Foreign Affairs Minister, Ricardo Luna.

(Conference at the Americas Council, New York, February 28th, 2017)

First of all, I would like to summarize very briefly the conceptual premises that Peru must internalize in order to reset its foreign policy design.

The world sails in uncharted waters. Basic assumptions about the international order, global economy, and electoral dynamics in Western democracies are in disarray. The very nature of the international system shaped and led by the US during seven decades, is now challenged by its own political leadership. The backlash against global capitalism stems from the most globalized market economies. Populism appears to prevail in the US and Britain and it gains ground in wealthy European democracies.

Contradictory and disparate signals cloud the already uncertain panorama. Protectionism is signaled as the pathway to prosperity in the US, while China’s leaders call to support open markets and rule-based trade. The US role –essential to face global issues and security threats– is put in doubt by Washington itself.

As the US re-evaluates its fundamental foreign policy principles, leaders in China and Russia reassert and fine-tune their international positions, while Europe’s tentative geopolitical design faces a complex juncture.

Prime Minister Theresa May warned last month, in Davos, that liberalism, free trade and globalization risk being undermined by people from developed countries. Their voters doubt that globalization works for them, and feel mainstream political and business leaders have neglected people’s legitimate concerns. There is a growing perception of a schism between “us” and “them”, between citizens and the political and business elites identified with globalization.

Populist rhetoric transcends the ideological spectrum and mixes anger, frustration, and a sense of insecurity about the future. It appeals to nationalism by nurturing sentiments against immigrants and fears about the outside world. Its parochial, insular, views suggest simplistic and vague solutions to intricate problems. They, thus, spread misconceptions about world affairs and international politics.

The current upheaval is a symptom of a major dysfunction in the vortex of globalization and international relations. Leaders who manage domestic politics cannot monitor or direct a globalized economy. Money has no nationality in a borderless global economy. But political processes remain defined by national policy and local dissatisfaction. A divide grows between transnational forces that champion free trade and capital flow and, on the other hand, companies, unions, and workers bound to the national economy that seek to protect markets.

Foreign Affair Minister of Peru, offering his remarks at the Americas Society in New York.

However, not just darkness but a deeper malaise lies at the heart of the populist revolt. The tacit promise of a global economy is that it will lift living standards for everyone. Its success depends on the prosperity it should spread for everyone. While criticism about policies set by international financial institutions has been present since the turn of the century, the 2008 financial meltdown deepened public mistrust in the global economy’s beneficial consequences.

The costs of massive global financial mismanagement were unfairly distributed. International financial markets failed to prevent the effects of their reckless frenzy, but taxpayers in the US and Europe undertook the burden of the rescue plans implemented to cover banking losses. In contrast, everyday citizens were left to face on their own the challenge of adjusting to the financial crisis. Once the storm settled, some financial leaders received huge dividends and people with lower incomes lost their homes, savings, pensions, or jobs.

Discontent with globalization swiftly mutated into rejection, and became a political force to be reckoned with. In sum, the split between winners and losers of the financial crisis sparked today’s populist backlash against globalization. It also set free the appetite to choose, almost at random, the most convenient culprits.

Political consensus can withstand increasing income inequality if economic and social benefits are spread generally, although they may be distributed in differing proportions. However, public support wanes when costs of economic downturns are distributed unevenly. Nearly a decade after the 2008 financial meltdown in the world’s main market economies, and after all individual efforts made to overcome its dislocating effects, income inequality continues to grow, job markets remain unstable, and, above all, concrete benefits of globalization are not seen clearly by most people, whether they live in Detroit, Brighton, or Madrid. Under those conditions, anti-globalization populism has found the stage ripe.

Populist discontent with the global economy fuels distrust in the international system, and vice-versa. The results of Brexit and the recent presidential election in the US continue to raise doubts, fears, and uncertainty. Ongoing political, social, and economic transitions threaten to erode support for the complex international order in existence.

Paradoxically, public confidence in developed democracies turns against the world order they created, based upon liberal policies, free trade, and multilateral practice. Nation-states are forced to face the challenge and to adjust their foreign policies to this rapidly changing and unpredictable world.

To what extent can the US government redefine its international commitments remains to be seen, but the political will to persist in a course of undefined global retrenchment is evident. Intense nationalism –both political and economic– and lagging confidence in global involvement is a combination of instability for the US.

Likewise, Britain’s complex divorce process from the EU entails not just untried but confusing perspectives. The future international role of the “Global Britain” envisioned by its Prime Minister is only barely sketched out.

In this international context, Peru –and other emerging states– must take into account these phenomena, so as to set a tentative course. It must evaluate available options to readjust its foreign policy in regional, extra-regional, and multilateral arenas, within the framework of a geopolitical redesign still in the making.

Peru’s government has put in motion initiatives to improve significantly bilateral relations with neighboring countries and regional powers, amidst elections and signs of political tensions in the region. Venezuela’s humanitarian crisis and corruption scandals complicate Latin-America’s political landscape. The corruption network that is being unveiled already is damaging the fabric of political institutions throughout the region.

Ricardo Luna: "Governmental response to prevent further deterioration of public trust is crucial because emerging economies need strong democratic values."

The network’s international scope and massive volume are unprecedented. Its tentacles spread across boundaries, party lines, and different governmental levels, including certain former heads of state. As the extent of organized bribery and graft becomes more known, confidence in public institutions erodes. Current governments are, thus, pressed to obtain tangible anti-corruption results to recover legitimacy. Governmental response to prevent further deterioration of public trust is crucial because emerging economies need strong democratic values.

Thus, the region faces an onerous double-bind: the grand flux of the global paradigm and, more immediately, the political turntable tackling widespread corruption demands. Both problems involve redefining relations among the emerging regional power, Brasil, and all its neighboring countries. This is the particular context we face today in South-America.

Current conditions undermine efforts to find common ground to respond jointly to the turbulent global geopolitical challenges. However, they demand an urgent answer: an unprecedented push to strengthen and to deepen effective regional integration processes. The goal is to develop a collective vision to face effectively readjustments in extra-regional spaces, focusing in particular at changes to come in Asia Pacific and Europe.

At this stage, Peru aims to consolidate the Pacific Alliance –an integration scheme formed with Chile, Colombia, and Mexico–, as well as to re-launch the Inter-American system when we host in Lima the Americas Summit in April 2018.

Peru also faces the challenge of continuing to carry out an active role in the integration of the Asia Pacific region, after having hosted in November the last APEC Summit. We will intensify our links with the region’s main powers: the US, China, Russia, Japan, Korea, and Australia.

At the same time, as Brexit’s effects in Europe and the EU unfold, Peru must identify opportunities to bolster cooperation with the more relevant European actors: Germany, Spain, Britain, and France.

Peru is also committed to continue working to become a full-member of the OECD, despite the current controversy about the rules and prospects of globalization and the resurgence of protectionism. It therefore remains engaged in modernizing state functions and economic regulations in accordance with OECD’s standards.

In this unpredictable scenario, Peru needs to contribute to the re-design and consolidation of multilateral institutions. The current multilateral model rests on weakened entities that must rebuild effective global governance. The leadership of UN Secretary General Antonio Guterres is a key starting point to attain that goal. His views are clearly aligned with the principles that guide Peru’s foreign policy.

President of Peru, Pedro Pablo Kuczynski (left) FA Minister Ricardo Luna (center) and UN Secretary General Antonio Guterres (right).

Consequently, the country’s current candidacy for a seat at the Security Council demonstrates its political will to take on the responsibility to help maintain international peace and security, amidst the ongoing diverse crisis in the unprecedented systemic break-down we now face.

In sum, pervasive questioning of globalization and the current international order reveals widespread rejection of basic assumptions that, in the long run, have proven to be dysfunctional.

The multiple electoral revolts respond to real populist impulses, of a vague and varying ideological nature, that question the existing international system. However, the backlash will clash with reality and with opposing forces that continue to support a liberal international order. The crisis thus provides opportunities for a creative diplomacy that faces challenges through calibrated action instead of defensive reflexes.

The international position Peru has undertaken during President Kuczynski’s first semester in office allows us to seek viable conditions to find the best options for our nation among the opportunities that arise in periods of transition and change.

Thank you very much.

FA Minister Ricardo Luna discusses Peru's position on regional issues

FA Minister of Peru, Ricardo Luna: "Peru’s government has put in motion initiatives to improve significantly bilateral relations with neighboring countries and regional powers"