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Latin America leans left

Last fall, when it looked like Luiz Inácio Lula da Silva would win Brazil's presidential election, investors panicked. Spooked by the leftist candidate's populist rhetoric, they dumped the Brazilian real, driving the currency to an all-time low of R3.99 to the dollar.

A year later President Lula presides over a stable -- and steadily strengthening -- economy. Though he has not abandoned his leftist social agenda, his administration has slowed inflation and even surpassed its International Monetary Fund budget surplus targets (see page 129). Investors have bid up the real to 3.00 to the dollar.

"Lula made a political decision of not being a populist but of implementing strong reforms -- we're going to start seeing a payoff next year," says José Barrionuevo, director of emerging-markets strategy for Barclays Capital in New York.

After a decade in which Latin American governments adopted the market-friendly economic reforms prescribed by the Washington consensus, a rising tide of dissatisfaction with endless austerity is sweeping the continent. Sluggish growth throughout the 1990s, along with persistent poverty and widespread income inequality, has given the left a new lease on life. But though radical strongman Hugo Chávez was catapulted to power in Venezuela, such an extreme lurch has been rare. Lula, by contrast, embodies a new center-leftism.

Following in Lula's footsteps are a new breed of pragmatic Latin American leftists -- economic realists with a bold social agenda, capitalists with a conscience. Along with the Brazilian president, the small but influential group includes Andrés Manuel López Obrador, the mayor of Mexico City; Alan García of Peru, the disgraced former president who has recast himself as a moderate leftist; and Héctor Silva of El Salvador, the presidential candidate of a new coalition of center-left parties.

They are all considered the candidates to beat in their respective countries' next presidential races, which in El Salvador will be in 2004; in Peru, 2005; and in Mexico, 2006.

Each came of age as a leftist but governs, or plans to govern, from the center. Recognizing that foreign capital is critical for domestic growth, these moderate leftists accept, in large measure, fiscal and monetary prudence, even as they ardently pursue a social agenda that seeks to reduce inequality as well as absolute poverty, create new jobs as well as curb crime. "It's the Washington consensus with a human face," says Peter West, a senior economist at Poalim Asset Management in London. "If Lula can pull off this off, political risk will go down."

Today's next-wave Lulas echo the "Third Way" political philosophy articulated by British Prime Minister Tony Blair and former U.S. President Bill Clinton. The Latin leftists aim to stimulate private investment and safeguard fiscal prudence, but they also believe that government power -- and public funds -- must be used to improve the plight of the poor. Of course, the gulf between rich and poor is much wider in Latin America than in Europe or the U.S.

"The new Latin leftists seek to be pro-business without being conservative, to not be representatives of Wall Street, to be within globalization and not against it," says Carlos Monge, head of government monitoring for Grupo Propuesta Ciudadana, a left-wing Peruvian watchdog group. That's not always an easy balance to strike, he adds.

It's quite a bit tougher after years of sluggish growth and persistent poverty. Between 1997 and 2002, Latin America grew, on average, just 1 percent per year. Per capita income actually declined by 1.45 percent.

"We must seek two things -- social development and economic development," says López Obrador, 50, who took office as Mexico City mayor in December 2000 as the victorious candidate from the center-left Partido de la Revolución Democrática. "The essence of our government is a balance between the two." Boasting 83 percent approval among Mexico City's 9 million residents and well known across the country, he is arguably Mexico's most popular politician.

Mexico's president, Vicente Fox, remains a well-liked figure, but considerably less so than when he took office in 2000. His approval rating recently was 49 percent, down from 73 percent in March 2001. Certainly Fox embodies a new democratic era in Mexican politics.When he won election as a candidate of the conservative Partido de Acción Nacional, it was the first time in 71 years that the presidency had been wrested from the Partido Revolucionario Institucional. But with a divided Congress, Fox has had limited room to maneuver.

That's especially problematic because economic growth is anemic. Forecasters estimate that the $620 billion Mexican economy will expand just 1.8 percent this year, after a 1.9 percent gain in 2002 and a ­0.3 percent contraction in 2001. The purchasing power of the average Mexican has stagnated for the past 20 years. Still, the economy boasts real strengths. Exports total more than $170 billion a year. And Fox's government has instituted tough fiscal and monetary policies, with the fiscal deficit representing just 0.5 percent of GDP and inflation running a modest 5 percent a year.

López Obrador's approach to governing Mexico City, which contributes 23 percent of the country's GDP, is equally sober -- as well as socially concerned. The mayor seeks to advance both "economic development and social development -- not one thing without the other," he says. To revitalize the capital's commercial center, which has languished since Mexico's 1985 earthquake, he raised $1.5 billion in private capital investments to supplement the $1.5 billion the city is putting up. And he instituted cash transfers of $65 a month for the handicapped, single mothers and citizens over 70, paying for this relatively inexpensive program with government funds. "The goal is to strengthen the people's economy," says the mayor, who discusses more of his philosophy in an interview on page 46.

In an earlier incarnation López Obrador was a more unreconstructed populist. In 1989 he co-founded the left-wing Partido de la Revolución Democrática and seven years later masterminded a massive protest against the contamination of small farms by Petróleos Mexicanos, the national oil company. Thousands of peasants blocked access to 60 oil wells for the better part of a month.

Unlike many Mexican politicians, who flaunt their power, López Obrador presents himself as serious, restrained and hardworking. "The mayor speaks softly, but in his behavior he is shouting that you can be a leader and live in a modest way and not equate power with corruption, which is traditional in Mexican politics," says Lorenzo Meyer, a political historian at the Colegio de México.

To realize his economic goals, López Obrador has cultivated strong relationships with Mexican and foreign financiers and businessmen. "You can't strengthen the economy without the private sector," he explains.

This public-private partnership has been marked by innovation. To ease Mexico City's debt burden, for instance, the mayor and his top financial official, Carlos Urzúa, got banks to restructure some $330 million of the city's costlier, shorter-term bank debt through an auction in May 2001. Banks bid to extend the loans' maturities out to 14 years at more attractive rates. The result was $15 million in annual savings in debt-servicing costs, a substantial reduction over the lifetime of the loans. To make the deal alluring for banks, López Obrador persuaded his municipal council to vote to let the city borrow more from commercial banks rather than rely so heavily on state banks.

"The Mexico City financial team is one of the best I've seen not only in governments but also in private companies," says Luis Villalobos, director of fixed-income structuring for Banamex, which bought some of the city's debt. "We talk the same language."

Although López Obrador has been cautious about addressing national political issues, he is an outspoken critic of the 1995­'97, $90 billion bailout of Mexico's banking system. He now advocates a renegotiation of the terms of the rescue, imposing tougher terms on the banks. Although he believes in funding public works, he also urges generous tax incentives to encourage private investment in urban renewal.

PERU MIGHT NOT SEEM AT FIRST TO BE A breeding ground for disaffected leftists. Its $52 billion economy is expected to grow 4 percent this year (down from 5.2 percent last year but still a far cry from the late-1990s recession). Inflation is muted, at barely 2 percent; the currency is stable and floats freely; and the deficit is nearly on target, at 1.9 percent of GDP. Nevertheless, despite a nearly 90 percent literacy rate, half of Peru's 25 million citizens live in poverty. GDP per capita is a mere $2,420.

These statistics help explain the continuing appeal of even a once-discredited leftist politician like Alan García, who identifies himself with Peru's peasants and slum dwellers. But García's electoral prospects also gain from the travails of his putative opponent in next year's election: Peru's bumbling and indecisive president, Alejandro Toledo of the center-right Perú Posible party. Only 11 percent of Peruvians think he's doing a good job.

It is disconcerting, though accurate, to describe García, 54, as an up-and-comer in Peruvian politics. The former president is by far the country's best-known politician. That's a mixed blessing for García as he gets ready to run again in 2005.

As leader of the Social Democratic Alianza Popular Revolucionaria Americana (APRA), the leading opposition to Toledo's ruling party, García came within just 4 percentage points of winning the presidency in 2001. A captivating speaker, he can work a crowd like Bill Clinton.

But García suffers from high disapproval ratings (58 percent), the legacy of his disastrous 1985­1990 presidency. Many Peruvians associate García with a profound state of chaos. He restricted Peru's payments to foreign creditors and nationalized banks, sparking hyperinflation and severe food shortages. García later faced charges of corruption for taking money from a public construction project, but the Supreme Court dismissed the case in 1992 for lack of evidence.

In Peru political corruption tends to be relative. "The revelations about corruption under García's successor as president, Alberto Fujimori, make García look like a Boy Scout," says Michael Shifter, vice president for policy at Inter-American Dialogue, a Washington, D.C., think tank.

At the same time, though, a wide-ranging congressional truth commission is investigating García for allegedly violating the human rights of imprisoned leftist guerrillas during his presidency (he has adamantly denied the charges).

García purports to be wiser today than when he first ran for president. Describing himself as a "democrat with a social accent," he says he believes in "supporting intelligently the free market, using the competitive capacity of the world economy." In García's view the state should promote competition, especially in such key sectors as telecommunications (see page 50).

He chafes at the five-year monopoly granted to Telefónica del Perú in the 1994 privatization of the nation's telecommunications system. To open up Peru's remote areas to domestic and international markets, García proposes that the government fund construction of infrastructure projects and then step back and allow private corporations to operate the highway, port or airport.

Many, however, remain highly skeptical of García's professed devotion to free markets. "The market doesn't completely trust García," says José Gonzales, president of LW Asset Management, a New York­based emerging-markets investor. "He's still perceived as an interventionist, and he hasn't been able to change that."

EL SALVADORANS ON BOTH ENDS OF THE political spectrum have been participants in an economic experiment. In January 2001 the country's currency was scrapped and replaced by the U.S. dollar, a risky gambit that promised to reduce inflation and lower interest rates but threatened to cripple exports and strangle growth if the program failed. On the whole it has proved a success: Interest rates have fallen from 14 percent in 2000 to a recent 6.5 percent. Inflation is running at 2.9 percent a year, down from 4.3 percent in 2000. Meanwhile, the country's $13 billion economy is expected to grow by at least 2.5 percent this year.

The right-wing Alianza Republicana Nacionalista (Arena) party has held the presidency for the past 15 years, while the Frente Farabundo Martí para la Liberación Nacional (FMLN), the party of the guerrillas who fought during the 12-year civil war that ended in 1992, has won a growing number of municipalities and national assembly seats. The presidential candidate of a coalition of center-left parties, Héctor Silva, 56, of the Centro Democrático Unido, stands to benefit from the hard-line positions of both the left and right.

A U.S.-born doctor, tall, dark and charismatic, Silva currently serves in the national assembly but gained national visibility as the mayor of San Salvador. During his two terms as mayor he firmly established that he is anything but a conventional leftist. He formed numerous joint ventures with the private sector, including a sanitary landfill and parking lots.

Job creation will be a top priority of a center-left administration, which would also push hard for tax reform. Silva advocates an increased burden on the wealthiest 5 percent of El Salvadoran households (see box above).

Pursuing such ambitious social goals while respecting the restraints of a sound fiscal policy will be difficult for the new Latin American leftists. It will be especially tough if the Lula government falters and loses the confidence of investors. "If you don't get economic growth in Brazil, then the center, center-right economic model will come into question throughout Latin America," says Carls Ross, senior managing director of emerging-markets research at Bear, Stearns & Co. in New York.

Although acknowledging the obstacles ahead, the popular mayor of Mexico City nevertheless sounds a sanguine note. "We want economic progress with social justice," says López Obrador. "A legitimate government must seek these two."


MEXICO CITY'S POPULIST MAYOR

He is the most popular politician in Mexico: If the 2006 presidential election were held tomorrow, Mexico City Mayor Andrés Manuel López Obrador would win easily. In two and a half years in his high-visibility post, the 50-year-old center-left politician has tackled corruption; boosted the city of 9 million's tax take; launched an overhaul of the run-down colonial center, the Centro Histórico; and introduced cash-support programs for the handicapped, single mothers and all residents over 70.

López Obrador avoids interviews (though he does give a daily 6:15 a.m. press conference), but he agreed to talk with Contributing Editor Lucy Conger in his office overlooking the Zócalo, Mexico City's grand plaza.

Institutional Investor: What is your vision of government?

López Obrador: Our model starts from the premise of economic progress with justice. We must seek the two things -- social development and economic development. The essence of our government program is balance between the two, not one thing without the other.

You have an "alternative plan" for Mexico?

That is to demonstrate that development with a social dimension is possible, that it's possible to combat inequality, that it's possible to pull the country out of its backward state.

How do you define "power"?

Power is not corruption. It is not arrogance. It is not authoritarianism. The left has gotten to power [in other countries] and gone crazy. Power dazes the intelligent and makes fools crazy. The best thing is to maintain your principles, to keep your feet on the ground. Resist all the temptations of power, and understand that power is the possibility of serving.

You gained fame as a radical, but in government you have been pragmatic.

That's right. I behaved differently then. I want to make clear that I was a social leader, and the struggles as a social leader are different from being in government. When you are a social leader, you don't even think of the possibility of holding public office.

You have said that the right doesn't know how to distribute wealth, but the left doesn't know how to generate wealth.

It's a saying. It is also said that the violin is picked up with the left hand but played with the right -- that you can get to power from the left but that you must govern from the right. I don't believe that. Balance is best. You have to produce wealth and distribute it.

Why have you felt it's so important to cultivate relationships with businessmen?

Look at what's happening here with assembly plants. In a globalized world, suddenly there are better conditions in China, and the plants leave. And there's no one in the [federal] government who talks with the assembly plants, and there's no program to prevent their moving. We talk constantly with investors, and all businessmen have an open door.

What type of incentives would you give to keepmaquiladoras(assembly plants)?

First, here in Mexico City investors are not subjected to bureaucratic paperwork. Second, there is no corruption; bribes are not sought. Third, there are fiscal incentives. For example, if you invest in the Reforma [Avenue] Corridor, you don't pay property taxes or payroll taxes through at least 2006.

You give cash transfers to the aged and single mothers and the handicapped. Is this a good thing for government to do?

I don't understand governments that worry about things and not people.

But how are you going to finance all the cash transfers that Mexico City gives out?

It's very simple. It's a question of defining who you govern for. Every program of social development in the city requires fewer resources than are paid in interest on Fobaproa [the 1995­'96 bank-rescue bonds]. What we do is written off as populism or paternalism, while spending that goes to bankers is called "promotion" or "rescue." It is possible to support the poor without lapsing into financial indiscipline.

What shape will Mexico City finances be in at the end of your term in 2006?

They'll be stable. We have good tax collection even though we haven't raised taxes. The principal problem of Mexico is corruption. When you prevent corruption, the resources are sufficient, the money is there. It's also a matter of running an austere government and not allowing the growth of current expenditures. We are doing all this.


II'S FALL 2003 COUNTRYCREDIT RATING

MEXICO

COUNTRY CREDIT RATING


54.8

SIX-MONTH CHANGE


­3.7

ONE-YEAR CHANGE


­4.2

Any U.S. economic recovery may be too little, too late for Mexico and its president, Vicente Fox. Sovereign credit analysts participating inInstitutional Investor's semiannual Country Credit survey (see page 93) slashed their rating of Mexico's creditworthiness by 4.2 points over the past year. They worry that economic sluggishness -- Mexico emerged from recession in 2002, but managed less than 1 percent real annual GDP growth -- has drained the political capital Fox needs to restructure the economy. Says Eduardo Videla, sovereign analyst at Banco de Chile, "The administration has not been able to implement the necessary changes." Progress hasn't been completely halted. In the first six months of 2003, Mexico almost halved its trade deficit.


CAN THE CENTER (LEFT) HOLD IN EL SALVADOR?

Héctor Silva, 56, is a jovial physician-turned-politician, a native-born American who renounced his citizenship to return to his ancestral homeland. He served two terms from 1997 to 2003 as mayor of San Salvador, the sprawling capital that is home to about one third of El Salvador's population. He administered a coalition government composed of an evangelical party, Unión Social Cristiana; the center-left Centro Democrático Unido; and the leftist Frente Farabundo Martí para la Liberación Nacional, a former armed guerrilla movement; plus a host of civic organizations. While mayor, Silva led a record number of joint investments with the private sector, including a sanitary landfill and parking lots, and he privatized the local slaughterhouse. He currently serves in the national assembly.

Silva spoke by telephone from San Salvador with Institutional Investor Contributing Editor Lucy Conger.

Institutional Investor: You are one of the leaders of a newly formed political coalition in El Salvador. How would you describe the coalition?

Silva: We have an alternative model that doesn't consider either the state or the market as gods. Ours is an alternative to the model that tried to implement a neoliberal scheme with great ideological rigidity and orthodoxy, while being challenged by a left that copied Marxist ideas. Our alternative is to provide economic and social stability.

Does the coalition identify with the "Third Way" political thinking of Tony Blair and Bill Clinton?

You have to take this relatively. We are in a different ball game, a different league. They talk of a tax burden equal to 35 percent of GDP, and in El Salvador taxes equal 10 percent of GDP. The World Bank says collection must be at least 15 percent to be functional.

How do you describe your own political views at this point?

I define myself as a social democrat, or whatever term you find convenient for the democratic left, those who think like Britain's Labourites, Spain's PSOE [Partido Socialista Obrera Española] and Sweden's Social Democratic governing party.

What is your coalition's platform for the presidential election next March?

We have five points: reform taxes; stimulate development outside greater San Salvador; give more power and resources to local governments; reform certain services, such as health and education; and integrate with Central America.

Would you explain some of those programs in greater detail?

Development outside greater San Salvador is not solely agricultural; it would include eco-tourism and agribusiness. We would make very carefully planned policies of subsidy, including credit policies and attention to free-trade agreements, so they offer some stimulus for agriculture.

What is your tax policy?

Tax collections have to be more than they are now. With 10 percent of GDP [collected in taxes], you're going nowhere. The solution is not only to reduce tax evasion, which would be about 1 percent of GDP. We must tax the top 5 percent [by income]. That is fundamental in El Salvador.

What about health care?

That requires more investment from the state as well as reforms to improve state care, plus the transferring of very basic care to municipalities and private voluntary organizations and -- in some specific services -- to private, for-profit providers.

How do you envision the private sector's role vis-à-vis the government's?

The private sector continues to be the principal actor of the economy, and that model will be preserved. Stimulating investment means not only low taxes, but also security, a skilled labor force and juridical security. The role of the state is as a facilitator more than anything else, and to create conditions that foster investment by other actors, such as local businesses. El Salvador has remittances of $2 billion per year. This country lives off the remittances. We should see them invested.

What is your view of Central American economic integration?

It will be very difficult to sell to voters. But all development forecasts indicate that we have to move quickly. El Salvador has the capacity to be the caudillo, or leader, of the region.

El Salvador dollarized the economy in 2001. What is your opinion of dollarization?

I was mayor of San Salvador at the time, and I opposed it. I continue to think that dollarization has brought us more negative costs than positive effects. But to overturn it completely would be an error. We need to recover some things we lost, to go back to having some degree of monetary policy. We cannot go backward.

Would your coalition identify who would make up the economic team during the presidential campaign?

This is not yet decided. I've been obliged to think a lot about this issue. I have a list of five people who would do a better job than those who are doing the job now, without frightening markets. They are not from the Patrice Lumumba University.

What is your opinion of Brazil's President Lula da Silva?

Lula is making his best effort. He has the great advantage of having one single party, although it has many currents.

What is your opinion of Venezuelan President Hugo Chávez?

I hear such contradictory opinions. It is evident that he is not doing well.

What's the toughest challenge for the left in Latin America?

To deliver. It is necessary to show results.


II'S FALL 2003 COUNTRYCREDIT RATING

EL SALVADOR

COUNTRY CREDIT RATING


46.4

SIX-MONTH CHANGE


4.9

ONE-YEAR CHANGE


0.4

El Salvador's economic growth and fiscal rectitude are cheering sovereign credit analysts. Analysts attribute the first quarter's annual real GDP growth of 1.7 percent to the nascent U.S. economic recovery and surging foreign worker remittances. The country gained 4.9 points inInstitutional Investor's latest semiannual Country Credit survey of sovereign credit analysts (see page 93), the biggest six-month jump in Latin America, and rose 0.4 point on the year. President Francisco Flores and his right-wing Alianza Republicana Nacionalista party aim to cut the budget deficit to 2 percent of GDP by 2004. But analysts fear a potential March 2004 presidential election victory by the newly energized Frente Farabundo Martí para la Liberación Nacional; the FMLN could pursue expensive social programs and possibly repudiate El Salvador's dollarized monetary system.


THE RETURN OF THE PRODIGAL

Is the reinvention of Alan García for real? President of Peru from 1985 to 1990, García drove the country into a state of chaos, as hyperinflation, a decimated currency and severe food shortages ravaged the economy and a violent guerrilla movement, Sendero Luminoso (Shining Path), caused the deaths of thousands. Today, presenting himself as a pragmatist on economic matters and a responsible leftist on social issues, García leads Peru's oldest party, Alianza Popular Revolucionaria Americana, which holds the largest opposition bloc in Congress. Considered a probable candidate for president in the 2006 elections, García must persuade voters and investors that he is not the García of old.

He recently spoke with Institutional Investor Contributing Editor Lucy Conger in Lima.

Institutional Investor: How would you describe yourself these days? Are you a Social Democrat? Leftist? Populist?

García: I'm a democrat with a social accent and a great concern for modernization so that history doesn't leave us behind. I'm still absolutely convinced that we are entering a new phase of the world economy, of profound globalization.

And how have you personally changed?

I've reached an age, 54, at which ambition is left a little bit behind. My attitude is no longer a desperate seeking of the presidency -- about that investment bankers can be calm -- but rather influence.

As president you nationalized Peru's banks. How do you build bridges with the financial community now?

In 1987, due to an ideological error, I said, "We've ended up without investment; we are going to control the banks." It was an error. Unrepeatable, absurd. Now I believe I can be useful to guarantee social stability and development of Peru. Second, I think that any intelligent person knows that 2003 is absolutely different from 1984. That in this stage of the consolidated world market, the instruments of action of 20 years ago make no sense.

Which "instruments" make no sense?

Exaggerated regulation, nationalizations, an empresario [business-owning] state -- that is out of sync with the new economy.

So what instruments make sense today?

Supporting, intelligently, the free market, using the competitive capacity of the world economy.

Should Peru manage its exchange rate?

I believe in a floating exchange rate. I don't like dirty floats like Peru's; there's a market, but every time the sol looks like it's going up, the government sells dollars. That's bad.

You're still criticized for the massacre of imprisoned Sendero Luminoso terrorists that took place while you were president. How do you respond?

I inherited a country in which there were at least 10,000 armed terrorists. As in any war there were naturally excesses. We have the dramatic, tragic episode of the prisons. What it demonstrated to me is that Sendero Luminoso not only existed as a terrorist group but also that the instruments of action of the state became "Senderized" too. That is to say, the police, the army. If the state had truly acted with a policy of genocide, there would have been hundreds of thousands of dead. If we had not restrained the terrorist movement, we would have had the third Pol Pot­like genocide here.

Your APRA party won 12 of 26 regional posts in last November's election. Now some of these regional chiefs are implementing policies not expected from the APRA -- private concessions to run services, privatizations.

Concessions are a fundamental instrument of development. This is a country without highways, and only by concessions can you build them.

How would you reassure foreign investors?

There's no investment without political stability. The most important and responsible politicians should sign a common agreement saying that the conditions in which investors establish themselves here will not change and that we are going to assure necessary stability.

How would you foster that?

Through this interview.

In the 2001 presidential race, you managed to poll 48 percent of the vote after only three months of campaigning following eight years in exile in France and Colombia. How did you do it?

Many Peruvians had not heard me before. I got a lot of votes from youth. I touched on issues like telephone rates, electricity rates; I called for a total free market in medicines -- topics like that connected me with people. And note, I did not talk of undoing the market reforms of [former president Alberto] Fujimori. As the Bible says, what's done is done.

How might you win in 2006?

I've always said a man is useful or useless, and usefulness can lead to credibility -- this man can guarantee us that there will be investment and social peace over a long time. If investors become convinced of that, they will begin to think that Alan García has changed and Alan García is necessary.

And how would you like to be remembered?

As a man who wanted to serve his country, but especially serve the poorest.


II'S FALL 2003 COUNTRYCREDIT RATING

PERU

COUNTRY CREDIT RATING


38.3

SIX-MONTH CHANGE


2.0

ONE-YEAR CHANGE


Unchanged

P eru ought to be the darling of investors in Latin America based on its 5.2 percent growth last year, rising exports and a robust banking system. But its score inInstitutional Investor's latest semiannual Country Credit survey of sovereign credit analysts (see page 93) was flat on the year; even its 2-point gain since March didn't boost its ranking relative to other countries (72nd in March and September 2003, and 74th a year ago). "The political outlook is of concern," says Patrick Carrigan, senior vice president for international risk management at Union Planters Bank in Miami. Peru's president, Alejandro Toledo, can't seem to translate encouraging economic news into political support. His 11 percent approval rating matches Peru's unemployment rate. Even more positive economic numbers are deceiving, Carrigan explains, because they largely derive from portions of the export sector, such as mining, that don't necessarily deliver middle-class jobs or provide as strong an economic multiplier effect. "The external economy is masking weakness in the internal economy," he says.