President Castillo reshuffles Cabinet; real GDP growth forecast revised up

PERU - Report 21 Oct 2021 by Alfredo Thorne

President Pedro Castillo reshuffled his Cabinet on October 6th. This followed a two-month period in which Castillo’s main challenges have originated in his own Cabinet, especially among representatives of his Perú Libre party, and the party’s head, pro-Cuban left-wing radical Vladimir Cerrón. While Castillo and Cerrón have a lot in common in terms of political outlook, Cerrón’s only objective is to change the Constitution and to perpetuate Perú Libre’s mandate, replicating the Bolivian, Cuban and Venezuelan regimes. Although Castillo also supports constitutional change in principle, he will be aware of the risks of pushing for a Constitutional Assembly without the backing of the public, and thereby risking impeachment, as we discussed in our September report.

Although the Cabinet reshuffle assuaged market jitters, it remains unclear how much good news the move represents. The new Cabinet must survive the no-confidence vote in Congress due on October 25th or November 3rd before it is officially seated. But we expect Congress to vote to confirm the appointments.

While the Cabinet’s focus on constitutional change has taken a back seat, Perú Libre continues to collect signatures, with the objective of submitting a citizens’ bill calling for a referendum on a Constitutional Assembly sometime in late 2022 (after the October 7th local elections). The split between the Castillo government’s and Perú Libre’s objectives is much sharper now. It is apparent that Castillo’s short-term objective is to increase his popular support and avert the impeachment being pushed by the radical right-wing parties. The side effect is that he has risked the split of his coalition in Congress (it currently comprises 37 members from Perú Libre and 10 from the moderate left-wing political parties).

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