Peru's Garcia: markets trump the left

By Marco Aquino and Terry Wade

LIMA (Reuters) - An ideological battle has split Latin America between open democracies embracing free markets and leftist regimes opposing them, Peru President Alan Garcia said on Friday.

Garcia, a former leftist whose first term in the 1980s ended in economic chaos, now fervently supports free trade and mainstream policies that helped Peru's economy grow 9 percent last year, one of the fastest paces in the world.

"South America looks like it's in a type of Cold War, like the big ideological blocs of the 20th century," Garcia said at the Reuters Latin America Investment Summit.

Chile, Peru, Colombia, Mexico and Panama favor open markets and are generating more jobs than leftist governments, he said, in apparent reference to Bolivia, Ecuador, Venezuela and Nicaragua.

He did not mention Latin American giants like Brazil, which tends to support policies favored by investors but lacks a major free-trade pact, or Argentina, which has blocked some food exports to keep local prices low.

"The only way to grow is to have markets," he said. "The worst recipe in this fast-moving, modern world is to shut yourself off, like Robinson Crusoe on an island."

Peru's leader, who once favored nationalizing the country's banks, now spends much of his time luring foreign investment, and on Wednesday Fitch Ratings became the first major credit rating agency to lift Peru to investment grade, a change that will attract more capital.

"The best (development) instrument there is today is the global market, big investment, and modernity," he said. "Old concepts of each country building itself up with its own resources or defending its market are totally obsolete."

Peru, which signed a free-trade agreement in December with the United States and hopes to clinch one this year with China, is lining up more deals and has slashed import barriers.

"All free-trade deals that we can possibly have we will sign," Garcia said.

THE ANTI-CHAVEZ

Garcia, who was wearing a tie clasp with the Great Seal of the United States on it, has emerged as a regional counterweight to Hugo Chavez, the president of oil-rich Venezuela, who has been accused of trying to export his socialist policies to neighboring countries.

"The president of Venezuela has a different point of view, but it would be interesting to see if he could have those views if oil only cost $20 a barrel," he said.

Garcia said he did not want to be part of any effort to isolate Chavez, a fierce critic of the United States.

"Newcomers to politics always want to be examples, the shining lighthouse of what's new. Maybe I had that temptation in my first government, but I'm in my second, 20 years later, so I no longer have this vain desire," he said.  Continued...