Changing the guard

Castillo takes office in Peru but investors are still waiting for clarity.

President Pedro Castillo of Peru, a former rural teachers’ union leader completed his first week in office amid growing investor uncertainty and market fears over his radical left-wing agenda. After a contested election result, Castillo quickly claimed that, “we are not chavistas, we are not communists […] we are workers, we are entrepreneurs,” and promised to respect private property in a stable economy.

However, Castillo’s cabinet appointments hardly shed light on his future political intentions. The appointment of Guido Bellido as prime minister caused shock both at national and international level as he is widely perceived as a radical left-wing and socially conservative militant. Days later, Castillo named Pedro Francke, a former World Bank technocrat, as Minister of Economy. Francke insisted that the government will have both a pro-market and pro-poor economic agenda.

Both Bellido and Francke have publicly expressed their willingness to work together in Castillo’s new political and economic project for the country. Nevertheless, political pundits in Peru remain divided between those who believe that Castillo’s cabinet will not manage to overcome internal ideological differences and those who argue that the president needed a plurality of voices in his cabinet to please a divided Congress.

International investors are cautious too, according to a local economist and political analyst, “In just 12 days of government, USD has exceeded 4 soles and inflation is at a 4 year high. Yes, there are some external factors, but the real cause is a lack of transparency, which leads to a lack of credibility and political uncertainty. Francke is trying to calm markets, but then Bellido tells Reuters that the state has to participate in strategic sectors such as natural gas; such mixed messages are not helpful.”

“Francke is trying to calm markets, but then Bellido tells Reuters that the state has to participate in strategic sectors.”

Economist and political analyst, Peru

Castillo’s first months in office will be crucial for the rest of his term, as uncertainty over the appointments and his ambiguous discourse on the economic and social agenda are failing to allay fears of both investors and the population.

It is also unclear who is really pulling the strings, a renowned political commentator in Peru told us, “Peru Libre is a small party, it is becoming clear that the real power lies with Vladimir Cerrón, the head of the party. Castillo is an inexperienced president who does not understand the complexity of government and the dimensions of power and he ends up taking refuge with whoever will protect him.”

“Castillo is an inexperienced president who does not understand the complexity of government and the dimensions of power and he ends up taking refuge with whoever will protect him.”

Political commentator, Peru

The same commentator also believes that Bellido and Francke are on a collision course, “Bellido is ideological and Franke is more technical, at the moment, Bellido is more interested in Francke staying then Francke leaving, but he has realised that he has a weak position. Castillo will have to be the arbitrator of the inevitable disputes but so far Castillo does not appear decisive enough.”

Patience among Peruvians will be limited. Already in his first week in office, there have been two rallies against the president with demonstrators chanting for impeachment. Divisions of the Congress make this possibility highly unlikely but show the pressure that Castillo will face in the upcoming months.

The political analyst predicted a difficult start to the presidential term, “Castillo is already struggling and there are urgent issues that need managing. Peru Libre will try to distract the people with radicalism and politics but Peru is more complicated than that and I’m not sure Castillo wants a radical agenda, so there is a split between the government and the party. The Congress is also divided. It’s not going to be easy for Castillo.”

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