This time I’m worried.

Some were worried 5 years ago if Ollanta Humala were elected President of Peru he’d move the country radically left a la Venezuela but I said nothing would change, that Humala would look out for whoever paid Peru the most, ie. the Lima political/business establishment and foreign investors.

This time around however, Peru’s upcoming presidential elections have me worried. The biggest problem facing the country in my opinion is extreme institutional weakness caused by corruption and incompetence. No matter what the policies or ideological convictions of the next Prez, Peru needs to address this institutional weakness or risk becoming a failed state like Colombia in the 1980s.

Today’s news of Julio Guzman, a leading candidate in the upcoming elections, being banned from the vote after several back-and-forth decisions by the national electoral body is just one – albeit highly visible – example of the type of institutional weakness that pervades every part of society now in Peru.

As another example, a friend of ours told us one of the recent mayors of the city of Cusco created 3,000 new positions in city government for his supporters and made no effort at all to give them formal responsibilities or keep them from cleaning out the city’s coffers any way they saw fit.

Unfortunately I don’t think any of the leading presidential candidates would move to address the rampant corruption and incompetence. At the moment Keiko Fujimori is favored to win the presidency and in my opinion she would likely send Peru further down the path of a failed state if elected. I don’t think her personal qualifications or convictions are even relevant in that, what worries me is that all of her supporters who have been loyal to her father’s movement for 15+ years since her father got run out of the country will come out of the proverbial woodwork to claim their reward for 15 years of support.

If I was advising a foreign company on investing in Peru at the moment I’d say keep a clear path to the exit.