No letup in political risk, as government prepares tax package

PERU - Report 22 Nov 2021 by Alfredo Thorne

When Mirtha Vásquez was chosen by President Pedro Castillo to replace Guido Bellido as prime minister, most analysts took this as an indication that the president was moving toward a more moderate, conciliatory sociopolitical stance, and markets rallied in response. In fact, out of the eight ministers replaced then, six were members of or sympathizers with the leftist moderate political party Juntos por el Perú, and were allied with Finance Minister Pedro Francke.

With Bellido a member of the Perú Libre party and a close ally of that party’s radical leftist pro-Cuba president, Vladimir Cerrón, the change also signaled a split between Castillo, and Cerrón and his party. Against this backdrop, on Vásquez on October 25th attended Congress for the no-confidence vote on her Cabinet. Her speech was filled with propitiatory budget allocations designed to please everyone but representatives of the private sector. While Vásquez committed to working with the private sector, she made no specific mention of any initiatives; the furthest she went was to praise coastal agro-industrial development. (Last Friday in a speech from Ayacucho she also said that she was terminating the concessions to four mines due to conflicts with their surrounding communities, and confirmed her anti-mining and anti-private sector stance.)

Like Bellido, she refrained from mentioning the amendment to the Constitution in her speech and, when questioned about it, indicated that it was not currently a government priority. Securing the rejection of the no-confidence vote was challenging for the government, since Cerrón had instructed Perú Libre’s congressional representatives to vote for it. Although Vásquez had met with all party coalitions ahead of the vote, the odds were still in favor of passage of the no-confidence vote. Peru Libre’s 37 members of Congress, plus 43 from the right-wing political parties—Fuerza Popular, Renovación Popular, and Avanza País—would be enough to carry the vote.

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