Advice for Peru’s New President

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More than a month after citizens went to the polls, Pedro Castillo has been named the winner of Peru’s presidential runoff. The former teacher ran as a champion of the populist left. As well as complaining of election fraud (despite evidence to the contrary), his opponents have played up fears that he will lead the country toward expropriations and communism. He should aim to prove them wrong by choosing moderation, however difficult this might be. Otherwise, the country’s prospects are bleak.

Today Peru is more divided — along geographic and ideological lines — than it has been in decades. Better-off coastal regions and the urban elite are at odds with Castillo’s rural strongholds. There are 10 political parties in a splintered 130-seat legislature. Last year, the country managed three presidents in a week. Castillo has to contend with this institutional fragility and the resentments that entrench it. His party is the largest in Congress, but has only 37 seats.

The new president must apply his paper-thin victory to running a country that has logged the world’s worst coronavirus death rate and remains in a state of emergency. The economy shrank more than 11% in 2020 because of the pandemic; lockdowns meant that jobs disappeared, leaving nearly a third of the population in poverty.

Against the odds, a president with scant political experience will need to build an effective government. He’s suggested that, having campaigned on the left, he will tack to the center. He should do exactly that, with policies and appointments alike.

The first priority for policy is public health. At the outset of the pandemic, Peru had fewer doctors and intensive care beds than others in the region and spent less on health care. Francisco Sagasti, the caretaker president, says the country has secured enough vaccines to provide for Peru’s population over 12 by the end of the year. But troublesome Covid-19 variants loom. Castillo needs to accelerate the supply of vaccines and distribute them efficiently. Western governments should do everything they can to help.

Smart appointments would enable the new president to broaden his support and debunk the claims of rival Keiko Fujimori (daughter of jailed former President Alberto Fujimori), who’s linked Castillo to Venezuela and Peru’s Maoist insurgency of the 1980s. Former World Bank economist Pedro Francke has been advising the new president and might be the new finance minister; he’s been doing the rounds with investors, ruling out expropriation and capital controls. Castillo has also said he’s willing to let Julio Velarde, the well-regarded head of Peru’s central bank, stay in his job.

The new president should go further — staffing his cabinet not just with party loyalists and a sprinkling of technocrats, but also appointing experienced figures with establishment credentials, while keeping extreme voices at a distance. Willing candidates will be hard to find and the president’s more fervent supporters will be uncomfortable with this. Nonetheless, it’s Castillo’s best course.

Beyond the pandemic, the government has to grapple with an acute shortage of jobs and with a daunting agenda of overdue and contentious reform — especially of education, pensions and fiscal management. He’ll need to keep his supporters happy while maintaining the confidence of foreign investors and creditors. Even if everything goes right, none of that will be easy. Without a broader base of support and competent people in the right jobs, Castillo is certain to fail.

Editorials are written by the Bloomberg Opinion editorial board.

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