Peru, Humala, Elections etc (from IKN109 last Sunday)

I've been asked in several mails this week for a longer comment on the Humala victory last Sunday, what it means to the market and Peru exposed stocks, etc etc and as I'm a bit too lazy to answer them with something new, what follows is the intro piece that appeared in The IKN Weekly issue 109 published last Sunday evening (very slightly redacted to remove a piece of unimportant personal information).

At that time Humala was clearly leading in the polls and a virtual certainty for the Presidency (which is now confirmed). Also, we were still waiting for Monday's open that saw the Lima exchange main index dive by 12.5% and we didn't know about Tuesday's and Wednesday's action that added back 7% and 3.5% respectively...so we got our call on this week in Peru about right (perhaps off by 24 hours). But there's lots more to chew over, so read at thine leisure, kind lector.

Peru is a buy, but not tomorrow morning (published Sunday June 5th, 2011)

This one gets put here instead of in the ‘Regional Politics section just to make sure it gets read. So let’s start with a nice clear statement about Peru exposed stocks: Tomorrow they sell off.

But with the short-term reactions out the way, Peru exposure is still a good option for mining exposure even with its now almost certain new President Ollanta Humala. Yes, there will be hand-wringing and wailing over this near certain Ollanta victory but once it becomes clear that the mining industry and its investment isn’t about to come grinding to a halt in Peru, the sector will adapt to the new rules, likely higher (though not prohibitive) State burdens and get on with the job of mining in Peru. What follows now discusses the Ollanta Humala side of things because he’s now the near-certain President elect and we’ll assume that from now on even though results are not official. If by some freak of stats Keiko is eventually called the winner we’ll cross that bridge another day.

Humala isn’t “anti-mining” per se. In fact he’s pro-mining, but he uses that “pro responsible mining” cliché that sends shivers down the spines of foreign investors and gets him comparisons with Rafael Correa along with the dog’s breakfast of a “nascent mining industry” in Ecuador that has so far done little else but antagonize locals and halt any sort of progress towards the large-scale mining operations he says he wants in Ecuador (sorry Rafa, evidence very thin). Ollanta Humala has said out loud that he’s in favour of mining, that the industry is extremely important to the country, that mining will continue to happen, that there aren’t going to be nationalizations in the industry, that private property is not under any sort of threat, all that backed up by the more general policy statement that he’s not going to change the rules to allow a second term of office as was the case in Correa’s Ecuador, Morales’ Bolivia, Chávez’s Venezuela and (interestingly and always left out by the fearmongerers) Uribe’s Colombia. He’s said, pledged, signed papers and put his hand on the bible to the effect that he’d do his five years and then leave. But back to the main issue that we cover, mining, and the main line of thought behind his proposed changes to the mining industry is that the mining companies pay more to the State as part of his ‘social inclusion’ policies and the monies raised going to State programs such as better schooling, pensions, healthcare etc. As for details, put simply his policies are to raise royalties from the current 1%-2%-3% rates to a 2%-4%-6% (a change that will probably happen). He has also spoken of raising corporate taxes on mining companies from the nationwide level of 30% to 40%, a rate exclusively for mining companies (this may be tricky to implement). Finally, he has often spoken of raising a windfall tax on mining companies to take advantage of exception profit levels, with a main eye firmly placed on the mega-mining operations such as Antamina, Cerro Verde, Yanacocha, Toquepala/Cuajone etc. As we’ve seen before in other debates on WFT, the theory sounds good to the outsider but putting these fiscal regimes into operation has been very difficult, so even if the spirit of the new Humala administration is willing it may take years rather than months even to get to the stage where WFT charges are levied.

The bottom line to this is that the royalty rates are likely to rise in Peru first, but you’ll also hear a lot from a Humala government about how Peru currently charges much less to its mining companies than peers in Chile or the USA (which is true) to offset the new round of taxes. The corporate tax changes may happen, perhaps as a negotiation trade-off against a windfall tax which your author believes will be tough for Humala to put in place, realpolitik-speaking.

However much Humala’s Peru claims the new taxes on miners there is a fair policy, businesses won’t like the idea much and there’s clearly going to be a rough period for Peru-based mining companies because he will run a government that raises more money from mining companies via higher royalty charges and/or taxes. This means that stock prices will be under pressure on today’s news, but you’ll also have to note that stocks downing in price will also be accompanied by fearmongering and will add in all the “them commies gonna eat your babies” type stuff. It’s important at these moments to separate the wheat from the chaff, because the chances are that Peru’s market and the miners therein will bounce back much faster than Northern commentators imagine...and that means opportunity for nimble traders. We’ll expand on that thought in a moment.

The other effect of a Humala government on Peru’s mining industry comes at the social interactive level and would be to give more power of decision to local communities on whether they want a mine built near to them...or not. This, for example, would mean the end for the Santa Ana project, the end of Dorato Resources (DRI.v) hopes of minebuilding in the Cenepa region of North Peru, the curtailing of activities in the jungle regions where anti-mining opposition is strong. But this would also mean that mining projects don’t cause the type of crisis flashpoints we’ve seen in recent weeks in the Puno region, so it’s worth noting both sides of the equation. The knock-on effect would mean that companies may not be so keen on committing to the less explored areas of Peru and NGOs might start making more of a nuisance of themselves as well, but resulting problems would be extremely unlikely in places like Rio Alto’s (RIO.v) La Arena mine, or Focus Ventures’ (FCV.v) exploration in Santa Rosa, or Fortuna’s (FVI.to) Caylloma, or Vena (VEM.to) at Azulcocha, or literally thousands of other examples, because mining is welcomed in the areas in which they operate. Or put another way, the mining exploration business in Peru is likely to continue just fine in the areas known for mining acceptance, but lessen in the farther flung spots that have attracted attention in recent years.

Expanding on that second point a little further, let’s re-emphasize something that’s been mentioned on these pages (and on the blog) more than several times. Peru has been, is and will be a miner-friendly country in general but the time is long past to heed ignorant commentaries about ALL the country being miner-friendly. Peru is miner-friendly in the areas that are traditional spots for mining. It’s not miner-friendly in the jungle areas (that make up over 50% of its country by area) because mining activity there is 1) new and 2) damaging to sensitive ecological areas, no matter what the mining companies say otherwise. It’s also important to understand Peru on a micro-regional scale, because a single village in the middle of a centuries-old miner-friendly spot can be dead set against mining for its own sweet reasons and be surrounded by others that are perfectly relaxed and happy to co-exist with the biggest type of world-class open pit operation.

So yes, we’ll be in for a rough few days now that Ollanta has seemingly gotten the nod in this election, but to use that horrid and hackneyed newsletter writer’s neverwrong bullshit, “Great buying opportunity!!!” (three exclamation marks used to emphasize irony). Also, I’d expect the Peru market, and therefore its exposed miners, to snap back more quickly than most foreign observers imagine, because the big controllers of the Peru stock market, the “AFP” pension funds, will be keen to protect their asset book and have already clearly raised cash in order to buy back into this market. This is because Ollanta Humala isn’t the radical raving Commie lefty boogieman he’s made out to be in the northern (and local right wing) press and there’s a mountain of evidence that points to his moderation of policies, particularly his move to the centre in the last few weeks. Yes, he’s left wing but no he’s not a radical lefty. No, he’s not Hugo Chávez so put that one behind you. I know that during the election he’s tried to attach himself to the image of Lula da Silva, so if he turns out like that President did Peru will be just fine. Personally, I see him more along the lines of a mining-friendly Mauricio Funes (El Salvador), but pigeonholing Humala is always going to be difficult.

Humala has moved to the centre to win this election and he has no choice now but to run a coalition government, else be slaughtered down the line. He doesn't have the natural charisma of Evo Morales (or Hugo Chávez or Rafael Correa) which will be a problem for him. He will adopt what are regarded by observers as left-wing policies wherever he gets the chance but the opposition is going to be fierce, worse than anything Evo or Hugo or Rafa suffers because the opposition forces in Peru are solid, organized and long-standing. He'll also piss people off when they realize they'll have to wait at least a couple of years for the Plan65 pension and his traditional radical supporters will either have to be reined in or seriously affect his credibility with the majority of mainstream Peruvian who have voted Humala on sufferance because they’re more opposed to a new Fujimori-led government (Peru has a memory for the bad things that went on, something that pleases your author on a non-business level). Finally, as a person I actually think he's quite a decent guy. Family man, more mature than 5 years ago, naturally intelligent, not a bullshitter in the normal politicians' way.

To wrap up, Peru mining stocks are still a buy, but they’re a buy later or a hold today if you’re already bought. A Humala win will make for a rough few days but it’s also totally buyable (and so would be Rio Alto at under $2 or Focus Ventures or Vena Resources at (or even under) 25c). The question is when the AFPs will step up to buy and my best guess is that they’ll wait two or three days before the bargain buys begin...but that’s just a guess. When it comes to mining Peru isn’t going the path of Ecuador, it isn’t going the path of Bolivia or Venezuela, either. Peru is Peru, a mining country and it will stay that way, period.

Post Script: For those of you versed in Spanish that care enough, find out a lot more about Ollanta Humala via the book he wrote in 2006, which goes into his past history until that point and explains his trajectory and his political stance. A free online copy of the most important sections of the book is available at link (1) in the appendix below. It’s actually a pretty interesting read, too.

x

Peru Presidential Election Results: Exit Polls make Ollanta Humala the winner

It's not yet official and we're best advised to wait until at least the more accurate but still unofficial "fast count" results due around 8pm Peru time (9pm est), but the 4pm close of votes has just gone and Peru is allowed to give fairly accurate exit polls to the world. Here they are:

Ipsos/Apoyo: Ollanta Humala 52.6%, Keiko Fujimori 47.4%

Datum: Ollanta Humala 52.7%, Keiko Fujimori 47.3%

CPI: Ollanta Humala 52.5%, Keiko Fujimori 47.5%

In other words, barring a statistical freak Ollanta Humala is the new President Elect of Peru and will take office on July 28th. We'll update this post at 9pm EST with the fast count results, which is probably the same moment that Keiko Fujimori concedes defeat. Pisco sours served, the end.

UPDATE: We hear the normally very accurate "rapid count" result is 52.2% Ollanta, 47.8% Keiko.As soon as that is officially confirmed by Peru's election agency I'll put a link up here. It's now time to get on with writing the Weekly section about what to expect tomorrow.

UPDATE 2: This is good from Reuters, a round-up of reactions from various market commentators. For the record, put me in the Benito Berber camp. Also for the record, Alberto Bernal of Bulltick has always been a zero on Peru and he shows it once again here.

Update 3: The rapid counts look like this:

Ipsos/Apoyo: Ollanta Humala 51.4%, Keiko Fujimori 48.6%

Datum: Ollanta Humala 51.0%, Keiko Fujimori 49.0%

CPI: Ollanta Humala 52.2%, Keiko Fujimori 47.8%

Finally, official vote watchdog "Transparencia": Ollanta Humala 51.3%, Keiko Fujimori 48.7%

These "fast count" results and NOT the official results, but have proven to be historically very accurate and close to the final election figures in Peru. So take this one to the bank: Ollanta Humala is the next President of Peru. That is all.

Update 4: A bit of jollity and a classic out of Peru Fail this evening, which I'll translate underneath. In the photo we see the map of Peru, with the red colour showing the departments won by Ollanta Humala and the orange departments won by Keiko Fujimori.

person 1: "Who did the little blue ones vote for?"

person 2: "It's called Lake Titicaca"

Peru polls on the day before the election (UPDATED)

Despite their publication in Peru being against the law in the last week of an election, the pollsters have been out and about and telling foreign journalists about their results. These then tell the non-Peru world and..oh my stars!...in the 21st century world of the interwebnetpipes that news blackout sure works well.

So today pollster Datum has just called Ollanta Humala ahead with 50.8% of valid votes, with Keiko Fujimori on 49.2%, according to Reuters. The poll was taken on June 2nd and third, 5015 people gave their opinions and the margin of error is +/- 1.4%. 

Meanwhile, we're waiting for Peru's most respected pollster Ipsos/Apoyo to give its last poll at 6pm local time (7pm EST), about two hours from now. We hear it will include opinions up to 1pm today, so fresh as a daisy it will be. Your humble scribe will update this post when that report is available.

Update: Big news out of Ipsos/Apoyo this afternoon. Just a couple of minutes ago, Peru's most respected pollster called Ollanta Humala ahead with 51.9% of valid votes and Keiko Fujimori on 48.1%. The poll was taken today, June 4th, from 4000 people and has a margin of error of +/- 1.6%. This means that it's the first time for weeks that Ollanta Humala has shown a polling result that beats out the margin of error. Data from this Reuters news report.

Why I think Keiko Fujimori will win the Peru election

Before going any further and to stop my mailbox getting filled up with mails in Spanish that cast allusions on the marital status of my parents at the moment of my conception, I'm not a fan of Keiko and feel no sympathy towards her. Neither am I a fan of Ollanta Humala. In my opinion neither candidate left in the running for the Presidency of Peru will make a good President or be good for their country. Basically, I have no dog in this race. So with that said, why do I think she wins?

1) A high proportion of the undecided votes are in the higher socioeconomic groups. This has been noted by all the polling companies in their recent surveys.

2) In other words, due to the close numbers that the two candidates are polling and the significant percentage of undecideds still out there, those are the people that are left to decide who wins. It's commonly called "the Lima vote" in Peru and the basic idea all through round two has been one of whoever wins Lima, wins the job.

3) Every time Ollanta Humala has made progress in the polls, the Lima Stock Market has suffered. True yesterday, with its 5.17% drop, after the weekend polls showed Humala closing the gap between himself and Keiko Fujimori to within the margin of error on most polls and even holding a slight lead in one of them.

4) The live TV debate was generally viewed as a tie by observers in Peru (bar the rabid supporters on either side of the fight).

5) In the end the middle class in Peru is much like any other middle class around the world. They're obsessed by money and either getting rich or staying rich.

6) It won't have escaped their attention that, so far at least, Humala up = stock market down, their all-important pension fund down, Peruvian Nuevo Sol (PEN) currency down. Neither would it have escaped their attention that Keiko up = indicators positive.

7) For many of these middle class, the idea of announcing that they will vote for another Fujimori is too embarrassing to be made public, but they plan to do it anyway in the privacy of the voting booth. This is the so-called "hidden vote" factor.

8) So all in all, if it's true that the higher socioeconomic levels in Peru have the deciding vote in this election, Keiko Fujimori is in a strong position. This also explains why La Republica this morning, the only serious newspaper in Peru that supports the Humala campaign, is trying to convince its public that investors are calm and relaxed about the Humala manifesto when all evidence points to this as being a total crock.

In other words I think Keiko wins this election because, when push comes to shove, human beings are greedy and self-serving. And money talks, bullshit walks. Sad but true. DYODD.

Two charts from IKN108

Just to give you an idea of how important tonight's live TV debate between Ollanta and Keiko is for the presidential election in Peru, with the big vote next Sunday June 5th now just days away:

Peru Prez Poll: Ollanta ahead, according to Imasen

The latest poll from Imasen and published in La Republica was supposed to be published tomorrow, but it got leaked and so La Republica, on this page, has confirmed the numbers.

According to this poll, Ollanta Humala has a slight lead. We note that the newspaper in question supports the Ollanta Humala campaign (about the only serious paper to do so). Nevertheless, this is the first poll to give Ollanta a lead in the last couple of weeks, with the big live TV debate up tomorrow evening (that you out there in the world can watch of CNN's Spanish language service, CNN Expansion, so I understand).

It's going down to the wire, be in no doubt. By the way, separate from the normal IKN Weekly issue 108, subscribers will get a full report on the debate proceedings either late Sunday evening or before the bell Monday morning.

Peru Prez Poll Friday May 27th: IOP/PUCP (trustworthy) puts Keiko a tiny % ahead

This survey just came from IOP/PUCP, a pretty trustworthy source and notably the poll isn't attached to any Peru newspaper or media source. Here's the headline chart:

We got Keiko leading Ollanta again but this poll is WAY closer than recent ones from other companies...a real live too-close-to-call, with nine days to go. Sunday will see the final big crop of polls before the one week pre-election period when no polls can be published there. Then the vote, Sunday June 5th. Then they can all STFU...please.

Peru Prez Poll: Datum says Keiko stretching her lead

A new poll out today by Datum and published in Peru 21 has Keiko up half a point from last Sunday. Here's the chart that shows today's numbers (red) and last weekend's poll (grey).

Note that the Datum/Peru 21 combo is known to be anti-Humala in nature and more reasonable pollster Ipsos/Apoyo had Keiko's lead at under three points last weekend. With that said, the trend shown here can't be good for Humala. The latest Datum poll was taken on May 22nd, asked 1214 people on a national urban/rural basis and has a margin of error of +/- 2.8%. Data from here.

Nicaragua polling for the 2011 Presidential election

Out just a few minutes ago is the Cid/Gallup Latinoamérica voter intention poll for Nicaragua's Presidential election, due to happen November 6th this year. Here's the chart...

...and incumbent Daniel Ortega is ahead. Second place ten points behind is radio station owner (hmm...that might be useful in the campaign) and congress member Fabio Gadea. Third comes ex Prez Arnoldo Alemán, who did the job between 1997 and 2002 and for some reason wants to do it again and the rest are noise. Data from here.

Argentina's Presidential Election: The polls

Peru isn't the only South American Presidential race this year, as Argentina also goes to the polls in Presidential, regional and congressional elections in October (and if we add in Central America, there's Nica and Guat, too). But over in the Argentina race it's a different story to the too-close-to-callness in Peru. Here are the latest polling numbers from three Argentina pollsters, CEOP, Ricardo Rouvier and Ibarómetro:

So even though she hasn't even thrown her hat into the ring officially, incumbent President Cristina Fernandez de Kirchner is a mile ahead in the running and in all probability will win in the first round (as Argentina's rules state that if you get more than 40% in the first round of votes and your nearest opposition is more than 10% behind you, you win). Behind Cristina come Ricardo Alfonsín, son of the ex-Prez Raúl, ex-Pres Eduardo Duhalde, eternal candidate Elisa Carrió and ex-Prez for about a day and a half (remember that back in 2001?) Adolfo Rodríguez Saá.

Date from here

Peru Prez Polls: Latest result shows stagnation

Just a few minutes ago we had the first weekend poll result out of Peru for the June 5th second round election, from pollster Idice. Here's a chart:

Yup, it's exactly the same numbers as the Idice poll for this time last week, with valid votes calling 51.9% for Keiko Fujimori and 48.1% for Ollanta Humala. So as Idice is likely favouring Keiko slightly (it's a business, dude...don't be naïve) and it was sponsored for this one by a pro-Keiko newspaper (El Expreso, the type of daily that makes National Enquirer look like Pulitzer material), we just have to keep on calling this tight Presidential race exactly that. It's still too close to call, folks.

There will be more polls released today from more reliable companies. Those will make it as comment into this afternoon's IKN Weekly, issue 107, along with the usual chunk of ongoing advice for those exposed to Peru markets (last week's call was right on the button, FWIW). DYODD, dude.

Peru Prez Poll, New Round Two numbers from Datum

Here's the valid votes total for the new Datum poll out this morning.

Points to consider:

1) This poll was commissioned by Peru21, a very anti-Humala publication.
2) Datum has shown results that consistently favour Keiko more than the average of polls in Peru.
3) With that said, the pollster will stand by its numbers and it does seem that Keiko is at least consolidating her small lead in the polls.

The result has a margin of error of +/-2.8% and is a national urban/rural type. 1211 people interviewed. Details here.

Peru Prez Polls, five pollsters in one chart

This weekend has seen four Peru pollsters publish new voter intention figures and here they all are on one chart that also includes the Datum poll out last Thursday that made the local market and currency rally:

Please note that all the polls shown here are for "valid votes" and do not include those polled that said they were either undecided or they'd spoil their ballot. As a general rule of thumb, there seems to be 20% of Peruvians in either of those categories and we can expect around half of them to make up their minds and vote for one or the other candidate. Or in other words, it's the undecideds that will eventually decide this race and there's still everything to play for.

Finally, as regards accuracy I personally would plump for the Ipsos/Apoyo people (green columns) as having the best track record and the ones least influenced by paymasters (yeah, that's diplomatic), although even they are open to crits because the owners are part of the Lima ruling class establishment. Find the full Ipsos/Apoyo poll linked here.

Fear and loathing in Lima

The media campaign to Stop Humala At All Costs continues in Peru and today we have breathless headlines from the main anti-Humala media sources telling the world about a run on the private pension funds. The basic story behind this is that a whole spook story went around a couple of weeks ago about how Humala would tap into the private pension funds (known as AFPs) to fund his social programs or even fund the State pension burdens. So today we get this in El Comercio with the title "Uncertainty Affects Loans and AFP Contributions" interviewing the biggest AFP that says they've seen 55 million Soles (U$19.6m) out of their 320m liquidity fund withdrawn over the month. Or we have this in Peru 21 (owned by the same people as El Comercio, but lower brow) entitled "Contributions Withdrawn from AFPs" that tells of 87 million Soles (U$31m) taken out the overall system and perhaps more to come.

Hey wow, 87m sounds like a big number doesn't it? Or when you compare a single fund's 55m in withdrawals compared to a 320m liquidity fund, that's a chunky percentage, no? Hmmm...well y'see that's not the real reality because it's a better thing to compare the total withdrawals to the total amount of Assets Under Management at the AFP Pension funds, which looks like this:

The total AFP assets from Peru Central Bank figures right here. Look, I'm not sticking up for Humala here and speaking frankly I think both the choices left in round two are bad. What I am saying is the same thing as I said in IKN105 to subscribers last Sunday:

"Well folks, like it or not unfair media bias isn’t confined to Peru or even South America and a smear campaign against Humala was always going to happen."

DYODD

Peru: Latest Ipsos/Apoyo poll puts Keiko in front

It's only by a whisker and it's still correctly described as a technical dead heat, but it's also the first time that Keiko Fujimori has been on top in any survey.

More details here and here.

Peru Prez Poll, Round Two latest numbers

This chart generated from the numbers out of reliable pollster IOP (part of the U. Catolica in Lima), with interviews taken between April 30th and May 3rd and published this Saturday morning.

You want a close race? Here's a close race for yaz. All the details in the IOP page right here.

PS: The full survey PDF is here

New Peru Prez Poll: Ollanta 39%, Keiko 38%

Somehow, your humble scribe has got his grubby little hands on a survey done by Ipsos/Apoyo for Morgan Stanley between April 23rd and April 30th, and it shows that the gap between the second round candidates is down to just one point, with Ollanta Humala on 39% and Keiko Fujimori on 38% You can see the survey yourself by clicking here and downloading it.

So now you know why Peru stocks are rallying today, with the IGBVL index right now up 4.41% at 20,344.4. People, I've been telling you that this one goes down to the wire for a while now...it's time to see it for yourself. And yeah, Peru exposed junior miners are cheap right now...duh.


UPDATE: A small request. Can those of you coming in from Twitter (aka tuiteh) and/or Facebook (aka feibu) please download a copy and offer a new link from which others can download, please? My filesharing link is getting swamped and the number of downloads is already very heavy (we're into the hundreds after less than one hour) so as IKN has no wish to be the centre of a viral hit spiral, alternative places for others to download would be appreciated. Thanks in advance.


UPDATE 2: Ahora esta en El Comercio aqui

Peru: Latest poll has Ollanta Humala 4.2% ahead

Here's the link, here's the chart:

And for those of you into details and subcharts and Spanish language commentary, there's tons of that on pages 3, 4 and 5 of today's edition of La Republica which you can access right here.

Peru Prez Poll, Round Two

A new poll is out today Friday from pollster Datum and published by Peru 21. This might leave it open to accusations of bias (because Peru 21 is an anti-Humala newspaper), but along with a CPI poll from yesterday that had the gap at 3.8%, there's a clear catchup tendency going on that's favouring Keiko Fujimori. Recall that last Sunday the gap was 6% and as I said back then, this one is going to be very close.

I'd only add one other thing right now: Be careful what you wish for. The full Datum poll publication can be found right here.

UPDATE: Highly recommended on this subject for Spanish speakers is this new post from highly esteemed Peru Political Scientist Cynthia Sanborn, someone who has forgotten more about this subject than most of the so-called experts out there know. Unmissable.

Peru Presidential Polls, the second round

Fresh out the oven is the first serious poll on the second round run-off for Prez of Peru between Ollanta Humala and Keiko Fujimori. Here's the chart:

This one is going to be tight. Find the whole survey, with nitty gritty details and vote splits that kinda suggest Keiko has a good shot at closing the gap, right here.