Peru Leftist’s Aide Rejects Hugo Chavez Comparison: ‘No Way’

Pedro Francke knows exactly what investors in Peru and abroad think of his boss, Pedro Castillo: that he’s an extreme leftist with Marxist ties who will sink the Andean country into Venezuela-style economic chaos if elected president.

So Francke wasted no time in his first day on the job as Castillo’s top economic adviser to try to dispel these notions.

“In no way is he another Hugo Chavez,” Francke, who’s worked as an economist at the World Bank and Peruvian central bank, said in an interview on Thursday. “We don’t want to nationalize the mining and oil industries, or other sectors. We don’t want generalized price controls or a dual foreign-exchange rate or to impose currency controls like Chavez did.”

Castillo, who is in a tight race with rival Keiko Fujimori ahead of Sunday’s vote, would pay the nation’s debts, respect the central bank’s autonomy and leave the mining industry -- the engine of the Peruvian economy -- in the hands of the private sector, according to Francke. He framed Castillo, a school teacher from Cajamarca, as a politician more akin to the leftist Latin American leaders of recent years who have presided over successful economies and falling poverty rates -- Bolivia’s Evo Morales, Uruguay’s Jose “Pepe” Mujica and Brazil’s Luiz Inacio Lula da Silva.

Peru Leftist’s Aide Rejects Hugo Chavez Comparison: ‘No Way’

To be sure, Francke is only one of the many people who are advising the candidate, and Castillo’s Free Peru party contains some hardline Marxists.

Market Swings

Peru’s markets have been volatile since Castillo unexpectedly won the first-round of the election in April, with a sell-off in bonds and currency whenever he gained in polls. He has called for higher taxes on foreign mining companies that operate in Peru, and for a massive rise in health and education spending.

Local assets gained Friday, with the sol leading advances among emerging-market peers. Local currency bonds due in 10 years rose 1.6 cents to trade at 117 cents on the dollar, the highest since March 26, amid a supportive global market backdrop. Dollar-denominated debt and the nation’s benchmark stock index also rose.

Francke’s comments “are playing a role” in the sol’s gains Friday, said Daniel Rico, a strategist at RBC Capital Markets in New York. “It might prove that it will be hard for him to go to the extreme left without the whole support of congress.”

Castillo’s rival Keiko Fujimori is much more popular among investors and wealthy Peruvians, while Castillo has more support among the poor, and in the countryside.

“There’s a lot of distrust, but when the election is over, there will be more tranquility and more understanding,” Francke said. “When the campaign ends and those aspects are cleared up, political tensions will subside and allow markets to function better.”

New Adviser

Francke, 60, was appointed by Castillo three days ahead of the June 6 election. He previously advised the party led by Veronika Mendoza, a left-wing presidential candidate who came sixth in the first round of the election.

Hugo Chavez, a former soldier who led an unsuccessful coup in 1992, upended Venezuela’s two-party political system when he won the election in 1998 on a platform to help the poor. Over the next 15 years he changed the constitution, stripped institutions of their autonomy, persecuted opponents, nationalized large swathes of the economy and implemented strict capital controls.

He named Nicolas Maduro as his successor before passing away in 2013.

Venezuela’s economy has been in recession ever since and the widespread malaise and poverty has driven an estimated 5 million people to leave.

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