saucy doubts and fears

Peru Presidential election: Two days to go, everyone’s attacking Veronika Mendoza

Really interesting to see how Peru’s media channels are out in force this morning and they all have one message: “Stop Vero”. It’s pretty clear that the late polls out yesterday which either have her just behind PPK or in a dead heat means there’s everything to play for and being the only real lefty in the pack, she’s scaring the moneypeople.
Here come a couple of comments. First this from Scotia this morning, which reflects the standard gringo view of what’s going on:
Peru-ve:  Strong Showing for Mendoza Could Be Negative for Mining Stocks with Peru Exposure:

Our Mining Research Team saying that
will head to the polls on Sunday April 10th to elect their national
congress and president. The presidential election is a two-round process
with the first round
this Sunday and the second round run-off vote scheduled for June 5. A
run-off is widely expected, with no individual candidate polling near
the 50% threshold required for an outright win in the first round.  In
the latest polls, front-runner Keiko Fujimori
came in at ~37% while contenders Veronika Mendoza and Pedro Pablo
Kuczynski were neck-and-neck at around 15%. Recent polls also show that
Ms. Fujimori is expected to only have a slight edge in a run-off
scenario with either of the other two candidates, so
each of these three candidates seems to have a legitimate chance at the
presidency.  Ms. Fujimori and Mr. Kuczynski appear to generally
advocate for continuity in the country’s economic and mining policies
while Ms. Mendoza promises to introduce a new economic
model for the country, which would rely less on extractive industries.
More specifically, she proposes to halt a scheduled cut to the corporate
tax rate and tighten Peru’s already-strict environmental regulations
for miners. Ms. Mendoza has been surging in
the polls lately.  A result on Sunday that puts Ms. Mendoza in a
run-off could be perceived negatively for mining stocks with Peruvian
exposure. We flag the companies in our precious and base metals mining
coverage with exposure to Peru.
Now this from your humble scribe, from The IKN Weekly IKN360 out last weekend. 

Come the evening of April 10th
the most likely scenario at this point is:

  • Keiko Fujimori wins the first round with over 30% of
    the vote (it could be as high as 38%), which won’t be enough to win
  • Pedro Pablo Kuczynski comes second with around 18% to
    20% of the vote and runs off against Keiko in the ballotage set for June.

We can consider the potential
outcome of a PPK vs Keiko run-off in due course, let’s make sure it happens
that way first though I can say at this point that voter intention polls have
it very close between those two in the run-off, with some pollsters giving a
slight edge to PPK, others an edge to Keiko (12). The potential fly in the
ointment of this scenario is Veronika Mendoza, the only true left wing
candidate who has made late strides in the intention polls and in some surveys
is now in a technical dead heat with PPK. There are two things to say on that:

1) Veronika Mendoza will not win
against Keiko in round two. All voter intention polls show that clearly, the
country collective is scared of “lefties” (it’s very easy to conjure images of
lefty Commie terrorists in the mind of the average Peruvian). So even if she
makes it, you up there will get your miner-friendly administration.

2) As round two is going to be all
about Keiko Fujimori vs “No Keiko” (or perhaps better said “No Fujimori”), I
expect many “No Keikos” to switch from similar candidates such as Barbanchea and
García to PPK, in order to keep Veronika out and give the “No Keiko” option a
real chance at victory.
Bottom line: If Mendoza squeaks into the second round you should consider it an investment opportunity, not an investment risk. What is important is to have patsies such as the ones at Scotia and their clients, the ones who can’t see beyond four days into the future and raise country risk without seeing the bigger picture

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