Reform over function: Peru’s political crisis

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Hello and welcome to the intelligence on Economist Radio. I'm your host Jason Palmer. Every weekday we provide a fresh perspective on the events sh world. Despite promises from President Donald Trump to revive America's coal industry, it's withering. Our correspondent visits a protest camp in coal country with a surprisingly wide base. Some supporters in Trump T shirts, others eating pizzas sent by left wing firebrand Bernie Sanders. And India is the world's largest producer and and consumer of sugar. But a mad set of economic policies has resulted in a surplus of the sweet stuff. 7 million tons of it. First up though. After years of a simmering corruption scandal, Peru has abruptly plunged into a full blown political crisis. The president Martin Vizcarra lost patience with the Congress and dissolved the bomb. Congress asserts that move was illegal and the dispute continues. Some protesters took to the streets to support Mr. Vizcarra. Riot police closed down parts of Lima. The President had been trying to pass anti corruption reforms and to change the way judges were appointed. He claims Congress, which is controlled by the opposition, has repeatedly blocked his efforts. All this unrest has rocked one of Latin America's more stable and economically robust countries.

This kind of instability is clearly not healthy for a relatively newly established democracy. So, you know, the question really is, will Peru be able to move on from here to establish stable governance, honest and effective governance? And I think, you know, the answer is still very much in the open.

Brooke Unger is our Americas editor.

Well, what's happened in the past few days is that the president of Peru, Martin Vizcara, has dissolved Congress. And Congress responded basically by suspending the president from his job in appointing the vice president in his place. So it looked for a while that Peru had two presidents, but that vice president has now resigned. So we're back to one president and one Congress that insists it hasn't been dissolved.

How did we get here? What is it that has the president pitted against Congress like this?

I mean, this dates back to the elections of 2016, when Pedro Pablo Kaczynski won the election, but his rival Keiko Fujimori gained control of Congress. And those two were basically at loggerheads from the very, very beginning. Now, Kiczynski was forced to resign last year because of a corruption scandal, an impeachment move against him, and Mr. Viscaro took his place. He was the vice president, but he and Congress have been at war, just as the previous president was.

And what do the Peruvian people make of this, this, this sort of impasse in, in the government and now an attempt to, to dissolve Congress?

Well, the Peruvian people are pretty much on the side of the President. He's a lot more popular than Congress is. He's got an approval rating of something close to 50%. Congress has a disapproval rating of something close to 90%. And that's to a large extent because Congress is seen as obstructing anti measures that the president wants to pass. On the other hand, last time Congress was dissolved was in 1992. And that episode was beginning a very dark period in Peruvian history. And so the current president's dissolution of Congress does raise some very uncomfortable memories. I mean, what happened back then was Alberto Fujimori, who is Keiko Fujimori's father, dissolved Congress and began a period of authoritarian and sometimes quite brutal rule that lasted for about eight years. He's actually now in jail serving a 25 year sentence for human rights crimes and crimes against humanity. So, you know that that didn't end well. And for people to see Congress once again being shuttered is disquieting. But, you know, the two situations are not really parallel. I mean, you know, you're not seeing tanks on the street. Current president hasn't dismissed the Attorney General, hasn't dismissed the Supreme Court. And you know, journalists are not being intimidated and harassed. So you know, I don't think we were seeing the beginning of another Alberto Fujimori type period.

And the people are supportive of the President simply because they view him as an anti corruption campaigner that the country's politics needs.

Well, I mean, I think one of the reasons that Vizcada has had some public support is that he's seen as cleaning up the mess that has been created to large extent by the so called Odebreak scandals which basically have involved this Brazilian construction company bribing politicians across Latin America, including in Peru. I mean, in Peru you've had four of the five most recent presidents in some way linked to this corruption scandal. So you know, Peruvian public life has been dominated to a large extent by this scandal and Vizcada is seen as being something of a new broom.

And what happens now? We've gone from one president to two, back to one, it seems. But how will all of this play out?

Well, it's not completely clear. One possibility is that the Constitutional Tribunal may in some way try and mediate some sort of a settlement between the President and Congress. Another possibility is that early elections will be held for both Congress and possibly for the President himself. So, you know, it may be that we will have a, a fairly complete political renewal. The thing is that nobody really knows what that's going to bring. I mean, there are no real obvious emerging leaders on the horizon. So it's very unclear who's going to take this country forward.

Brooke, thank you very much for coming in.

Thank you Jason.

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All of our life we've been kicked around. We've been put in jail, we've been shot at, we've had dynamite thrown at, and then you don't want us to have nothing. Well, I tell you, Mr. Horne, I'm.

Gonna be standing right there on that.

Picket line looking at you, and just.

As long as it takes.

In Harlan County, Kentucky, both coal and protest spirit run deep. Violent industrial action in the 1970s inspired an Oscar winning documentary.

They're treating us like that we're animals, dogs. But we aren't. We're American citizens.

40 years before that, the Depression era Harlan county war, as it was known as, was a much more drawn out and bloody episode. At its peak, nearly 6,000 miners refused to work as they unionized for the first time. These days, the unions have all but evaporated. There are barely 6,000 miners in the whole state. President Donald Trump garnered support in coal country by promising to resurrect the industry.

We are putting our great coal miners back to work.

But that hasn't happened yet. Many miners still back Mr. Trump perhaps for his brand of politics beyond coal policy. And that protest spirit hasn't dimmed either.

It's an old coal county. It's historically depended upon its deep coal mines.

James Astell writes Lexington, our column about U.S. politics. He's been reporting from this remote part of eastern Kentucky.

A company that was running five of those mines went bustling in July, turned out not to have covered the last wages of its workers. And a whole bunch of them blockaded the coal trucks that it had intended to ship out to sell the last coal that they dug, unpaid as it happened.

What's surprising is that many of the divides that define today's America, political, cultural, industrial, have all surfaced at the protest camp.

Are you sure?

Yeah.

Hello.

You're definitely, well, well provisioned. I met a bunch of miners still on the tracks over two months after this blockade, this protest started. One of them, just for example, was a guy called Daryl Raleigh. He'd been on the tracks since the start.

It's two weeks of a bounce check and then they owe me another eight.

Days that I've not seen at all. He's 64 years old. He's been underground for over four decades. He gave me a good sense of the history of the protests, what had caused it.

After you look up, you can pull up in there and then you can see the mines.

We drove out along the rail tracks to see the coal that the miners were blockading. Just here, right there.

You can't, you know, I can say.

We can't go up there.

These deep, deep Appalachian mines in this mountainous, forested countryside. And the entrance to the mine, then is.

It's right there where that belt mine's at.

Oh, it's just there, yeah. Okay. What was very interesting about Daryl was not only that he was a very good guide to this protest, but also he had himself participated in some of the protests back in the 70s, violent protests that Harlan county was synonymous for, when striking miners tried to set up blockades and there was violence with company thugs, as he put it. But he also could reach back even further to that, to the 1930s, to the much more violent industrial action in this area that his father had been involved in. Back in the 1930s, Appalachian miners in Harlan county tried to get organized, unionized, that is, for the first time. And there were serious gun battles where many people killed. What did he tell you about it?

Just some of the things that went.

On about people getting shot and people.

Was refusing to go to work, and they'd go drag them out of their.

Houses and make them go to work. Who was doing the tracking the. The company gun thugs?

So, I mean, how big is this protest and who's taking part in it? Is it just the miners?

It's ebbed and flowed, and it's definitely diminished now. So no doubt, one of the most remarkable, surprising things about this protest was the way that it brought together people from across the political spectrum. Politicians from the left were sort of, in an almost nostalgic way, encouraged to have an opportunity to speak to striking workers in a part of the country that's gone heavily for the Republican party and especially for Donald Trump. So Bernie Sanders sent some pizzas to the miners, for example, and there were other left wingers who were just turning up rather randomly to help them with their protests, this sort of band of anarchists who helped set up the camp for them. And yet, at the same time, it was clear that the miners are not their fathers and grandfathers holding the picket line, secure in their union membership and clearly of the left in their politics. Almost none of them have criticized President Trump who said he'd bring back coal, and yet most of the mines in their county have just closed. You know, there was one sort of telling incident where a transgender activist leader who helped set up the camp as they knew how to do, but this person who wanted to be known as they, not he or she had an argument with a trucker who was wearing a Trump T shirt. The miners refused to back the anarchist, and the anarchists all sort of up sticks and left in a huff. And it seemed to me that that was just a little bit indicative of where politics is in this part of the country. Of course, people are basically decent. Anybody who supports their cause will be welcomed. And hence this extraordinary gathering of people from the left and the right in politics. But at the end of the day, the trucker wearing the Trump T shirt was going to have the backing of the miners, not the left wing anarchists. And it was the anarchists in the end that had to go.

And so what did the miners themselves make of that kind of dynamic, this sort of motley crew of people who were showing up and then those kinds things happening.

So I think the miners were bemused by the range of supports, including high level political support that they had. I asked Stacey Rowe, who was one of the main organizers of the camp Miner's Wife, what she felt about all these politicians coming forward.

You know, we're nice to them, we don't save.

Us.

Yeah, that was for us. We don't say one way or the other what we are politically. We appreciate anybody supporting us, no matter who it is. We just don't say whether we support them or not. Nope, I don't vote. In all honesty, I don't like none of them.

I might like something that Trump says that don't mean I like everything he says.

James, this is an industry that Mr. Trump's administration has promised to revive, but is still kind of slowly petering out, and yet that doesn't seem to have had an effect on people's attitudes to him.

I think that's exactly right, Jason. And what that shows, I think, is that the nature of Trump's appeal to these workers, these miners, was not really about his economic promises. These miners have seen mine closures for decades. They know that the coal industry is dying in America, especially in Appalachia, and it's not coming back, not by some presidential fiat. They like Trump because they think he represents them in some broader cultural way. He speaks their language, he stands for people like them, and so they'll forgive him if he doesn't deliver on his outlandish, in fact, unachievable economic promises. And they won't go to his opponents, who they don't think speaks for them, is like them, represents people like them. So I guess one of my takeaways from this trip was that cultural identity in politics in America these days is so much more important than class or economic identity.

James, thank you very much for joining us.

Thank you.

As part of Open the Economist's global conversation on the roles of markets, technology and freedom, we've run A youth essay contest. Big congratulations to Larissa Parker for her winning submission on creating a new legal framework to address climate change. But there was also one particularly interesting entry.

Unless massive and rapid improvements in the technology to harness the immense productivity of the Earth's resources can be made, the Earth's future is in serious danger.

As part of the contest, our senior editor, Kenneth Cukier, did a little experiment. He fed the essay question into a text generator powered by artificial intelligence on a global scale.

The impacts of global warming will become worse and greater, creating new conditions and opportunities for environmental destruction with more extreme weather events, more severe droughts, and more frequent and severe weather events.

So how does this text compare with the other entries?

Well, it's actually pretty good. I would put it a little bit at the low end of the mean. Keep in mind it's an essay contest for 16 to 25 year olds. Most of them were of high quality. They were typically more coherent in terms of an argument. But the language of the essay written by the AI was extremely high.

And so how far are we from a world where we can't distinguish the AI's text from a youth generated essay?

I think we're already there. And that's what this essay shows. This is what you would expect from maybe a 16 year old or a 20 year old who was distracted and doing other things and didn't have a very logical argument, but has a lot of very serious words put together. It's going to improve. But what was remarkable was that it was coherent and that most people wouldn't have suspected that it was actually generated by a computer. Now, the good and bad of AI is something that the Babbage podcast, which I host, is going to be exploring next week on a special show dedicated to artificial intelligence.

Kenneth, thanks very much.

Thanks a lot, Jason.

And this weekend, the Open Future Festival will take place in Hong Kong, Manchester and Chicago. The last tickets have been released, and if you can't make it, follow the livestream@exterator.com OpenFutureLive. And of course, check out Babbage with Kenneth next week, wherever you listen to podcasts. From oceans of syrupy chai to sticky coils of jalebi, Indians, it would seem, adore sugar. But in the year ahead, they literally can't consume enough of the sweet stuff.

India's sugar producers have been enjoying a bull run for the last couple of years. They've been producing more and more than they ever have before. And meanwhile, India's sugar eaters have barely increased their appetites. So as the producers get ahead of the sugar eaters. India starts to look at a situation where it has an overhang.

Alex Trevelly is our India correspondent.

This may be, as far as anyone knows, the biggest stockpile of sugar ever amassed by a single country in the history of the world. 14 and a half megaton pile of sugar, a lot of it in temporary warehouse space where the sugar is sitting and waiting for a buyer.

Why has supply been allowed to outrun demand by so much?

The problem starts with the price set by the government in the form of a price floor for the raw sugar cane that small marginal farmers sell to the sugar mills. That price is not allowed to fall below a certain level, which is actually quite a generously high level. That margin is almost 100%, which is to say the farmer is guaranteed a profit nearly equal to his costs for whatever sugar cane he plants. You can imagine how many farmers take advantage of that.

Why though? Why does it have this slightly mad sounding set of policies?

There are a few things at play. One is sugar being a staple in cooking for households. Everywhere in the world, governments want to keep sugar cheap. There are so many farmers involved in the production of India's sugar cane. You've got something like 7.5% of the country's rural population counting on it each year that you don't want to disappoint them. These are voters and if anything goes terribly wrong for them, you've got financial and social crisis on your hand. Much easier to raise prices that these people earn for their product than to lower it or let it float. There is an incredibly tight nexus between the politicians of these states that grow the most sugar, happen to be the two most politically important states in the country, and the so called sugar barons, the businessmen who end up running the mills, very often a mill, own one year as a politician the next year and vice versa.

So it seems like there aren't a lot of reasons for India to change the system it's built for all of these different motivations, but what's it gonna do with all this sugar?

There are plenty of reasons to keep India an expensive place to produce sugar. But then you end up with these problems. The most physical manifestation is this 14.5 megaton sugar bomb and the stuff goes bad after a year. You've got the maximum 24 months in the warehouses which cost something to construct before starts to degrade and becomes less marketable or even unmarketable. So it's urgent now that India finds a way to get rid of it. But since it was produced at great Cost, the natural way to sell it to neighbors becomes difficult or prohibitive because there's cheaper sugar pouring out of Brazil and other parts of the world. Why does anyone want India's overpriced sugar? Now, if you know the logic of India's bureaucrats, you might guess what comes next. Why not pay people to buy our sugar in the form of export subsidies? What's happening now is that, in effect, bonuses are being given to the sugar mill owners who sit on these mountainous millions of tons of sugar to sell overseas. And for every quintal they sell, they're given a certain number of thousands of rupees. I think it boils down to about 15 US cents per kg. That adds up to about a billion dollars. And it may not be enough. The Indian government is doing other things to try to persuade foreign buyers through bilateral agreements to sop up its sugar, which costs too much because, of course, so much should never have been produced in the first place. That's the best way anyone's figured out to deal with it. And it's not even good enough in the sense that. But that stockpile now at 14 and a half million tons, is expected to grow by at least a couple million tons over the next year.

What about things that you might be able to make from it and get some value added?

Let's say Indian farmers keep on producing so much sugarcane. There are better things to do with sugarcane than make sugar that's not wanted. In particular, in today's world, ethanol is a very appealing destination for it. You can divert sugarcane juice at the mills from the production of crystalline sugar to ethanol distilleries. This is what they do in Brazil. It gives the producer a degree of flexibility. They can play the ethanol market as well as the sugar market. You have too much sugar, you don't need to make more of it. That's the way that India would have to go if it were really to become competitive on the world stage without subsidizing both demand and supply.

Alex, thanks a bunch.

Thank you very much, Jason.

That's all for this episode of the Intelligence. If you like us, give us a rating on Apple Podcasts and you can subscribe to the economist@exterator.com radio. Offer 12 issues for $12 or 12 pounds. See you back here tomorrow.