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October 30, 2014
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Peru’s Humala scraps through cabinet vote

Secures sixth team of ministers in three years by just one vote after agreeing to scrap pension law

LIMA — Peru’s Congress narrowly ratified President Ollanta Humala’s embattled cabinet yesterday after the ruling party offered to suspend a rule requiring independent workers to pay into a pension programme.

Humala secured scarcely enough support for his sixth cabinet in three years with 55 votes. Fifty-four lawmakers voted against his cabinet and nine abstained.

If the cabinet did not gain the slim vote of confidence yesterday, Humala ministers would have had to resign and he would have been forced to form a new cabinet.

The vote was the third after a majority of lawmakers balked at the cabinet’s ratification last week, part of a bid to pressure Humala on a raft of demands ranging from ministerial changes to the repeal of the pension law.

Passed in 2012 when Humala wielded more power in Congress, the pension law mandates independent workers to pay into a private pension fund or the state pension programme.

Peru’s private pension system is the most important source of investment capital in the country, managing some US$39 billion.

After the law was passed, Habitat , a unit of Chile’s Inversiones La Construcción, won the right to sign up all new contributors to the private system by offering the lowest fees.

The president of Humala’s Nationalist Party, First Lady Nadine Heredia, said on Twitter that the party and its allies in Congress would back suspension of the independent worker rule in the pension law.

“The Nationalist Party is in favour of creating a bill to suspend independent workers’ obligation to contribute to the AFP (pension fund administrator Habitat),” Heredia wrote.

It is unclear how long the requirement would be on hold, or what impact it would have on Habitat.

Habitat declined to comment on the law’s suspension until a formal decision by the government is taken.

The law that makes it compulsory for independent workers to pay into a pension system, whever it be state or private, was launched in August last year. It has received criticism from large sectors of the population who consider that it threatens the freedom of contract.

Peru is not the first time that Habitat ventured abroad: in December 2000 it sold its nine percent of its stake in Afore of Mexico. It also had an 8.5 percent share in Previnter AFJP in Argentina.

Humala’s previous cabinet also faced three votes before securing congressional approval in March. That marked the first time in more than a decade that the constitutional ratification requirement was not just a routine formality.

The latest political crisis emerged after Humala’s power in Congress waned further. In late July six lawmakers left his party’s political bloc in Congress, leaving it with a one-vote edge over the main opposition party.

Economy slows

The calls for changes from within Humala’s cabinet come at a time when the Peruvian economy, which depends heavily on the country’s huge mineral production, is slowing due to lower demand for raw materials from big consumers like China and a fall in private investment.

The Peruvian economy grew by only 0.3 percent in June, the lowest monthly rate in nearly five years, forcing officials to review the forecasts for 2014.

Opposition lawmakers continue to ask for Minister of Energy and Mining Eleodoro Mayorga, who is accused of conflict of interest said, to resign from his post.

According to analysts the tight result in Congress show that differences between the government and the opposition are increasing, which could affect Humala’s future projects as his popularity falls below 30 percent.

Herald with Reuters

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