Peruvians Say “No,”

By Matt Badiali
June 05, 2006

Peru’s future lay in the balance last week, and the people had two poor choices.

The first choice, Alan Garcia, was a rehabilitated former president who left office in shame 16 years ago. His former presidency was characterized by rampant inflation, terrorism, corruption, and food shortages.
The second choice, Ollanta Humala, was a Hugo Chavez disciple.

Humala railed against multinational companies working in Peru. He was determined to nationalize mineral resources. He vowed to join Venezuela, Bolivia, and Cuba in a bulwark against America.

In the end, an endorsement by Chavez may have cost Humala the presidency!

The result of the Peruvian election sends a sigh of relief through the mining business world. After the Bolivian election and the subsequent nationalization of its natural gas fields, South America seemed poised to become one giant socialist experiment.

However, the election of Alan Garcia sends a clear message to Venezuela. Not all the people agree with Chavez, and Peruvians were willing to elect a former crook to prove it.

Humala’s presidency would have impacted stocks held by many U.S. investors. He was ready to nationalize Peruvian minerals. Under Mr. Garcia, those properties are much more likely to remain with foreign companies.

A short list of companies with Peruvian properties includes Newmont, BHP Billiton, Phelps Dodge, Xstrata, and Silver Standard.

If you own stock in these companies or if you own resource funds, you avoided a loss. Next time you are in Peru, thank a Peruvian for saying “no” to Humala!