Will PPK’s Energy Policies Be Right for Tomorrow’s Peru?

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Indigenous groups in the Peruvian Amazon last year blocked a major Amazon river tributary following what they say is the government’s failure to address a social and environmental crisis stemming from oil and gas operations, The Guardian reported. // File Photo: Feconat.

Pedro Pablo Kuczynski, known by his initials, PPK, won Peru’s presidential election on June 5. Fitch Ratings has said that Peru’s growth trajectory under PPK will depend on whether initiatives such as improving the country’s energy infrastructure succeed. Known for orthodox economic policy, PPK showed some openness during his campaign to policies he had once rejected, such as renegotiation of contracts with multinational natural gas companies. PPK had previously served as energy and finance minister. How will Peru’s energy sector fare under PPK’s leadership? Is he likely to bend to political pressure and become more flexible with policies in the energy sector, as was suggested during his campaign? What will be the biggest challenge to the new president as he seeks to strengthen energy infrastructure?

Jose L. Valera, partner at Mayer Brown in Houston: “The Peruvian economy as a whole should fare well under PPK’s leadership and growth, and the energy sector will be an important component but by no means the only one. PPK understands that the general welfare of Peruvians will improve principally from widespread economic growth, and that the role of the state in this regard is to provide the conditions for investment and job creation. Peru’s macroeconomic situation is very good, but the micro-economy is not—informality, underemployment, narrow tax base, stifling bureaucracy, security and corruption being the main issues. I would not expect PPK to ‘renegotiate’ contracts Venezuela or Ecuador-style. Legal and contract stability are far more valuable to Peru in the long-term than populist gestures. At 77 and barred from running for another consecutive term, PPK will do what is best for Peru and not for him politically. He is probably the first president who…”

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