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The
race for the presidency begins. In the political arena,
the preparations for the 8 April presidential and congressional elections
are in full swing. After the deadline to register as a candidate for
the presidency expired on 8 January, seventeen candidates have registered
with the National election board (JNE). Election officials
registered ten candidates from established political parties.
Meanwhile, candidates from seven new parties were accepted conditionally
because of doubts over whether they had gathered the 120,000 signatures
necessary to run. Registration for congressional elections remains
open until 8 February.
Government
pledges fiscal discipline.
For 2001, the government plans a fiscal deficit of 1.5% of GDP. This
number includes the changes to the tax structure recently implemented by
the Paniagua administration, including the cuts to corporate and personal
income tax rates from 30% to 20%. The impact on the public accounts
of these measures will be compensated on the revenue side by adjustments
to the consumption surtaxes (ISC, Impuesto Selectivo al Consumo) on fuels,
alcoholic beverages, cigarettes and bottled water and the prolongation of
the solidarity tax (IES, Impuesto Extraordinario de Solidaridad) as well
as the pledge to reduce tax evasion. On the spending side, the
government has announced a freeze on expenditures in most areas of the
budget and expenditure cutbacks in the ministries of the interior and
defence. These measures will result in spending cuts of 5.0% in real
terms compared to 2000 (1.4% in nominal terms). The Central Bank
estimates that these measures will reduce public consumption by 4.9% and
public investment by 8.6% in the 2001 national accounts.
Financing
seems secured.
Peru should not encounter any major difficulties in meeting its 2001
financing needs of US$ 1.8 billion, which represents the US$ 866 million
non-financial public sector deficit and US$ 892 million in amortisation of
internal and external public debt. Some US$ 550 million should be
covered by privatisation proceeds and the remainder (US$ 1.5 billion) by
the issuance of external debt. In addition, Peru is currently
seeking the approval of a Stand-by Agreement with the IMF of US$ 166
million. Finally, economy minister Javier Silva Ruete is seeking to
improve the profile of Peru's foreign debt burden by extending the
repayment time frame, according to the government.
Presidential
frontrunners establish themselves.
The presidential race is in full swing. According to the latest
January poll, conducted by Peruvian research Institute CPI in Lima,
Alejandro Toledo Manrique from Perú Posible continues to lead the polls
with 26.9% support. Lourdes Flores Nano, the presidential candidate
for Unidad Nacional, which integrates PPC and Unión de Centro Democrático,
follows with 18.1%. Flores has gained considerable ground since the
beginning of January, when voter support was 11.8% and would, in fact, be
elected as President with 45.9%, if a second round would be held between
her and Alejandro Toledo (41.3%). Fernando Olivera Vega (FIM, Frente
Independiente Moralizador), the congressman who released the video showing
spy-chief Montesinos bribing a congressman, gathered 16.3%, trailed by
former President Alan García Pérez, who left Peru in chaos after his
rule from 1985 to 1990, who would gather 11.0% of support. Luis
Castañeda Lossio and Jorge Santistevan y de Noriega have meanwhile
withdrawn their candidacies.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Peru. For more details please click here.
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