TORONTO () -- In early April your correspondent took aim at "," noting that the leader in the polls, Ollanta Humala was a maniac, and most certainly prepared to wreak havoc on his own country by reducing the appeal of its substantial resource endowment, and driving away foreign investment.
Fortunately, not all of Humala's countrymen are quite as self-destructive as he is, and the result of today's runoff election is a victory by Humala's moderate counterpart, Alan Garcia - investors can finally stop holding their collective breath. Unfortunately, however, Humala came far too close for comfort this time around, and his success as the radical candidate coming out of nowhere should worry investors in the country, and right-minded Peruvians alike - a man of his stripe shouldn't even have a shot, as he could single-handedly set the Andean nation back a hundred years.
According to CNN, "Humala, a retired military man like Chavez, has spooked upper- and middle-class Peruvians by attacking the established parties as corrupt and unresponsive to the needs of the poor. He vows to write a new constitution stripping them of power." In the same piece the popular network quotes a taxi-driver that voted for Humala as saying that he did it, "so that there is a change. A military man is tough. There is too much corruption. Let's hope he can impose order. If Ollanta can't change this, no one can change it."
While many may well consider these simple-minded beliefs to be noble and upright, our unfortunate taxi-driver hasn't the first idea of the ignorance of his actions. Sadly, this situation is a reminder of the perils of total enfranchisement, but due to the shear scale and scope of that problem it will have to be the subject of another article.
In our last piece about the situation in Peru, we noted, "Mining investment in the country totaled $1 billion last year. The country is the world's 4th largest producer of copper, third largest producer of zinc, second largest producer of silver and sixth largest producer of gold," and pointed out that, "the mining business is tough enough without the added plague of a Chavez-type government."
Investors will more than likely witness a bounce in Peruvian related mining names this week, specifically producers and developers with significant deposits. Nevertheless, the potential for organized chaos and disruption of legitimate businesses and operations in that country is not going away, and the status of foreign investors' plight is unlikely to be ameliorated with Humala now restless and looking for another fight.
At this point Peru should be alright, until the next election that is, but it would pay for readers of RI to keep in mind that it takes 5 - 10 years to bring a mine onstream. In other words, all of the capital that you, and your public company sink into a solid project over the next 5 years (if it takes that long) could be in jeopardy in the next election, when the Peruvian taxi drivers decide to elect a radical like Humala.
'Caveat emptor' remains the best advice for that part of the world.
