High expectations During his campaign, Toledo promised Peruvians higher wages, a fight against poverty, anti-corruption measures, higher pensions, more employment, military reform, development of tourism, and industrialization. As
Pedro Pablo Kuczynski noted "Toledo comes after almost 30 years of either dictatorships or governments that weren't so democratic. People expect Toledo to solve all the problems of the last 30 years, which included an enormous increase in relative poverty." Toledo's inability to fulfill many of these promises created widespread dissatisfaction. His approval ratings were consistently low throughout his presidency, sometimes sinking into single digits. Toledo also promised open market free trade reforms, which reflected Peru's business interests while also promising to review
Fujimori's privatization programs. Specifically, Toledo promised not to privatize any of Peru's public utilities. This promise, combined with lofty promises of reduced unemployment and poverty, caused Peru's rank and file to set the bar very high for his administration. Shortly after coming to office Toledo met with IMF officials and promised that he would raise $700 million in 2002, and almost $1 billion in 2003, by selling state assets. To compound his problems, President Toledo faced a
devastating earthquake in his first year in office. This natural disaster left much of Peru morally and fiscally devastated. With many homes and businesses destroyed, economic ills were exacerbated.
Indigenous issues Touting his heritage throughout his campaign, Toledo continued the efforts begun by Paniagua, who had brought together experts and indigenous leaders to discuss the needs of indigenous people throughout the country. Toledo's inauguration ceremony on
Machu Picchu was attended by all the presidents of the neighboring Andean states who joined him in signing the "Declaration of Machu Picchu," promising to protect indigenous rights. Maria Elena García calls the years of Toledo's presidency a transition ripe with new opportunities for indigenous people, noting the "reframed state-indigenous interactions", "increase in NGO projects and social movements", and "proliferation of indigenous organizations." However,
Oxfam's Martin Scurrah points out the agency's good work, noting that in addition to promoting a chapter on indigenous rights in the new constitution, Eliane Karp has "intervened on numerous occasions in support of or in defense of indigenous initiatives." Toledo's efforts at decentralization sought to give indigenous groups greater influence upon policy-making on a regional level. The first regional and local elections, held in November 2002, required that 15% of the candidates in regions with an indigenous presence must have indigenous backgrounds. However, decentralization has been viewed critically by some, who claim that in dividing up regions, administrators have at times ignored the distinctive cultural and historical factors that define different areas. In a speech to the Human Rights of Indigenous Peoples in Latin America conference, Toledo expressed disappointment at the growing disparity between the incomes of indigenous people and other citizens. Despite the growth achieved by the Peruvian economy, the poverty gap has widened between the upper and lower classes. Toledo mentions the reintegration of the indigenous populations into the Peruvian social and political system as a key to sustainability and economic growth. Advocates of indigenous rights have also criticized some of Toledo's efforts to jump-start the economy through investments, such as his support for the
Camisea natural gas project and other projects that involved exploring or developing natural resources. These critics claim that companies buy land at unreasonable prices, force indigenous people off of land that is historically theirs, and exploit natural resources in ways that are harmful to communities and the environment. Peru is one of the largest producers of gold, silver, and zinc in Latin America, and some critics complain about the priority the Peruvian government gives to mining as opposed to industries like fishing and agriculture, with which indigenous peoples are more familiar. They note that mining companies may bring new jobs to rural areas, but that they are not jobs for which natives are well qualified. Even as the Peruvian government was taking in too little money to pay civil servants, the country saw its cost of living increase dramatically during the early years of Toledo's administration. These hardships, combined with increasing unemployment and stagnant wages caused the general public to doubt that Toledo was living up to lofty campaign promises. By 2003, Toledo's approval rating had fallen below 10%, the lowest of any South American president at the time.
Social initiatives Toledo did implement some of his plans for investment in social infrastructure and institutions. The amount of paved roads increased by 20% during his presidency; medical attention to the poor doubled in rural areas, and public sector salaries increased (school teachers' pay rose by 87%) and over 100,000 new homes were built for poor Peruvians. By 2004, Peru had a far-reaching
social safety net that included food programs serving 35 percent of the population, and work programs offering temporary employment to unskilled workers. The Cooperative Fund for Social Development funded projects to construct and improve schools, health clinics, rural roads, water and sanitation systems, and electric grids. Toledo placed food and infrastructure programs under the Ministry for Women and Social Development and urged that municipalities implement decentralization. Social safety-net spending in Peru remained well below the Latin American average under Toledo even as it covered a larger percentage of the population, which means that outlays were insufficient to lift many people up out of poverty. Toledo also attempted to improve access to healthcare in the most remote places. His Juntos program awarded a monthly benefit to poor families who agreed to get vaccinations and screenings, attend school, and obtain birth registration documents. The Toledo administration also provided financial incentives to young doctors who were willing to spend the first few years of their practices in remote areas. However, when Peru Possible's rival political party APRA made significant gains in regional elections, the Toledo administration halted its decentralization program by withholding power in the areas of revenue and expenditure. This left many regionally elected governors confused as to how far their authority extended. Without strong fiscal plans to support his new policy of centralization, Toledo had to continue decentralizing power and recognizing more regions. Toledo continued to assert control of regional governments, however, by withholding funding. In January of that year, the
Constitutional Court repealed several anti-terrorism measures enacted during Fujimori's administration. It was estimated that 54% of these victims were killed by the extremist guerrilla group Shining Path, 30% by the Peruvian Military and police forces, and the rest were by rural or peasant self-defense militias. These investigations were financed by a portion of the US$360 million discovered in foreign accounts which had been stolen by Fujimori officials. In late 2001, the Directorate against Terrorism reported that the
Shining Path, a terrorist movement which has been active since the eighties, was organizing along new fronts and infiltrating protests, blocking highways, and organizing student marches. The government reacted by reestablishing five counterinsurgency bases, which soon assisted in destroying six Shining Path camps. But terrorist activity continued and in 2003, Toledo declared the first of several states of emergency due to the terrorist threat. Toledo walked a thin line in responding to both U.S. pressure to severely limit coca-production and protests by coca farmers against the eradication of coca production in poor, rural areas, where the majority of the population is involved in that business. The presumed link between the Shining Path and narcotics trafficking was unclear, because the coca farmers gave most of their crops to drug traffickers who then paid the Shining Path to operate within certain regions. Recognizing the drug trade as a threat to regional security, Toledo sought to create a common Andean approach to the drug war. He saw that revenue from drug trafficking funded terrorist activities, but also that U.S. insistence on the eradication of coca crops failed to address the problem. Alternative crop programs were also being resisted by coca farmers who depended on the coca trade for their livelihood. At a meeting of the 19-member Rio group in May 2003, Toledo proposed developing a joint strategy to deal with drug trafficking, but pressure from Washington, which preferred bilateral efforts, helped kill the notion.
Asia The Toledo administration held free trade agreement talks with Singapore and Thailand, came to an agreement with Thailand on air transport, and signed an extradition treaty with South Korea. Foreign Minister García-Sayan visited China and discussed support for multilateralism and strengthening the UN. In 2004 China declared Peru an official tourist destination, and in 2005 the countries concluded several trade agreements. and Venezuelan interference in Peruvian politics. (157) This included Chávez's official endorsement, and unofficial financial backing of leftist candidate Ollanta Humala in Peru's 2006 presidential race, which was soon seconded by President Morales. Peru looks to the agreement are to: • Consolidate and extend the trade preferences under ATPDEA • Attract foreign investment • Generate employment • Enhance the country's competitiveness within the region • Increase workers' income • Curb poverty levels • Create and export sugar cane
ethanol The United States looks to the agreement to: • Improve access to goods and services • Strengthen its investments • Promote security and democracy • Fight against drug trafficking The U.S.-Peru agreement has faced criticism. In Peru, the treaty was championed by Toledo, and supported to different extents by former President
Alan García and candidates
Lourdes Flores and
Valentín Paniagua. Current President
Ollanta Humala has been its most vocal critic. Humala's
Union for Peru won 45 of 120 seats in Congress in 2006, the largest share by a single party, prompting debate on ratification of the agreement before the new legislature was sworn in. Some Congressmen-elect interrupted the debate after forcibly entering Congress in an attempt to stop the agreement ratification. One controversial element of the agreement relates to land resources. Laura Carlsen, of the Center for International Policy, who is also a contributor to Foreign Policy in Focus notes that "Indigenous organizations warn that this ruling effectively opens up 45 million hectares to foreign investment and timber, oil, and mining exploitation." However, most of the criticism of the agreement has focused on its potential impact on Peru's agricultural sector. By planting crops to similar to those subsidized by the U.S., Peru faced a competitive disadvantage in the production of agricultural products because poor farming families with inadequate tools, technology and techniques may not be able to produce crops at low enough prices to export. In response to these concerns, Peruvian lawmakers created a Compensation Fund which directed $34 million per year to cotton, maize/corn, and wheat producers for a five-year period to help them adjust to the new competitive pressures.
Economic policy , 21 January 2003. Toledo's economic policies can be described as neoliberal or strongly pro free-trade. He inherited a national economy which in the previous decade had experienced an unstable GDP with periods of growth and shrinkage, as well as fiscal deficits frequently amounting to over 2% of GDP. Inflation had not dropped below 23% until 1995 and was still feared by many. In response, Toledo developed policies which focused on fighting poverty, generating employment, decentralizing government, and modernizing the state. Among Toledo's initiatives designed to generate revenue and transform the economy were plans to privatize national industries. The first major effort of this kind was the $167 million sale of two state-owned electric companies. Protests in the city of Arequipa turned violent as Peruvians reacted with anger to the prospect of layoffs and higher priced electricity. They also recalled that billions of dollars earned from privatization under the Fujimori administration had ended up filling the president's personal bank accounts. Toledo decided not to carry out the sale of electric companies, but promised to continue privatization efforts, which were a key provision of a deal struck with the
International Monetary Fund. Toledo had promised to bring in US$700 million through privatization in 2001 and US$1 billion in 2002. Although he failed to meet these goals, the IMF approved a $154 million disbursement to Peru in December 2002 and allowed the country to raise the fiscal deficit target in its agreement. Although Toledo originally promised tax cuts, violent protests by civil servants prompted the increase in social sector spending that Toledo had also promised, which necessitated tax increases. To tackle tax reform in June 2003, he brought in Peru's first female prime minister, Beatriz Merino who quickly submitted proposals to the congress. Among the suggestions were pay cuts for higher-paid public-sector officials, including a 30% salary reduction for Toledo himself, a 5% across-the-board cut for all agencies and ministries, tax increases on beer, cigarettes and fuel, and an extension of the 18% sales and value-added tax to, among other things, long-distance bus journeys and live entertainment. The final package also included the elimination of tax breaks, the introduction of a minimum corporate tax, the closing of tax loopholes for the rich, and the strengthening of local government realestate tax regimes. In an attempt to increase remittances from Peruvians abroad, the Ministry of Foreign Affairs under Toledo sought to strengthen the link between Peruvian migrants and their homeland through the creation of advisory councils. The issue is especially important for a country which experienced a massive emigration of professionals under Fujimori and which still has 10% of its population living abroad. The councils were also part of an effort by the first Minister of Foreign Affairs, García Sayan, to professionalize the foreign service. ==Post-presidency (2006–present)==