Fugitive returned

Sep 27th 2007 | LIMA
From The Economist print edition

A landmark extradition sees Alberto Fujimori facing justice

FOR much of his decade as president between 1990 and 2000, Peruvians saw Alberto Fujimori as a saviour. He conquered the hyperinflation bequeathed by his predecessor, Alan García, and restored growth. With Vladimiro Montesinos, his shadowy intelligence chief, he crushed the Maoist terrorists of the Shining Path and locked up their leader, Abimael Guzmán. Now the saviour has joined Messrs Montesinos and Guzmán behind bars.

There was always a dark side to Mr Fujimori. Though twice freely elected, he shut down his country's Congress in 1992 and used other strong-arm methods. He fled to Japan in 2000 after trying fraudulently to win a third, unconstitutional term. In November 2005 he flew to Chile, in an apparent bid to slip back into Peru and rally his supporters for last year's presidential election. There he was arrested at the Peruvian government's request.

In a decision hailed by human-rights campaigners, Chile's Supreme Court ruled on September 21st that Mr Fujimori should be extradited to Peru to face seven sets of charges. These include complicity in the actions of the Colina Group, an army death squad that killed 25 civilians in two separate incidents (one of them involved the slaughter of those attending a barbecue which the intelligence service believed was to raise funds for Shining Path). Most of the charges relate to corruption: the most sinister feature of Mr Fujimori's rule was the unlimited power granted to Mr Montesinos to bribe and extort on a scale that prosecutors say topped $1 billion.
>Mr Fujimori claims not to have known the doings of his spy chief. But Mr Montesinos, who has already been found guilty on several charges and is serving a 20-year jail sentence, will be a key figure in his trials. Mr Montesinos and several members of the army are still being tried for the actions of the Colina group.

The Fujimori case had the potential to strain Peru's relations with Chile, which while much improved are easily inflamed by hurt from defeat in 19th-century wars. But Chile's Supreme Court stuck to the letter of the country's law. In approving extradition while rejecting six of the charges, it mainly based itself on Chile's own penal code rather than on international norms.

Nevertheless, some lawyers see the verdict as a wider turning point. The court followed the ruling of Britain's House of Lords in the case of Chile's former dictator, Augusto Pinochet, in dismissing defence arguments that Mr Fujimori, as a former head of state, enjoyed immunity from criminal prosecution.

José Miguel Vivanco of Human Rights Watch, a New York-based group, points out that the Fujimori case marks the first time that a court has extradited a former head of state for trial in his own country, rather than by an international tribunal. In doing so, Chile's Supreme Court, one of the more formalistic and conservative in Latin America, has up-ended the region's long tradition of granting political asylum to former rulers. Under that tradition, Panama shelters several disgraced presidents, including Haiti's Raoul Cédras.

Another former Haitian dictator, Jean-Claude Duvalier, this week asked forgiveness of his country. Mr Duvalier, in exile in France since 1986, is believed to want to return home after running out of money. But the country's president, René Préval, said his government would press ahead with efforts to recover money he believed was stolen during Mr Duvalier's rule.

Mr Fujimori's case will be a test for Peru's judges and for Mr García who, in an irony of history, is again its president. The judiciary was undermined when Mr Fujimori appointed pliant judges in the 1990s. It has since taken steps towards greater professionalism. The defendant enjoys certain privileges: as a former head of state, he will be tried by the Supreme Court, and under international law he can be tried only for those matters on which the Chilean judges approved his extradition.

In 1992 Mr García himself sought asylum in Colombia, fearing corruption charges from Mr Fujimori (they were eventually dropped). Since winning last year's election, having campaigned as a free-marketeer, he has relied for a legislative majority on the backing of Mr Fujimori's supporters. They are now led by Mr Fujimori's daughter, Keiko, who won 603,000 votes in Lima, three times more than any other congressional candidate.

That alliance is now under strain. Mr Fujimori is being held at a police base, rather than under house arrest as he hoped. Mr García says his former adversary's fate should be decided strictly according to the law. Ms Fujimori, who is likely to run for the presidency in 2011, calls her father the victim of a vendetta.

In trying to return to Peru, Mr Fujimori seemed to hope that he would again be greeted as a saviour. But Peru has moved on: in polls, a majority say they would never vote for him. Ms Fujimori has some of her father's political talents, and Peru's politics is notoriously unpredictable. But rather than the return to the presidential palace he dreamed of, it may be Mr Fujimori's fate to join Mr Montesinos and Mr Guzmán in the high-security jail he himself ordered built in a naval fortress.

Jam today, not mañana

Sep 20th 2007 | SANTIAGO
From The Economist print edition

Stronger democracies have brought demands for a share-out of economic growth. Two reports, the first from Chile, the next from Peru (see article)

DESPITE a transition to democracy and rapid economic growth, Chileans have grumbled a lot over the past 20 years—but only quietly. Many felt let down by the terms on which General Augusto Pinochet yielded power in 1990, which let him stay on as head of the army for eight years; but their complaints were muted by relief at the return of democracy. Many were also disappointed that the centre-left coalition, called the Concertación, which has governed since 1990, maintained the dictatorship's free-market policies; but that disappointment was tempered by the prosperity and improved services that these policies delivered.

The muted complaints have suddenly become louder. Last year, encouraged by the promise of Michelle Bachelet, Chile's president since March 2006, to lead a more “participatory” sort of democracy, secondary-school children took to the streets to demand better education in the biggest protests since the 1980s. With the price of copper, the main export, at record levels and the economy growing at 6% this year, workers are protesting too.

Until recently, strikes were relatively rare in Chile. Last year, however, miners at Escondida, the world's biggest copper mine, won a hefty increase after a month-long strike. This year has seen stoppages in the forestry industry and a 36-day strike by sub-contracted workers at Codelco, the state-owned copper producer.

“Workers see a country that is growing and companies that are doing well and they're tired of waiting,” explains Arturo Martínez, president of the Central Unitaria de Trabajadores (CUT), the main trade-union confederation. The unions point to Chile's unequal income distribution. A government survey last year found that almost 1m workers, or 15% of the total, were earning less than the legal minimum take-home pay of just over $200 a month.

With unemployment dropping sharply, wage demands are unsurprising. They are also being fanned by the Communist Party. It is aggrieved by the government's failure to act on a campaign promise to reform an electoral system, left in place by the dictatorship, which makes it almost impossible for small parties (such as itself) to win seats in Congress.

Trade-union leaders say the country is on the brink of social conflagration. Certainly, recent strikes have been unusually violent, as was a national day of protest called by the CUT, the Communist Party and others on August 29th. This gained the support of some Concertación politicians, who have taken to railing against their own government's “neoliberalism”. They object to a strict fiscal policy under which much of the windfall gain from the copper price is being saved for the future. (This will enable the government to spend its way out of any future recession.)

Rather than a big ideological shift, the discontent reflects a change in labour relations. Workers are more aware of their rights and want them respected, says a senior manager at Codelco. One matter of contention is sub-contracting. This has helped to keep exports competitive, but in some industries it has been used as a means of obtaining a low-wage workforce on short-term contracts.

A new law seeks to prevent the misuse of sub-contracting. Last month the government set up a committee to consider broader changes in labour laws. “We're not condemned to look at poverty and inequality and merely wait for growth and the trickle-down of wealth to take care of them,” said Ms Bachelet recently. The government also wants to set up special courts to settle worker grievances and to strengthen unemployment insurance.

Economic, political and social stability since 1990 has been crucial in attracting the investment, both local and foreign, that has secured rapid economic growth. As a result, Chile is a much richer country: income per head is almost $9,000, up from $2,400 in 1990. At this stage in its development, further capital investment and better education should raise productivity and thus wages, in a virtuous circle.

There is plenty of scope for improving productivity. The management of forests and plantations is five times more labour-intensive than it is in Scandinavia, for example. But improving education takes time. And as an alternative to capital investment, Chilean firms can import cheap labour from poorer neighbours, such as Peru and Bolivia, points out Rosanna Costa of Libertad y Desarrollo, a conservative think-tank. That is happening in low-paid jobs in construction and agriculture.

Chileans are throwing off the mental shackles imposed by the dictatorship. The process was accelerated by Pinochet's death last December. But political freedom has bred impatience for a fairer share-out of the fruits of growth. Ms Bachelet has proved less adept than her predecessors at serving up the Concertación's successful recipe of economic liberalism combined with redistributive social policies.

Even so, Chile seems unlikely to veer towards populism. Greater prosperity has brought mortgages and credit-card debts. These are “the new chains of the workers,” complains Mr Martínez. They are also a sign that most Chileans now have a stake in stability.

Revolt in the Andes

Sep 20th 2007 | LIMA
From The Economist print edition

A vote of sorts against big mines

MANY of the world's top mining companies have made big investments in Peru and are now ramping up output just when world prices for minerals are at record highs. The government has handed out concessions for exploration covering 12m hectares (45,000 square miles), which it hopes will trigger further investment of $11 billion over the next four years. The industry is booming, as is the economy. But in the Andean highlands that contain the mineral deposits, some Peruvians are turning against the mining companies.

The latest battle is at Rio Blanco, a remote spot close to the border with Ecuador where the Andes meet the Amazon, forming a misty cloud forest. Monterrico Metals, a London-based start-up recently sold to China's Zijin Consortium, plans to develop a huge copper mine there, costing $1.4 billion. Urged on by a loose coalition of environmentalists, Catholic priests and foreign NGOs, local mayors have campaigned against the project. On September 16th they held an unofficial referendum in the three affected districts. Of the 17,971 votes cast (a turnout of almost 60%, said the organisers), all but 984 voted against the mine.

Opponents say the mine would pollute rivers that are vital for farmers in fertile valleys lower down and accuse the company of ignoring local opinion. More broadly, they argue that mining has failed to develop the highlands. President Alan García's government denounced the referendum as unrepresentative and claimed its organisers were “communists”.

At Rio Blanco genuine fears and grievances have been mixed with much misinformation and political manipulation, a familiar pattern in Peru. The local mayors say they now want talks on the project. Richard Ralph, Monterrico's chairman, welcomes this as a chance “to dispel some of the myths about a mine that hasn't even been built”. He says that the project will use clean, modern mining technology and very little water, which it will not pollute. The company has promised the few thousand villagers who live close to the mine a community-development fund of $80m over the next three decades.

Monterrico hopes that work on the mine can still start next year, after an environmental-impact study is completed. Other mining companies in Peru will be watching closely. In recent years the industry has tried to clean up its image. But it labours under a legacy of poor environmental practice (some of it when the big mines were state-owned in the 1970s and 1980s). Conflicts between farmers and miners over water use are particularly common.

Modern mines may be much cleaner but they are capital-intensive and generate relatively few jobs. Some economists argue that mines could do more to boost surrounding areas by using local suppliers: one study found that in northern Chile each mining job generates seven others, while the figure in Peru may be lower.

In response to the protests, mining companies are spending more on community development. Half of their income taxes are also returned as local royalties. But local governments often make a bad job of spending this money. And in Apurímac, one of Peru's poorest regions, the national government has rejected all the projects proposed by local communities that would draw on a $40m fund set up by Xstrata, a Swiss firm developing a copper deposit at Las Bambas.

“Mining companies are making huge sums of money right now, but...the average person living near a mine does not see any benefits,” complains Victor Madariaga, who heads the chambers of commerce in southern Peru. In Cajamarca, the site of Yanacocha, a big gold mine, six out of ten residents are still poor (though that figure is lower than a decade ago and includes areas far away from the mine).

Others argue that by focusing on mining's impact on the local economy, the critics miss the point. Mining provides much of Peru's foreign exchange and tax revenues. Some Peruvians argue that more of the windfall from high prices should be taxed: mining's total tax bill was around $2.9 billion last year on net profits of some $7.3 billion, according to the mining society. Taxes have been edging up: the previous government imposed a royalty of up to 3% on new projects; Mr García negotiated a further “voluntary contribution” of 3% of the industry's after-tax profits (raising some $175m this year).

With or without mining, parts of the Andes will remain poor. But with it, Peru's economy can continue to grow fast. For that, the government will have to do more to engineer a modus vivendi. It is looking at reining in labour sub-contracting in the industry. But it has yet to take what is perhaps the most important step: remove environmental regulation of the industry from the mining ministry and vest it in a specialist environmental agency. The future of mining in Peru depends on the government acting as an effective referee. The days when mines could ride roughshod over the locals are well and truly over.

Neoliberalism: Santiago Calling

It is time to turn neoliberalism up a notch, not down. And the government should stay out

Last week in my beloved hometown, Santiago de Chile, a street protest was staged against the neoliberal model. Check out the report under the bombastic title Chileans take to streets in anger at regime.

The regime is a term used chiefly to describe oppressive and unelected governments. Chile, on the contrary, is ruled by a woman who won by a devastating majority in fair and free elections. However, the state of things has turned nasty thanks to Ms Bachelet's own strategy: she opened the floodgates criticising the neoliberal model. Now some Chileas demand her promises to be delivered. Obviously, president Bachelet knows very well that the economic system works fine. Poverty has decreased. The gap between rich and poor persists due to poor education and uncontrollable fertility rates at the lowest end of the social ladder. Some sections of the opinionated class insist we need a change of the economic course. I cannot help but thinking it’s the society, stupid.

The paradox here is that Chilean president is a lefty-cum-neoliberal, but the result is neither social liberties nor sound free-market policies. The public has been told too often and for too long that the problem is the economy, legacy of the dictatorship and the excuse was that democratic governments were unable to change it out of fear of the reaction by the conservative forces. However, the left now is majority in both chambers of Congress. The president is a left-winger. The electorate is on her side. There are no elections coming up so no need for populism. She is doing nothing simply because on her campaign she lied to everyone, and people are now showing their dissatisfaction. In other words, the electorate woke up to reality.

There is no alternative

In fact, the government should perfect the free-market model and not give in to populism. In Latin America, we have had enough of populism and neo-populism. Neoliberalism is not the root of all evil. Hardly two decades of sound market principles have been applied in Chile, and now poverty is about to be abolished. What do the union workers want then? They simply long for old-school socialism, a system exhausted and proved not only immoral but brutally wrong. People want the state to intervene, but that is actually dangerous. The economy should keep growing to make more people, especially the poor, join the job market. That is why the populist minimum wage should be scrapped altogether: let the market mechanisms work its magic. Trade Unions' main concern is the low wages (£200 per month). I do not understand why then this coalition approved an increase toVAT two years ago, and insist on protectionists barriers to imports of such importance as grains and milk. Prices for diary products and bread have sky-rocketed. The poor have been hit the hardest, and no wonder they complain when their wee salaries are used to subsidise the landownser. An increase in salaries may affect them as a result of higher internal consumption and inflation.

Another problem is Chileans low productivity. Workers tend to be lazy and the job market is not flexible enough. And the icing on the cake is the shambolic transport system in Santiago, and only the government can be blamed for it. Workers find themselves commuting endless hours. There was a faulty transport system before, but it did the job of getting people to their work places, and it was based on freedom to set up new bus routes giving the chance to small entrepreneurs to offer their services. The left coallition decided to change over to a centrally planned system, and in a pompous tone ex President Lagos announced only Stockholm would rival Santiago. It turned out a bloody mess and the Bachelet administration only intensified the problem. Indictments are already underway. Transport has been a major components in Bachelet's underperforming government. People seem to target the economy rather than the ruler of the country. People are wrong.

The gap between rich and poor is less a concern than the gap between society and the economy, the latter is way ahead of the former. Chileans remain deeply Catholic, hence their weak work ethics. Independece Day in Chile means two Bank Holidays in mid-september, and now one more has been added: a week of productivity will be lost this month. They wonder why the economy is not doing any better? Because they do not work enough, perhaps?

On the demographics of Chile, Roman Catholic idiosyncratic vices explain a lot. Sexual oppression leading to teenage pregnancy in the less educated has an impact in the high crime rates, and scores of workers on minimum wage have too many children. If you think that £200 is too low, fair enough. I agree, even. But why would you have three or four children then? The powerful Roman Catholic church opposes all sorts of contraceptive methods and cheers when people breed like rabbits. Let alone legalisation of abortion, which is a taboo in Chile, and anyone suggesting switching back-street abortions to safe hospitals can expect to be labeled, at best, a criminal. (In that case I am a hell of a criminal: legalise abortion now!)

Suffice to say that the protests were fuelled by a Chilean bishop who demanded a 60% hike in the minimum wage and made an appeal to pay an ethic salary, whatever that is. Now with god standing by them, do not expect workers to give up easily.

History repeats itself

We went through this once. See And if it means civil war, so be it, from Time magazine, 10 of setpember 1973 (also here in my Spanish site). At that time, workers took over companies and the whole country was brought down to its knees. The outcome was more that three thousands deaths in 17 years of dictatorship. It is in the government's interest to curb the unions... now!

It is true, this is not as bad as in the 70s. Chile now is stable, inflation under control, food supplies are there, only a bit expensive, but there is no need to queue for hours to buy them. I have to insist and remark that poverty is decreasing. The protests also gathered a few thousands, less than expected, and they only made headlines because of the riots.

The reality is that this government lied, like all their predecessors. Things are not great, but Chileans have never had it so good. How to build up a more meritocratic society is the real challenge. Let’s hope that next time, the left-wing candidate will not run on a free-market bashing ticket. Workers should get over it, and put this down as a lesson: next time, just do not vote for them again.

I recommend the opinion article published in The Guardian How the neoliberals stitched up the wealth of nations for themselves and and the letters about it on Santiago sends a message to the City.