Castillo’s government weakens; growth likely to moderate in 2022‒23
Popular support for the government of President Pedro Castillo continues to dwindle, at a surprisingly rapid pace. Last week the government averted an impeachment process in Congress by only six votes. This perilous state has developed only four months after Castillo stepped into office. Without support, and with a significant track record of political mistakes marring Castillo’s short tenure, opposition parties in Congress may soon try again.
We have argued in recent reports that the president has two options: to reach out to a potential new base of political support, by shifting more explicitly to a centrist position (thereby gaining the votes of the centrist political parties that dominate Congress); or to persist with radical leftist rhetoric, while likely continuing to fail to deliver any tangible benefits in terms of public initiatives to the general public, and thereby continuing to invite calls for impeachment. We still believe that the future of this administration is in balance. Yet in light of the latest events, the likelihood of the latter scenario materializing has increased.
We had argued that the midterm elections of October 2nd 2022 would be decisive in determining the political roadmap for the medium term. With 25 regional gubernatorial seats and 1,874 local mayorships to be filled, we believed that this election would determine the political direction of the country for years to come. Depending on the outcome of these elections, we thought Peru would either begin to replicate the economic strategies followed by the so-called Century XXI Socialist countries, such as Venezuela, Cuba and Bolivia, or would choose to retain its free market economy, and align itself with the democratic Pacific Alliance countries.
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