August 16, 2005

Peru’s Kuczynski leads revamped Cabinet

By Jude Webber

LIMA, Peru (Reuters) - Peru's respected outgoing economy
minister, Pedro Pablo Kuczynski, took over as prime minister on
Tuesday at the helm of a revamped team designed to lead Peru to
clean elections next year.

Ending the worst turbulence in his rocky four years in
power, President Alejandro Toledo swore in a new Cabinet with
seven new ministers -- many of them senior figures in his Peru
Posible party.

"I know we have a demanding task. I know we have a long way
to go and we have to do it together," Toledo said at a ceremony
at the presidential palace after swearing in his new team.

Last week Toledo sparked a Cabinet crisis when he appointed
controversial ally Fernando Olivera as foreign minister. Carlos
Ferrero resigned as prime minister because of the appointment,
a move that by law forced the rest of the Cabinet to quit as

Ferrero and other ministers had disagreed with Olivera on a
regional law in southern Peru legalizing some cultivation of
the raw material for cocaine. Toledo's party and a majority of
Peruvians, according to a weekend poll, also opposed the move.

Kuczynski, a political independent who helped turn Peru's
economy from moribund in 2001 to one of the region's best
performers, is Peru's fifth prime minister in four years and
will have the task of keeping the rocky government on an even
keel ahead of the vote.

To ensure continuity at the helm of Peru's $68 billion
economy, which is enjoying an export boom helped by record
metals prices and is expected to grow some 6 percent this year,
Toledo chose Kuczynski's deputy, Fernando Zavala, 34, to head
the Economy Ministry.


Although Kuczynski, a flute- and squash-playing former fund
manager, has harbored presidential ambitions, he appeared to
rule out a run next year. He would have to quit his brand new
job by October 7 if he intended to seek the presidency.

"It's obvious that if one takes a job like this it's not
for six weeks. That wouldn't be serious," a smiling Kuczynski,
66, told reporters before the ceremony.

He met Olivera, winning support from the leader of a party
whose backing has been key in Congress where Toledo lacks a
majority, and said his team had to organize transparent
elections and hand "a clean house to the next government."

But he said his biggest job was "to re-establish social
harmony" -- something that could be easier said than done.

Peru has recorded four years of strong growth but many
people complain progress on jobs, wages and fighting poverty is
still too slow.

Mario Huaman, leader of Peru's biggest labor confederation,
CGTP, said he feared Kuczynski's appointment was a victory for
big business and the political right and meant a continuation
of privatizations and fewer labor rights.

Kuczynski, a tall, Oxford- and Princeton-educated economist
with a permanent laid-back smile, has worked at the World Bank
and the International Monetary Fund, as well as at Peru's
Energy and Mines Ministry and two stints as economy minister.

He leaves the Economy Ministry the day after Peru wrapped
up early payment of $1.55 billion of debt to the Paris Club of
creditor nations, the highlight of his plan to make Peru's debt
load more bearable.

One of the first tasks for Toledo and his new ministers
will be to welcome Defense Secretary Donald Rumsfeld, who
visits the world's No. 2 cocaine producer this week.

Although markets saw the governmental crisis as business as
usual in Peru, where a string of ministers have quit in
corruption scandals, last week's debacle slashed Toledo's
approval rating to just 8 percent just as the government is
grappling to keep a lid on fast-rising spending and simmering
social protests.

Toledo cannot run in elections next April and hands over
power in July. The presidential race remains wide open.