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3/21/18

Peru, impeachment, PPK, Vizcarra and mining (from IKN461)

I'm getting mails asking WTF is going on in the Peru political zooshow. Even though the following, written on Sunday, is somewhat out of date due to the big video upheaval of yesterday, it's useful for Thursday and is also a need-to-know on Martin Vizcarra. Here ya go, from IKN461 last weekend:

Peru: PPK’s day of reckoning this Thursday
Two developments in the slow death of the presidency of Pedro Pablo Kuczynski (PPK) this week. First we had the official approval of the “vacancy” impeachment debate in Congress, which for local protocol reasons needed a debate to approve the debate. That happened and Congress has now decided the date of the session, this Thursday March 22nd. A couple of weeks ago I mentioned that the magic number of 2/3rds of Congress is 87 and as things stood, the vote to vacate PPK would be between 80 and 98. Since then we’ve heard more positions and it’s looking even shakier for PPK, we can put the vote to kick out the President at between 86 and 93 votes. Only one of those seven numbers works for PPK.

Meanwhile, PPK faced the “Lava Jato” Commission looking into the effect of Odebrecht corruption in Peru on Friday, the grilling took place at the Presidential Palace and lasted seven hours. Although we have no official word yet, reports such as this one (18) are doing the rounds about the meeting. Along with factoids such as the case that brought PPK to the brink back in December turns out to be just one of eleven transactions performed by companies controlled by PPK, plus the way in which PPK denies any control of the companies used by Odebrecht to pay “consultancy fees” (First Capital Investments and Westfield Capital) but strangely, 49.96% of the fees received by those companies are then transferred to PPK’s bank accounts, we can quote the impressions of commission members who for the moment have to keep their name out of the papers. Here are two quotes from separate commission members:

“With the Financial Corruption Unit (UIF) report in hand, we asked him about the relationships of First Capital Investments and Westfield Capital, but he could not explain clearly why those payments from Odebrecht went through the companies. He repeated his discourse about the “Chinese Wall” (note, the supposed wall between him and his business dealing while he was a member of the government) and could not remember much about the sums involved. It was disappointing.”

“Neither was he convincing as to why a payment from Odebrecht to First Capital, a company he denies owning at the time, was transferred to a personal bank account in the BCP bank and then transferred to a Westfield Capital account in The USA. Didn’t he keep repeating that he had no relation with First Capital?”

Back in early January, I posted on the blog that PPK wouldn’t survive February due to this mess (19). That turned out to be wrong, but it’s looking like it was only wrong by a month because his fate lies with around seven “undecided” members of congress and many of them have said that they’d only decide on how to vote after getting the Lava Jato report. With the weak showing in front of that committee now a fact, I’d make a best guess we have an 80% chance of PPK being thrown out as President and his Veep, Martín Vizcarra, taking over. The debate happens Thursday and is likely to take all day and night, we may not get the vote and decision until the wee small hours of Friday, local time.

Regarding Vizcarra, he’s been playing his cards very close to his chest, ostensibly supporting his President without sticking his neck out. He’s also made it clear that he won’t resign if PPK is impeached, which is a de facto way of telling the world that he would accept the Presidency. This fits with the strongly sourced rumours already reported on these pages as to how people in his team have been in negotiations with the Fujimorista “Fuerza Popular” party on how to form the next cabinet of ministers. He’s also been getting messages of support from Keiko Fujimori, leader of the party at both personal and party political levels that speak volumes about the “pre-agreement” that’s been going on in the background.

And really, the presence of Vizcarra in this whole mess is the main reason none of us on the outside looking in should be worried about Peru or any mining investment exposure we have in the country. Two things:

1)     He’s a canny operator, experienced in the style and substance of Peru politics and a consensus seeker. He’ll bring much-needed stability to the upper executive (at least for a while) and is known as an honest politico (a rarity in Peru).
2)     Not only is he an experienced politician, but he’s well versed in matters mining and before becoming Veep he was governor of the Moquegua region of South Peru. He knows the industry and its pros and cons and was, for one example, the main figure in the negotiations between Anglo and locals around Quellaveco that reached key agreements for the EIA permit. I can offer up other examples but we can summarize with “Vizcarra is good for mining” and be done.