Thus high growth from resources may not trickle down to the masses; thus inequality of income and wealth may persist in spite of high growth and lead to social unrest unless fiscal policy has some redistributive role. Is this argument correct or not?

  6. Mark Turner   July 17, 2007 at 10:00 pm

    Let’s take it piece by piece:  “…Mark..”  That’s me :-)   “…It looks like the new comparative advantage of Latin American economies is in resources…”  Yes (i’m going to keep it simple)  “…they can grow fast if they invest in such resources as commodity prices are now so high and expected to remain high…”  Yes  “….But such resorce intensive sectors are often capital intensive (mines, energy, etc.)…..”  Change ‘often’ for ‘almost always’ and I agree  “…..Thus high growth from resources may not trickle down to the masses;….”  Yes  “….thus inequality of income and wealth may persist in spite of high growth…”  Yes. Persist or even become greater.  “….. and lead to social unrest unless fiscal policy has some redistributive role…..”  Yes  “….Is this argument correct or not?…”  Well, i don’t know if the argument is correct or not, but i certainly agree! (see above:-))  Lots of things in play here, Nouriel. The Peru mining industry is a good example. You have a full decade of private sector investment that adds up to over U$10Bn (if memory serves) 1995 to 2005. For most of that time the country and its government didn’t give two hoots about the sector due to the depressed hard commodity prices. It was the private sector that took the capex risks, so who can deny them the reward? But cut to 2007, and the miners are sometimes made out to be robber barons by those with short memories.  On the other hand, the concentration of wealth in the hands of the few is an undoubted problem for all LatAm states, not just Peru. Society tends to enjoy watching people get rich, but not at any cost. This is where we seem to stand today. (The ‘Tunnel Effect’ of people’s hopes. While there’s light at the end of the tunnel, society remains orderly. Take away the hope and ask for trouble.)  There has to be a middle way here (and I’m not trying to sound like Gautama Buddha). In the long run it will pay the large corporations to be more socially aware as outright rebellion tends to ruin asset bases. If the people vote for a reactionary nationalist leader in the next set of elections they may even end up with nothing. Who knows at this point?   The corporate awareness for the society around them is one of the stark differences I experience between mature industrialised nations with optimum employment and developing nations. In 21st century N. America, Europe etc companies HAVE to care else go out of business (maybe that’s cynical, maybe they want to care:-)). In a developing nation, for good bottom line results the caring is an optional extra.  I could go on and on here, but the point is made (I think). I’d guess that there were a whole field of economic theory here, but as equities analysts make for terrible scholars I can’t help you there :-)   I gladly accept insults and criticisms.

  7. JohnH   July 17, 2007 at 10:11 pm

    Agreed, Mark, I do emphasize the positive about Venezuela, although I am well aware of the negatives. I do this for three reasons. First, Venezuela serves as something of a model for other countries of the region, like it or not. Venezuela has been extremely successful at combining rapid economic growth with increased prosperity for most of the population along with higher levels of public participation in their democracy. A high level of public spending and investment is an integral part of this. It is true that inflation has crept back up recently, though it had been systematically reduced over a number of years. The recent rise might well be explained as an unintended but natural consequence of its high growth rate.  Second, analysis of Venezuela has been extremely limited here, despite the country’s track record and the likelihood that there are some important lessons to be learned. For example, Chile recently got raves for moderately high economic growth, while Venezuela’s far superior growth got ignored.  Third, and most important, is the fact that most English language economists and media outlets are adamantly opposed to giving any credit to Venezuela for what it has accomplished, routinely bury good news and sensationalize the bad. I agree, “it would be nice to have one corner of cyberspace where today’s Venezuela could be debated in a mature way.”   This could be the place to report on Venezuela openly and objectively. Then we could have that mature debate.

  8. Nouriel   July 18, 2007 at 11:30 am

    Mark, thanks very much for the reply and clarification on my points and questions. Most useful. I guess the issue remains open of whether policy makers are able/willing to use fiscal/redistributive policies to address some of the inequality consequences of this resource intensive growth model.

  9. Flanker   July 18, 2007 at 5:11 pm

    “You talk about the growth rate (good) but don’t mention the inflation rate (bad). You talk about political franchising (good) while ignoring the crime rate (bad).”  GDP growth is trending down: from 10 to 8.8%  Inflation trending down: from 17 to around 14% (the last target was badly missed due to raising the minimum wage for the second time around August)  Unemployment trending down: from 10 to 8%  Poverty last 6 month drop was from: from 37 to 32%  Crime is more or less as bad (though the government has been painting a rosier picture) and I fail to see the direct connection with the economy.  Oil prices stable  Oil production slightly declining but at around 3.07 mmbbd  Electricity production projects in the pipeline include a 2,000 MWatt hydroplant, and multiple thermal plants dotted around the country  Aluminum production up  Consumption way up (around 30%)  National railway projects under construction with a few segments set to open in a few years.  More subsidized subway lines under construction, and multiple cities with a plethora of mass transit systems under construction.  That is all I could think of