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Will Castillo’s New Cabinet Inspire Confidence in Peru?

Peruvian President Pedro Castillo on Oct. 6 swore in his new prime minister, Mirtha Vásquez, who took office amid a broader cabinet shuffle. // Photo: Peruvian Government. Peruvian President Pedro Castillo on Oct. 6 swore in his new prime minister, Mirtha Vásquez, who took office amid a broader cabinet shuffle. // Photo: Peruvian Government.

Leftist Peruvian President Pedro Castillo on Oct. 6 dismissed his controversial prime minister, Guido Bellido, replacing him with Mirtha Vásquez, a moderate leftist and former interim president of Congress. Bellido’s ouster came amid a cabinet shuffle in which Castillo also replaced his ministers of mining and labor but left other officials, including Finance Minister Pedro Francke, in place. What do the changes show about the direction of Castillo’s government? Does replacing Bellido and others mean that moderates have won out against far leftists in Castillo’s cabinet, and will the changes reassure investors in Peru? What actions can Vásquez be expected to take as prime minister?

Carlos Arata, partner at Rubio Leguía Normand in Lima: “Pedro Castillo is showing intentions of shifting to more moderate positions. First, he ratified Jorge Velarde as president of the central bank. During his tenure at the central bank, Velarde has shown himself to be a strong defender of a conservative approach to the country’s finances. Also, Bellido’s replacement was a necessary move by Castillo in order to give the markets certain tranquility that Bellido’s and Perú Libre’s agenda will not be pursued as a priority. It is clear that Bellido’s manners and intentions were creating a lot of instability in the country. The last straw was his statements on the renegotiation of the Camisea gas concession agreement (we renegotiate or we expropriate). Castillo had to ask for his resignation; otherwise, Congress was going to demand an explanation from Bellido (and Íber Maraví, the labor minister, who was accused of being a former member of the Shining Path terrorist group). This does not mean that the government is moderating, as certain new members of the cabinet are still on the far left end of the political spectrum. However, these moves do show, on one hand, that the friction inside the two factions is real and the moderates are winning. On the other hand, they show that the government is making efforts to move toward less radical approaches. Although we still need to be vigilant and cautious, it seems that economic policies will be more investor friendly and are looking for a more social approach to the country’s growth.”

Cynthia McClintock, professor of political science and international affairs at The George Washington University: “Castillo’s new cabinet represents an important shift away from the far-left faction of Perú Libre, led by the party’s founder, Vladimir Cerrón. Yet, since his July inauguration, Castillo has sent mixed messages; fears both that he is extremely unprepared for the presidency and that he secretly harbors a radical agenda are widespread. Given that Perú Libre and Verónika Mendoza’s moderate left party hold approximately one-third of the congressional seats, with parties at the center about one-third and parties at the right about one-third, the expectation at Castillo’s inauguration was that he would marginalize Cerrón—an unreconstructed, Cuba-educated Marxist (who was convicted of corruption in Peru). However, Castillo’s first cabinet included not only Bellido, a close ally of Cerrón under investigation for ‘apology for terrorism,’ but far-leftists at the helm of the ministries of culture, energy and mining, the environment, foreign affairs and labor (plus other ministers widely deemed unqualified for their posts). The new cabinet is more broadly based, including not only Prime Minister Vásquez, an environmentalist from a small leftist party and a diplomatic and disciplined former Congress speaker, but also moderates at energy and mining and at production; it retains three ministers close to Mendoza’s party (most importantly, Francke). However, the new interior minister is Cerrón’s lawyer and, as in Castillo’s first cabinet, no minister represents a centrist party. Investors will not be confident unless Castillo’s words and deeds are consistently more moderate. His proclamation of a ‘second agrarian reform’ in Cusco on Oct. 3—the anniversary of the leftist military coup by General Juan Velasco—was not helpful to this end. However, with Castillo’s bold promises, his approval rating in Peru’s interior is in the range of 50 percent—not shabby for a president who tallied only 19 percent of the first-round vote.”

Julio Carrión, associate professor of political science and international relations at the University of Delaware: “The first two months of the Castillo administration were an unqualified political disaster. The perception that Castillo was beholden to Vladimir Cerrón, Perú Libre’s general secretary, undermined his leadership. Moreover, Guido Bellido’s loquacity and penchant for controversy fueled this perception. Castillo started as a weak president, and Bellido dragged him down further. The latest IEP poll showed that only 33 percent of respondents approved of Bellido, and in removing him, Castillo has reasserted his power. The new cabinet gives Perú Libre fewer seats, but it retains some important ones. In Mirtha Vásquez, Castillo has tapped a well-respected politician to reinvent his government. Yet not all his cabinet appointments are beyond dispute. The selection of Luis Barranzuela, Cerrón’s lawyer, as interior minister is highly problematic. His position of influence in the investigation into Cerrón and other Perú Libre leaders for money laundering and illegal campaign financing represents a significant conflict of interest. Only a naïve observer would believe this appointment was accidental and not indicative of Castillo’s unwillingness to break ties with Cerrón and his party. However, it is likely that the new prime minister will adopt a more moderate stance than her predecessor. Mirtha Vásquez already announced that the pursuit of a constituent assembly is not a political priority. The reappointment of Francke as finance minister and Julio Velarde as president of the central bank signals that fiscal and monetary policies will be handled responsibly. Where Bellido was comfortable antagonizing Congress, hoping to ‘exacerbate the contradictions,’ Vásquez will instead seek to build political coalitions in Congress to pursue her agenda. It will not be easy because the radical right has significant representation, but there is a pragmatic center that could strike partial agreements with her and Castillo.”

Ursula Indacochea, director of the Judicial Independence Program at the Due Process of Law Foundation (DPLF): “Undoubtedly, the changes in the cabinet are a clear sign of the government’s willingness to start a dialogue with Congress to seek a minimum consensus that will make the country governable. Mirtha Vásquez is a key piece of this strategy, as she managed to stay afloat as president of Congress at the time of great political instability, at the end of 2019 and throughout the government of former President Sagasti. But in addition, these changes seek to overcome the internal struggle within the executive branch between three groups: the circle of confidants of President Castillo, the Perú Libre party (led by radical leftist Vladimir Cerrón), and sectors of the moderate left, all of which are represented in the cabinet. The evident tensions were proven by investigative journalism, in a report that showed former Prime Minister Bellido boycotting other members of his own cabinet. Vásquez has said the executive branch will reorganize in order to reaffirm the government’s core priorities, which are education, health and housing. However, the president has sent several messages that may upset investors. The first is the idea that promoting a new Constitution is not an immediate priority, but rather a long process, which the government will pursue but on the basis of consensus. The second is that the government will promote a responsible economic policy, which has been confirmed by the permanence of Pedro Francke in charge of the economy. The third is that the government will facilitate environmentally responsible extractive industries and affected communities, which is an important message given Vásquez’s background as an environmental activist.”

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