But will it work in Peru? HE HAS promised a "great transformation" but to judge by his first few days in office, Ollanta Humala does not see this as involving an open rupture with the free-market policies that have turned Peru into the fastest-growing economy in South America. Mr Humala's cabinet is mainly of the moderate centre-left, including many independents and a liberal economic team. In his inauguration speech he repeated that the changes he wants, aimed at benefiting the 30% or so of Peruvians who live in poverty, will be "gradual". All this has reassured financial markets and those businessmen who feared that Mr Humala, a former army officer who once admired Venezuela's Hugo Chávez, would impose far-left policies. Rather, he is trying to emulate Brazil's moderate social democracy. But will he succeed? He announced a series of new social programmes. They include a new non-contributory basic pension of around $90 a month for the elderly who lack other provision, a state-run child-care programme, and more scholarships for poor students wanting a university education. A conditional cash-transfer scheme for poorer Peruvians will be widened. Since all this will be introduced gradually, officials say, the fiscal cost next year will be only $275m. Many of these social programmes copy Brazil's. So does Mr Humala's announcement, fulfilling a campaign promise, of a big rise in the minimum wage, to $273 a month next year (36% above its level of November 2010). Businesses worry that such a big rise will deter investment. Economists worry that, together with the new pension, it will deter small businesses from joining the formal economy. The best estimates are that between 60% and 75% of Peruvians work in the informal sector (a much higher proportion than in Brazil). That is the main cause of low productivity and wages, and means that the legal minimum wage has less social impact. Some of the money to pay for these schemes will come from a windfall tax on mining profits. The new minister in charge, Carlos Herrera, says this "has to be done correctly", respecting existing tax agreements. Mr Humala no longer says he will ban the export of natural gas but he does want the local market to have priority. Some mining companies seem reassured. Two of them, Newmont of the United States and Peru's Buenaventura, announced that they would move ahead with Conga, a copper and gold mine costing up to $4.8 billion in Cajamarca, in the north. In all, possible mining and hydrocarbons investment totals over $50 billion in the next five years. Whether this goes ahead depends in part on whether the government persuades local people of its benefits. The local government in Cajamarca, headed by an ally of Mr Humala, questions the merit of the Conga project. Mr Humala has backed away from earlier talk of abolishing term limits. But he did himself no favours by swearing his oath of office on an earlier charter, rather than the 1993 constitution. His appointment of former army generals to the defence and interior ministries sends a disappointing signal to those who believe Peru's over-mighty, but incompetent, security forces need reform. But Peruvians may judge him on his record of maintaining economic growth and cutting poverty. In the past five years growth averaged 7.2% and poverty fell from 45% to 31%. Mr Humala will do well to match that.
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