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Peru’s political crisis: what happens next?



The unexpected impeachment of Peru’s president, Martín Vizcarra, is the latest twist in a ferocious battle between the executive and legislature that has plagued the country’s politics since the last elections in 2016.

Mr Vizcarra, who was impeached by Congress on Monday over corruption allegations, left office immediately. He was replaced on Tuesday by the head of Congress, Manuel Merino, who is expected to lead the country through to next April’s presidential elections.

Why did Mr Vizcarra lose?

On the morning of the vote, it seemed Mr Vizcarra would win. He had easily defeated a similar impeachment attempt two months earlier.

But unlike in some previous votes, Peru’s political parties gave their members free rein to vote as they wished, with only one of the nine parties in the fractured house voting as a bloc.

Before the vote, Mr Vizcarra gave a combative speech, pointing out that more than 60 members of congress were under investigation by prosecutors. Some parliamentarians reacted badly to that speech, describing it as “arrogant” and “distant”.

Citibank analysts also said “a set of last-minute audio leaks seems to have tilted the balance”. The corruption case against Mr Vizcarra has largely been based on leaked WhatsApp messages, which appeared to suggest his closeness to construction companies that allegedly paid bribes to win contracts in a region of southern Peru while he served as the region’s governor.

Mr Merino, who led the failed impeachment attempt in September, seems to have been more successful this time in winning over other parties. This, according to Eileen Gavin, principal Latin American analyst at Verisk Maplecroft, is “indicative of a slew of backroom deals in the past month”.

What was the public reaction to the vote?

A protester in Lima on Monday holds a sign that reads in Spanish ‘Only Vizcarra represents me’
A protester in Lima on Monday holds a sign that reads in Spanish ‘Only Vizcarra represents me’ © AFP via Getty Images

People were angry. Mr Vizcarra has garnered a lot of public support for his anti-corruption campaign. Congress, in contrast, is a hated institution, widely regarded as corrupt and self-serving. One recent Ipsos poll found 78 per cent of Peruvians opposed impeachment, with many saying Congress should be dealing with the coronavirus pandemic and the economy — not trying to remove the president.

Following Mr Vizcarra’s defeat, his supporters took to the streets in protest, and there were isolated clashes with the police. Later though, Mr Vizcarra appeared in public and accepted his defeat. That calmed waters, although many Peruvians regard what happened as “a coup” and might be prepared to take to the streets again, depending on what Mr Merino does next.

What happens next?

Now that Mr Merino has been sworn in, he will choose a new cabinet. He insists he will stick to next year’s presidential timetable, which envisages a first round vote in April, a second round (if needed) in June, with a new president taking office in July. Any deviation from that pledge will trigger howls of protests, not only from Peruvians but also the EU and the Organisation of American States.

Mr Merino might try to reverse Mr Vizcarra’s political reform that bans members of Congress from seeking re-election. Again, any such attempt will face stiff resistance.

With only a few months in which to operate, Mr Merino might try to implement populist economic policies, such as reducing VAT or allowing Peruvians to dip into their pensions to alleviate the hardship caused by the pandemic.

Generally, though, he was “very likely to favour a key role for the private sector in the economy and minimum state intervention, particularly in the mining sector”, said Diego Moya-Ocampos, analyst at IHS Markit.

Who is the new president?

Peru’s new president Manuel Merino  tried to persuade the armed forces to back a previous attempt to oust Mr Vizcarra
Peru’s new president Manuel Merino tried to persuade the armed forces to back a previous attempt to oust Mr Vizcarra © AFP via Getty Images

A 59-year-old agronomist from the northern city of Tumbes, Mr Merino is an unremarkable career politician, having served as a member of Congress for three periods in 20 years. He is a member of Acción Popular (Popular Action), a party with a vague centre-right ideology.

He won notoriety in September when he tried to persuade the armed forces to back a previous attempt to oust Mr Vizcarra.

“Inexperienced and untested, [he] will now have to pick up the pandemic response and economic recovery,” Ms Gavin said. “He will not be up to the challenge”.

What will this mean for next year’s elections?

Peru’s electoral field was already wide open before Monday’s vote, and the outcome of next year’s election is now even more uncertain. Mr Merino might use his time in office to bid for the presidency, rather as Jeanine Añez did (unsuccessfully) in neighbouring Bolivia.

Mr Vizcarra’s supporters might reward the centrist Purple party for its loyalty: it was the only party that supported him in the impeachment vote and the party’s leader, Julio Guzmán, is likely to run for the presidency.

Polls suggest the frontrunner is George Forsyth, a young former footballer and mayor who described what happened on Monday as “a coup in disguise”. But most polls suggest no one has a clear lead. One poll presented people with a long list of candidates and asked who they would vote for. About 31 per cent replied “none”.

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Regulators close ranks on crypto




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Regulators are continuing to step up their scrutiny of cryptocurrencies, with central banks and South Korea’s tax authorities demonstrating fresh concerns.

In a report published on Wednesday, the Bank for International Settlements, the global body for central banks, argues that digital tokens such as bitcoin have few redeeming features and “work against the public good”. It also dismissed stablecoins — a link between crypto and conventional assets — as an “appendage” to traditional money.

Perhaps unsurprisingly, the BIS did endorse the development of digital currencies backed by central banks, saying they could be a tool to achieve greater financial inclusion and lower the high costs of payments. “Central bank digital currencies . . . offer in digital form the unique advantages of central bank money: settlement finality, liquidity and integrity,” it said.

In contrast, bitcoin wasted energy and cryptocurrencies were “speculative assets rather than money, and in many cases are used to facilitate money laundering, ransomware attacks and other financial crimes”.

South Korea has acted against the financial crime of tax evasion, with more than Won53bn ($47m) of bitcoin, ethereum and other cryptoassets confiscated from 12,000 people. Officials said it was the largest “cryptocurrency seizure for back taxes in Korean history” and noted that local exchanges had allegedly been used to conceal assets because they did not collect the resident registration numbers of account holders. Many of South Korea’s 60 crypto exchanges are battling to meet regulatory conditions to operate beyond September.

This week’s #techAsia newsletter asks whether the death knell is being sounded for cryptocurrencies. That could be the case in China, where it is scaling up tests of its official digital renminbi, and appears serious about stamping out the crypto industry on its soil. Bitcoin fell below $30,000 on Tuesday following the latest regulatory crackdown, but it has recovered to be worth more than $34,000 today.

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China bolsters ties with Myanmar junta despite international condemnation




Trade and diplomatic ties between Myanmar and China are normalising in the face of intense domestic opposition and international condemnation of the military junta that seized power in February.

Beijing has strengthened relations with Myanmar’s military leaders despite a series of violent attacks against Chinese business interests in the country after Aung San Suu Kyi’s government was toppled.

Yun Sun, an expert on Myanmar-China relations with the Stimson Center, a US think-tank, said Beijing had already made a “fundamental assessment” that Myanmar was moving into another prolonged period of military rule.

“I think the Chinese can see that this military coup is successful and is here to stay,” she added.

The resumption of state-level engagements and economic activity signals that Myanmar is reverting to its traditional economic reliance on China. The country has used its larger neighbour as a buffer against international sanctions and divestment by foreign investors, who have announced plans to quit the country or shelved projects.

Since the coup, 875 people have been killed by the junta and 6,242 arrested, according to the Assistance Association of Political Prisoners (Burma), a human rights group. The country’s economy and public services were severely disrupted by mass protests in the three months that followed the putsch, and have only partially recovered.

The resumption of bilateral trade will fuel the widespread suspicion among anti-coup resistance groups that China was prepared to support the new military regime.

The cumulative value of China’s imports from Myanmar for the first five months of the year was $3.38bn, up from $2.43bn in 2020 and $2.56bn in 2019, before the coronavirus pandemic, according to official Chinese customs data.

Exports to Myanmar for the same period have not recovered to the same extent, however. By the end of May, goods valued at $4.28bn had been shipped to Myanmar, compared with $4.56bn and $4.79bn in the two previous years.

In a further sign of strengthening diplomatic relations, Chen Hai, China’s ambassador to Myanmar, met coup leader and military commander-in-chief Min Aung Hlaing in Naypyidaw, the capital, in June. In a subsequent statement, Chen referred to Min Aung Hlaing as the leader of Myanmar.

China was among the countries that abstained in a UN general assembly vote last week calling on the international community to halt the flow of arms to Myanmar and release Aung San Suu Kyi and other political detainees. 

Beijing had good relations with the government of the deposed leader, who is in detention facing multiple criminal charges. However, it has refrained from criticising the military, fanning anger among the mass protest movement that sprang up after the coup. 

Beyond being Myanmar’s biggest trading partner, China also has strategic infrastructure investments in the country, including energy pipelines that give Beijing a critical link to the Indian Ocean.

James Char, a Myanmar expert at the S Rajaratnam School of International Studies in Singapore, said many people in Myanmar still blamed the Chinese government and business interests for complicity in supporting the military’s decades of rule before the transition to democracy.

“The Chinese, themselves, are very clear about [public sentiment in Myanmar],” Char said.

Attacks on China-linked businesses in the wake of the coup culminated in an explosion at a Chinese-backed textile factory west of Yangon on June 11, according to reports from local Myanmar media, as well as junta-controlled information services and Chinese state media.

Beijing’s wariness of inflaming Myanmar protesters would probably slow Chinese direct investments and the resumption of planned larger-scale developments that formed part of President Xi Jinping’s Belt and Road Initiative, analysts said.

Additional reporting by Sherry Fei Ju in Beijing

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Australia calls Great Barrier Reef warning politically motivated




Australia has labelled a draft decision by the UN’s World Heritage Committee to include the Great Barrier Reef on its “in danger” list as politically motivated.

The committee, which is chaired by Tian Xuejun, China’s vice-minister for education, and selects Unesco World Heritage sites, proposed adding the world’s largest collection of coral reefs to the danger list because of the damaging impact of climate change and coastal development.

The designation could ultimately lead to the reef losing its World Heritage status, although officials said listing was intended to prompt emergency action to safeguard a living structure that stretches 2,300km along Australia’s eastern coast.

But Sussan Ley, Australia’s environment minister, said the government had been “blindsided” by the committee’s finding and alleged there was a lack of consultation and transparency. She added that Canberra would challenge the draft decision.

“When procedures are not followed, when the process is turned on its head five minutes before the draft decision is due to be published, when the assurances my officials received and indeed I did have been upended, what else can you conclude but that it is politics?” she said.

That the World Heritage Committee is chaired by a senior Chinese official has stoked suspicions in Canberra that it had been singled out over its diplomatic and trade clash with Beijing.

China-Australia relations have soured following Canberra’s call last year for an inquiry into the origins of Covid-19 and Beijing’s imposition of tariffs on Australian wine and barley imports.

Ley said she and Marise Payne, Australia’s foreign minister, had already spoken with Audrey Azoulay, Unesco director-general, to complain about the draft decision.

But scientists downplayed the suggestion that the “in danger” listing was politically motivated. Three mass bleaching events in five years demonstrated the need for the government to do more to tackle climate change, they said.

“I’m seeing some press coverage saying this is all a plot by China not to buy wine, lobsters and to screw the Barrier Reef. I think that’s pretty far-fetched given that the draft decision released overnight will be voted on by 21 countries,” said Terry Hughes, professor of marine biology at James Cook University.

The controversy will heap further international pressure on Canberra, which has been pressed by the US, UK and others to commit to a national target of net-zero emissions by 2050.

In a draft decision due to be voted on next month, the committee urged Canberra to “provide clear commitments to address threats from climate change, in conformity with the goals of the 2015 Paris Agreement, and allow to meet water quality targets faster”.

It noted the loss of almost one-third of shallow-water coral cover following a “bleaching” event in 2016 — a process linked to warmer than normal water that can lead to a mass die-off of coral.

The row over the “in danger” listing occurred at a difficult time for Australia’s conservative coalition, which is embroiled in internal squabbling over climate policies.

On Monday, Barnaby Joyce, a climate sceptic and supporter of coal mining, ousted Michael McCormack to become leader of the National party, the junior coalition partner to the Liberal party, and Australia’s deputy prime minister. Joyce is expected to oppose any move to commit to net zero by 2050.

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