Fujimori to Face Kuczynski in Presidential Runoff in Peru

April 13, 2016

  • Keiko Fujimori has 39.5% of vote with 88% of ballots counted
  • Kuczynski Leads Mendoza for second place with 21.6% of vote

April 11, 2016 – (Bloomberg) Keiko Fujimori, the right-leaning daughter of a jailed former president, topped Peru’s presidential election on Sunday, but with less than the 50 percent required for victory she will face pro-market Pedro Pablo Kuczynski in a June runoff, a partial count of the votes indicated.

Fujimori won 39.5 percent of the vote, while Kuczynski held 21.6 percent with 88 percent of the ballots counted, the electoral office said. Veronika Mendoza, a leftist who had surged in recent weeks pledging curbs on the mining industry and higher corporate taxes, giving markets the shivers, was in third place with 18.5 percent of the vote. Peru’s currency surged the most in more than 20 years and stocks rallied.

Kuczynski and Fujimori have both pledged to continue Peru’s pro-business policies that many credit with fueling the fastest growth among major Latin American economies over the past 15 years. Fujimori has stressed her tough stance on crime, while Kuczynski has highlighted economic proposals such as a reduction in the sales tax. Still, voters may decide between the two based on their attitude to Fujimori’s father, Alberto Fujimori, who tamed inflation and vanquished Maoist guerrillas, before fleeing the country amid corruption allegations.

“If Kuczynski’s able to make this all about a return to authoritarianism and corruption, a referendum on a return to Fujimorismo, he will win,” said Steven Levitsky, a political scientist at Harvard University. “Keiko has to make the debate about Lima versus the interior, and throw a dose of populism into the race.”

Opinion polls suggest that Kuczynski and Fujimori will draw similar numbers of voters if they meet in the second round scheduled for June 5.

Close to 23 million Peruvians were registered to cast ballots to elect a successor to President Ollanta Humala, who is barred from running for a consecutive term, and 130 lawmakers to Peru’s unicameral Congress.

Investors Celebrate

Markets rallied as Mendoza slipped to third place. She had proposed curbs on the mining industry, increasing corporate taxes and renegotiating natural gas export contracts.

Peru’s currency surged 2.9 percent to 3.283 per U.S. dollar at the close of
trading in Lima, the biggest jump on a closing basis since 1994. The country’s
main stock index rallied 8.6 percent, the most among 93 primary indexes tracked
by Bloomberg.

The cost of insuring Peruvian bonds against default also tumbled. Peru’s five-
year credit-default swaps fell 19 basis points to 169 basis points.

It’s “obviously an awesome result,” said Edwin Gutierrez, head of emerging-market sovereign debt at Aberdeen Asset Management in London. Markets “will be content either way but would absolutely love a PPK victory.”

Kuczynski, a former finance minister and central bank director, has said his government would issue more debt to finance public works as well as cut the sales tax. Fujimori, 40, has said she would tap into a $9 billion contingency fund to pay for infrastructure projects.

Dividing Voters

Alberto Fujimori is currently imprisoned on the outskirts of Lima after being sentenced in 2009 for 25 years for ordering the killing of suspected terrorist sympathizers. His daughter has sought to evoke his firm hand while promising to avoid his excesses. Some voters have reacted enthusiastically, others skeptically. Fujimori was educated at Boston University and Columbia University and is married to an American.

Kuczynski, 77, is often known by his initials, PPK. He has degrees from Oxford and Princeton and worked as an investment banker in New York as well as at the World Bank and International Monetary Fund before serving as finance minister. He ran for president in 2011, coming in third behind Humala and Fujimori.

Peru’s republican history has been marked by a series of military coups, making this the first time since winning independence from Spain 195 years ago that the country is holding a fourth consecutive democratic election.