Over the past decade, Peru has been one of the most stable and fastest growing countries in Latin America. Peru is seen as one of the most attractive Latin American countries in which to invest and do business, with an average GDP growth of almost 6 percent since the early 2000s, low inflation, growing rates of employment, and a significant reduction in poverty. Its leaders have actively championed democracy internationally, heading the "Grupo de Lima" initiative in an attempt to solve the crisis in Venezuela.

But Peru’s success story has been threatened by the same Odebrecht scandal that has engulfed Brazil and several other countries. The scandal has tainted President Pedro Pablo Kuczynski, opening a space for his opponents to push, almost successfully, for the president’s impeachment. The relative political stability that has facilitated Peru’s sustained growth is now under serious threat.

Extreme fragmentation

Political power in contemporary Peru is highly fragmented. Decentralization has redistributed resources and authority to regions by means of the "canon"—a percentage of mining receipts paid to the regional governments depending on the region’s export earnings. A large majority of the 25 regional governors are local figures who have no connections to national parties.

As regional governors are elected in single round votes, they are often backed by a small fraction of the region’s electorate and thus lack an effective mandate. Several regions are receiving funds beyond their ability to use them effectively. Twenty-one of 25 regional governors have been indicted or are already in jail for corruption.

Peru’s disintegrated national political parties now serve almost entirely as highly personal vehicles for individual candidates, their ranks larded by "transfugas"—individuals willing to change parties to follow the highest bidder. They help elect presidents, but cannot provide them majorities in congress.

Leftist candidates have on occasion won election as mayors of Lima and other cities, but have never succeeded in retaining and leveraging that support nationally.

Although Fuerza Popular, the loose coalition led by Keiko Fujimori, gained 73 seats in the 130-seat congress, most parties remain small. APRA has only five seats today, and current president Kuczynski’s party had a mere 18 seats to start with and has lost several more recently. The socially conservative platform and authoritarian image of Fujimori’s party, and the widespread concern that if she were elected she would free her father from prison (who has since been pardoned by Kuczynski anyway), have kept her from the presidency, despite the party’s commitment to social welfare. In Peru’s two-round electoral system, the anti-fujimorista vote has twice given the presidency to candidates who had come in second to Keiko in the first round: Ollanta Humala in 2011 and Kuczynski in 2016.

Over these decades, significant national power has never accrued to the left. Some leftist groups even joined together as Izquierda Unida in the 1980s, but were undermined by Alan García’s victory in 1985 and by Sendero’s negative impact on support for even the non-violent left. Leftist candidates have on occasion won election as mayors of Lima and other cities, but have never succeeded in retaining and leveraging that support nationally.

No substantial indigenous-based party has emerged in Peru, despite the large population that still speaks Quechua, Aymara, and other Amerindian languages.

No substantial indigenous-based party has emerged in Peru, despite the large population that still speaks Quechua, Aymara, and other Amerindian languages. The lack of an indigenous party has often been attributed to the fact that rural to urban migration and "cholification" (integration into the mestizo class) have provided an effective alternative to identity politics.

Since Alberto Fujimori, one Peruvian president after another has governed, as he did, from the center-right. Presidents Alejandro Toledo (2001-2006) and Ollanta Humala (2011-2016) ran on moderate leftist platforms but once elected turned quickly to centrist economic and social policies. García, elected to a second term (defeating Humala who campaigned in 2006 on a quasi-chavista platform), was a strong convert to neoliberalism.

All three presidents—Toledo, García, and Humala—are under investigation for significant corruption, but the economic reforms Fujimori initiated and they maintained have contributed to Peru’s continuing economic success, with their implementation firmly in technocratic hands.

Peru has spawned many noteworthy political ideas and movements in the past century, but has done poorly at building enduring political institutions.

Economic power in Peru today is also diffuse. Many on the Peruvian left think that CONFIEP—the industrial/commercial peak organization—still holds great power. Many CONFIEP members in turn still fear the supposed power of unions. But both groups exaggerate. Neither trade unions nor companies alone control Peru’s political agenda; they have become veto groups to be bargained with rather than shapers of national policy.

Foreign investment now comes from a larger number of countries—including China, Chile, Brazil, Colombia, Spain, and Australia as well as the United States and Canada—particularly in mining, banking and telecommunications, traditional and non-traditional agriculture, fishing, construction, and consumption of goods for domestic markets.

Financial power has shifted: two of the four largest banks in Peru are based on Peruvian capital. Extractive industries, largely financed from abroad, are strong, but must contend with labor and indigenous pressures reinforced by international NGOs, mainly from Europe, that focus on human and indigenous rights and environmental issues. Although the mining companies are often adept at negotiation, these conflicts raise important issues, including air and water pollution and water scarcity; several important investments have consequently been delayed.

Peru’s institutional weakness

Peru has spawned many noteworthy political ideas and movements in the past century, but has done poorly at building enduring political institutions.

The Revolutionary Government of the Armed Forces, Latin America’s most important innovative attempt at a military government committed to social and economic reform, apparently inspired Hugo Chávez of Venezuela. But it failed badly in Peru within less than a decade and the experience left the armed forces weakened and discredited.

In the 2016 elections, Peruvians turned to Kuczynski, an experienced technocrat and financial expert, with long-held political aspirations, who gave up his U.S. citizenship to facilitate his long-shot electoral campaign. Kuczynski’s victory was widely attributed to many voters’ rejection of Keiko, which was sufficient to gain the support in the second round of leftist Veronika Mendoza, who had won much of the "anti-Lima" vote of Peru’s south and center in the first round.

Peru’s progress today is hindered not by powerful economic, social, or political interests, domestic or foreign, but rather by the relative absence of state authority and capacity as well as the weakness of political institutions more generally.

Lack of strong enthusiasm for Kuczynski, his economic orthodoxy, and his technocratic solutions to Peru’s problems constrained his mandate. As president, Kuczynski has been largely hamstrung: by Keiko Fujimori’s control of Congress, popular apathy toward his administration, a lack of a real party that can support his leadership, and evidence that companies with which he was involved received illicit funds from Brazil’s Odebrecht construction firm, which nearly led to his impeachment in December 2017.

A path forward

Peru’s progress today is hindered not by powerful economic, social, or political interests, domestic or foreign, but rather by the relative absence of state authority and capacity as well as the weakness of political institutions more generally. The main challenge in Peru is not to limit power but to create and channel it. The collective potential of the oft-changing individuals who are considered powerful in Peru to help transform the nation depends less on individual prowess than on building institutions able to provide more effective representation, assure accountability, curb corruption, and improve the quality of public services, including health and education.

The past few years have shown that Peru has the physical and human resources to achieve impressive economic growth while also addressing poverty and inequality. There is significant entrepreneurial ability in both the business and informal sectors, and there is increased awareness of and responsiveness to social issues. Poverty was reduced from 55.6 percent in 2005 to 20.6 percent in 2017.

Peru has diversified its exports and made peace with its neighbors. Its democratic institutions have functioned resiliently, if unevenly, for several decades. Although international comparative polling data shows very high public rejection in Peru of politics, politicians, and parties, support for democracy has increased somewhat over the past decade.

Peru needs political parties and civil society organizations that are able to make connections, articulate interests, build coalitions, and design, develop support for, and implement reforms.

Alienation from politics is the norm in Peru. No institution or social sector commands broad popular respect. Some worry that the growing success of Fujimori’s party and the close vote in the last election provide evidence that she could run—and win—on a right-wing populist platform, promoting nationalism and traditional values and promising crackdowns on crime and delinquency.

Peru’s main problem today is not a lack of resources, nor that it is being held back by one power center or another. What Peru needs to achieve sustained economic growth, improved social equity, and effective democratic governance are better educated citizens; improved physical infrastructure; and, especially, stronger and more representative political institutions. It needs parties and civil society organizations that are able to make connections, articulate interests, build coalitions, and design, develop support for, and implement reforms. These are Peru’s biggest challenges today.

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Jane S. Jaquette is a professor emerita at Occidental College and served as president of the Latin American Studies Association from 1995-97.

Abraham F. Lowenthal is the founding president emeritus of the Pacific Council. He is also a professor emeritus of international relations at the University of Southern California.

A version of this article was originally published on The Global Americans.

The views and opinions expressed here are those of the authors and do not necessarily reflect the official policy or position of the Pacific Council.