Peru President’s Call for Early Elections Fails to Curb Chaos

Stephan Kueffner and Matthew Bristow
·4 min read
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(Bloomberg) -- The violent chaos roiling Peru spread on Monday after President Dina Boluarte’s call for early elections failed to calm demonstrators protesting against her five-day old government.

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Crowds blocked highways and massed in city centers in several regions of the Andean nation, and at least four people were killed as security forces tried to reimpose order, according to the Health Ministry.

Demonstrations have gathered momentum since Pedro Castillo of the socialist Peru Libre party was ousted from the presidency and then arrested on Dec. 7. His supporters are calling for his release from the police base where he is being detained, the dissolution of congress, early elections and a rewrite of the constitution.

Read more: Impeached, Jailed, Wanted: President Is a Dangerous Job in Peru

In an address late Sunday night, Boluarte called for elections to be brought forward two years to 2024, and also imposed a state of emergency in in some Castillo strongholds where protests are most intense. Boluarte was elected as Castillo’s vice president, for a term that expires in 2026.

“We see an escalation of political confrontation that’s not healthy for the country,” Boluarte said in her address.

Protesters have blocked key highways that connect Lima and the country’s main port with agricultural heartlands, and clashed with police in riot gear in downtown Lima. A breach of security by protesters in Arequipa forced the local airport to close.

The developments over the last week underscore Peru’s long-running political crisis that has seen congress continually confront sitting presidents for the better part of a decade, with the last person to fully finish his term being Ollanta Humala in 2016. Boluarte is the nation’s sixth head of state since the start of 2018.

To try to defuse the crisis, Boluarte’s government submitted a bill to congress which would allow early elections.

“It’s urgent to carry out democratic and constitutional changes in the congress, fundamentally obeying the citizens’ sentiment,” the cover note accompanying the text of bill read. It would need 87 votes from the 130 members of the unicameral legislature to pass.

Market Reaction

Peru’s stocks, bonds and currency all weakened Monday, with the selloff in stocks made worse by lower copper prices.

The magnitude of the protests has been surprising, said Sarah Glendon, senior analyst at Columbia Threadneedle Investments in New York.

“The protests really matter because if they are prolonged and if they are big, then they can have an impact on fundamentals,” she said.

The call for early elections is “the right thing to do,” keeping the overall look for markets in 2023 “fairly stable,” Daniel Rico, a FX strategist at RBC Capital Markets, said in response to written questions.

Ratings agency S&P Global Ratings Monday revised the nation’s outlook to negative from stable, citing increased risks to institutional stability, but kept its rating two notches above junk territory at BBB, in line with Panama and Uruguay.

Mines and Agriculture

The demonstrations are affecting harvesting, packing and transport to the port of perishable goods, said Gabriel Amaro, head of Peru’s agricultural producers, in reply to written questions. Peru is a major exporter of agricultural goods including blueberries, avocados, grapes and asparagus.

The political unrest also threatens to inflame simmering community tensions in mining areas. Peru’s rise to become a major producer of copper, zinc and silver has been hampered by sometimes-bloody protests and sporadic roadblocks as indigenous groups vent frustrations over what they see as insufficient compensation for land being used by mining companies.

Antamina, the giant copper-zinc venture owned by BHP Group and Glencore Plc, was operating normally Monday, Chief Executive Office Victor Gobitz said in an emailed response to questions. Hochschild Mining Plc’s two underground mines in southern Peru were also unaffected by political protests. MMG Ltd.’s Las Bambas copper mine — the target of a multiple community protests since it opened in 2016 — didn’t immediately respond to a request for comment.

Read more: Ex-Central Bank Economist Named Peru’s New Finance Chief

Street Protests

Castillo’s approval ratings had fallen to about 25% by the time he was impeached, but he did still enjoy significant backing among the poorest farmers and some other groups such as teachers. Many of them resent Boluarte for having ditched Castillo when he attempted to dissolve congress.

Via Twitter, Castillo Monday called his running mate a “usurper” and complained that he was “humiliated, kept incommunicado, mistreated and kidnapped.”

--With assistance from James Attwood, Maria Elena Vizcaino and Leda Alvim.

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