By Teresa Cespedes
LIMA, July 10 The chief of Peru's constitutional
court on Wednesday rejected President Ollanta Humala's request
that it delay a ruling that could force the government to
finally pay billions of dollars in 40-year-old land reform
Oscar Urviola, the head of the court, said it was important
to resolve the controversy over the outstanding debt to boost
investor confidence. Peruvian presidents have resisted honoring
the bonds since they were issued as compensation for land
redistributed to the poor in the 1970s.
The court ruled the government must pay up 12 years ago and
was expected to explicitly tell the executive branch how and
when to pay as early as Tuesday.
Humala said in a televised interview on Tuesday that the
court should abstain from ruling on "sensitive" topics such as
the land bonds until Congress names new members to the court in
coming weeks, suggesting the current court lacks legitimacy.
Lawyers and critics were quick to say Humala was meddling in
the proceedings of the autonomous court. Urviola stopped short
of calling his comments interference, but made it clear that the
court would not shy away from controversial rulings.
"With my complete respect for the president, I have to say
that the constitutional court does not agree with its
proceedings being imposed upon or conditioned by external
factors," Urviola said at a news conference. "It is a sensitive
topic, yes, because it will obviously trigger a payment."
Conservative estimates say there are between $1 billion and
$3 billion in land reform bonds. Other estimates say the
liability is far larger, between $4.6 billion and $8 billion, or
about 4 percent of gross domestic product.
Much hinges on the historical price index used to calculate
the value of the bonds and the number of bonds outstanding.
The agricultural bonds were issued as compensation in the
1970s under a land redistribution program started by leftist
dictator General Juan Velasco, who sought to take farms from the
rich and hand them over to peasants in a bid to create a more
equal society and redress the legacies of Spanish colonialism.
Many middle-class planters, banks and even workers were
ensnared in the program, which caused Peru's agricultural output
to collapse when 5,000 farms were seized between 1969 and 1981.
Since the 1990s, Peru has shed Velasco's left-wing economic
model and become one of the world's fastest-growing economies,
with free-trade agreements from China to Europe and
investment-grade credit ratings.
But it is unclear how paying the land bonds would affect
Peru's credit ratings. Cleaning up a so-called fiscal skeleton
would be seen as a plus, but paying off the bonds would also
officially put them on the government's books.
Despite the constitutional court's 2001 ruling in favor of
bondholders, the government under several administrations has
balked at making payments, worried about lacking the cash.
Urviola said the court was still studying the best way to
make the government comply with its previous ruling and a
decision would likely be made "in coming weeks."
"This court is going to dictate the pending resolution
taking into account all necessary aspects so that the sentence
is honored, and so that it does not cause any problems for the
Peruvian state as it fulfills its obligations," he said.