Neoliberalism in Peru (sometimes referred to locally as "Criollo neoliberalism") «Nos encontramos (entre las diferencias de los tipos de liberalismo) frente a una fundamentación en que la doctrina y la historia de la lucha por la libertad y por la democracia tiene poco o nada que ver con la adulteración maniquea del neoliberalismo criollo, que pretende reducir la política a la economía y esta a los simples supuestos de la competencia perfecta convirtiéndolos en valores». first emerged on the political scene in Peru in the late 1980s. Neoliberalism is a political and economic ideology that advocates for free-market capitalism, and is known as Neoliberalismo in Spanish. The term has multiple, competing definitions, and is often used pejoratively. Its turning point came in the 1990s with the implementation of the Fujishock, a set of drastic economic measures taken by President Alberto Fujimori inspired by the US government based on the Washington Consensus, and with the promulgation of the 1993 Political Constitution, which was heavily influenced by neoliberalism. Although it suffered a setback in 1998, during the 1997 Asian financial crisis, it recovered and intensified during the period of greatest economic growth, driven by the commodities boom, between 2003 and 2013. It is one of the most comprehensive and longest-lasting implementations in Latin America, due to comparatively weak political opposition to neoliberalism.
Its main promoter was Hernando de Soto, who was key in the dissemination and consolidation of the neoliberal vision among business and political sectors in the 1980s. It has the backing of the Inter-American Development Bank (in the well-known Washington Consensus), multinational corporations and the social classes of the Peruvian coast, although its support among the middle class is rather nuanced or divided.
As an ideology, at least in the hands of Alberto Fujimori, Peruvian neoliberalism was associated with conservative positions. It was built on the ruins of liberal currents, which had lost influence in the country, but distanced itself socially from them and resorted to practices that limited liberal democracy. Its proponents promote economic measures such as deregulation and privatization, including the reduction of welfare spending and elimination of social programs.
Fujimori's project has transformed the Peruvian state into a predominantly business-oriented and wealth-generating entity. Furthermore, an economic elite was established that controls the financial services, export, and communications sectors, which are the determining factors in the unofficial Lima Consensus. The country achieved economic stability at the cost of greater social inequality and a clear restriction of freedom of expression among the sectors of the population, including indigenous peoples.
Development of neoliberalism
Background The origins of neoliberalism can be traced back to the founder of the country's economic thought, José Manuel Rodríguez (1857-1936). Rodríguez, possibly inspired by Classical liberalism, sought a solution to an economic crisis following the Guano era. Among his proposals was fiscal reform through tariff reductions, contrasted with interventionist capital controls. In 1912, Rodríguez was summoned by the Ministry of Finance (later Ministry of Economy and Finance).
In the late 1940s, the regime of Manuel Odría initiated a plan of economic liberalization.
In the 1950s, during Manuel Prado Ugarteche's second term, Pedro Beltrán Espantoso was appointed Minister of Finance. Educated at the London School of Economics, Beltrán implemented the first free-market measures. He disseminated his plans in the newspaper La Prensa, which primarily promoted its own free-market ideas during the 1940s to 1960s. p. 101. «Estas ideas se difundieron en el Perú desde fines de los años cuarenta, siendo su principal promotor el diario La Prensa, de Pedro Beltrán Espantoso. Por décadas, este periódico se convirtió en el gran propagandista de las ideas de la libertad económica. Su ciclo terminó con las dictaduras militares de Velasco y Morales Bermúdez, pero sus ideas fueron retornadas luego del triunfo de conservadores y republicanos en Gran Bretaña y los Estados Unidos en 1980». He also implemented adjustment measures and sought loans from the International Monetary Fund (FMI). Peru was one of the first Latin American countries to have agreements with the IMF. Researcher Parodi indicates that, following Beltrán's fiscal stabilization measures and Prado's Industrial Promotion Law, the foundations were laid for an import substitution industrialization model.
Following Prado Ugarteche's departure, national investment fell to its lowest level in Latin America in 1968, according to Ernesto Álvarez Miranda. The middle class, rendered invisible in the country, opted to pursue social demands by joining oligarchic groups. In the late 1960s, the sought to unify social participation and eradicate class struggle. p. 46. «The Velasco project—a mixture of radical nationalism, Christian social theory, and Marxism—attempted to promote a sort of “social-democratic concertation” from above, in which all social actors were to participate in a national project of unity instead of struggling with each other». With the help of some middle-class groups, the military succeeded in eliminating the upper class and thus ended the liberal economy. Velasco implemented an industrial policy that resulted in the highest economic growth between 1969 and 1974, leading to the emergence of a national bourgeoisie.
The was one of the first to promote neoliberalism without enshrining it in the Constitution. It reversed the measures of President Juan Velasco Alvarado, established new adjustment measures, and eliminated state-aid to workers. The changes were formalized with decree laws 22264 and 22265, issued on August 10, 1978. The government implemented the Plan Túpac Amaru, a milestone in the neoliberal ideological advance of the 1970s that initiated business diversification. At the end of the term, historian Henry Pease stated that the Partido Popular Cristiano (PPC) had contributed to the inclusion of a social market economy in the Constitution of 1979. According to Jürgen Schuldt, the PPC collaborated with specialists to develop a government plan aimed at implementing a "neoliberal economic ideology" in the country.
In the first half of the 1980s, Manuel Ulloa Elías implemented a new version of liberal economics to address the monetary crisis. As a member of , he proposed eliminating price controls and limiting subsidies for the poor through a voucher system inspired by the United States plan. The system did not achieve the expected results. He also proposed privatizing companies and reforming the tax system, measures that also failed to produce the desired results for the country's economy. The team in charge of Ulloa's plan was disbanded in 1984.
In 1986, the first government of President Alan García implemented socialist measures to alleviate poverty, such as using accumulated government resources to finance consumption and imports., p. 23. «En un inicio, contó con la ayuda de las reservas acumuladas gracias a la suspensión del servicio de la deuda, lo que financió un boom de consumo e importación. A través de medidas populistas que tuvieron un impacto inmediato en la vida de los pobres, avivadas a través de manifestaciones y de ampliamente difundidos "balconazos", su popularidad superó el noventa por ciento en 1986, y el APRA logró importantes victorias a lo largo de todo el país en las elecciones municipales de 1986». However, the lack of state planning to guarantee monetary reserves and stimulate private investment, as well as rising inflation, hampered the performance of the country's public administration. One of the biggest controversies was the nationalization of 33 banking and financial institutions. The result was the emergence of parallel banking. Alan García's term as president turned Peru into a pariah state in the international financial sector. Businesspeople who had previously placed their trust in García were disappointed.
Implementation Fujimori implemented strong economic measures at the beginning of his term, between 1990 and 1991, following the Washington Consensus. This included reversing the nationalization of the banks and abandoning the manufacturing and industrial policies originated by Juan Velasco Alvarado. In effect, Fujimori eliminated the excessive regulation that kept local industry protected and established a single tariff rate, which would prove key for Peru's entry into APEC.
With the self-coup of 1992 and taking advantage of his brief period as de facto ruler through a repressive regime, Fujimori promulgated the 1993 Constitution, which reflected a marked neoliberal influence. In 1994, the Peruvian Institute of Economics (IPE) was created, tasked with providing technical and intellectual support to the Ministry of Economy and Finance, one of the Fujimori-era ministries.
Fujimori and his associates believed that the government's measures would culminate in strong economic growth by 1998, but this was prevented by the 1997–1998 economic crisis. Following this, a period ensued that the United Nations Economic Commission for Latin America and the Caribbean termed the "lost half-decade" (1998–2002). The political opposition criticized the neoliberal project for its fragility and dependence on foreign capital.
First neoliberal measures The economist Hernando de Soto founded one of the first neoliberal organizations in Latin America, the Institute for Liberty and Democracy (ILD). Soto began receiving assistance from the Center for International Private Enterprise (CEPI), an organization of the National Endowment for Democracy (NED) under the administration of Ronald Reagan, to promote free market economics. Between 1988 and 1995, Soto and the ILD participated in four hundred initiatives, laws, and regulations that significantly modified Peru's economic system. In addition, Soto promoted the distribution of land titles to the popular sectors.
De Soto's ideas initially influenced the Democratic Front (Fredemo) of Mario Vargas Llosa, for whom he served as a personal advisor, although De Soto later distanced himself from the group. Later, De Soto advised the Fujimori regime and helped consolidate the neoliberal economic system, supported by the (Confiep). This latter organization was responsible for convincing investors who had become disillusioned with the economic policies of Alan García's first government.
The regime focused on economic stabilization measures, which began with the Fujishock. These reforms favoured the free market and allowed Peru to enter the international financial system. The origins of its strategy were controversial, particularly the alleged adoption of the Green Plan, known as "Plan Verde", and its similarities to the government of Manuel Odría., pp. 15–16. «La nueva fórmula se parecía bastante al régimen del general Manuel A. Odría (1950-56), aunque el contexto internacional era bastante diferente y el Perú era un país muy distinto». Economist José Oscátegui pointed out that the economic proposals were not the work of Fujimori or Vargas Llosa, but of De Soto, and asserted that there was "a self-serving legend intended to give credit to his followers (of Fujimorism)". At his 2009 trial, Fujimori argued that his measures were necessary to prevent Peru from becoming a pariah state in the financial world.