Peru and Turkey: consolidation or disruption?

In the past 10 days, Peru and Turkey held national elections that have huge potential to impact the steadiness of each country’s progress toward greater democracy and economic prosperity.  In Peru, a divided population narrowly opted for Ollanta Humala, a left-wing ex-officer who had backed a military coup attempt only six years earlier. In Turkey, citizens decisively, if not overwhelmingly voted to give a third term to the moderately Islamist AK party, led by Prime Minister Recip Tayyip Erdogan.

Peru and Turkey have experienced dramatic economic growth over the last 10 years. Powered by economic liberalization programs in the 1990s, and by a booming commodities sector since, Peru was Latin America’s fastest growing economy since 2000.  Meanwhile, Turkey has been not only the fastest-growing big economy in Europe or the Middle East, but also the most resilient to financial crisis and rising commodity prices. Most of Europe, including Turkey’s fast-growing East European neighbors, fell into recession in 2008, while the Arab World’s economic stagnation exploded into revolution this year. Turkey, however, has continued to enjoy 7-8% annual growth rates.

In such an atmosphere of growth and progress one might have expected relatively boring elections, where voters and candidates broadly called for “more of the same.”

Unfortunately, the Peruvian and Turkish elections were not so boring. Peru’s Humala may turn out to be a clone of Hugo Chavez, while Erdogan may follow Vladimir Putin’s example and rewrite the constitution so that he can remain in power for many more years.

And yet, neither of these events may come to pass. Instead, Humala may follow the example of Brazil’s former president, Lula da Silva, and focus on spreading the benefits of Peru’s economic growth, while preserving the free market reforms that made it possible in the first place. Erdogan may decide a constitutional power grab is not worth the risks it poses to his party’s long-term popularity, and to his own political legacy. 

This uncertainty will make Peru and Turkey much more interesting places in the next few years. It also highlights the fact, that despite much progress in the last 10+ years, emerging markets still have a long way to go before their politics are as “boring” as some of the developed economies in North America, Europe, and Northeast Asia. 

After all, development is an exceedingly hard game. During the late 1960s and ’70s, many developing countries enjoyed years of unbroken high growth. Brazil, Mexico, Indonesia, Thailand, and others had dramatic transformations during this period, shifting from agrarian, almost feudal societies to relatively industrialized ones. However, the progress did not last. In the 1980s, a regional debt crisis led to a “Lost Decade” in Latin America, while the Southeast Asian nations saw declining rates of growth, especially after China emerged as a more productive center of manufacturing exports.

So, I for one will be keeping a close eye on Peru and Turkey over the next few years. I will also be observing a number of other high-performing emerging markets, where economic, political, or social issues threaten to disrupt the recent pattern of  steady growth.

Written by David Gates for Emerging Markets Blog

This entry was posted in Europe, Latin America, Market Analysis, Uncategorized and tagged , , , , , . Bookmark the permalink.

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