Peru’s Castillo assumes presidency, pledging economic stability

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LIMA — Pedro Castillo on Wednesday vowed to tackle what he said were persistent social divisions in Peru that dated back to colonial days as he was sworn in as the country’s president, but pledged he would make no radical changes to the economy.

In a speech shortly after he was inaugurated, Castillo, sporting his trademark wide-brimmed hat, struck a conciliatory tone for investors, saying he wanted the state-owned bank to compete with private lenders but that he would maintain economic “order and predictability.”

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Castillo was elected in last month’s vote as a representative of a Marxist party, shaking the political elite and worrying companies fearful of his plans to hike taxes on mining to fund health and education reforms in the world’s second-largest copper producer.

He reassured them on Wednesday there was “not the remotest” plan to nationalize industry but said he would seek “a new pact” with private investors.

He wanted to streamline regulation of the mining industry to improve the local economy with tax revenue and net capital inflows, he added. Peru’s riches needed to be more equitably shared, he said.

“The defeat of the Inca Empire gave rise to the colonial era, it was then… that the castes and differences that persist to this day were established,” he said.

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“The three centuries in which this territory belonged to the Spanish crown, they exploited the minerals that sustained the development of Europe, to a large extent with the labor of many of our grandparents.”

CHALLENGES AHEAD

The son of peasant farmers gave his address amid strict health and security protocols. His inauguration was attended by heads of state and senior ministers from around Latin America.

His challenges are significant. He faces the world’s deadliest COVID-19 outbreak, tensions in his party, and weak congressional support in a starkly divided nation that was split almost in half by a polarized June 6 ballot he won by a margin of just 44,000 votes.

There is intense interest in the make-up of his cabinet of ministers, still under wraps amid horse trading between the radical wing of his Free Peru party and more moderate advisers and allies.

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The cabinet’s swearing in was due to take place shortly after Castillo’s inauguration but his party announced on Wednesday morning that it would be delayed until Friday.

“Castillo’s message will set the guidelines for the start of his government. But the cabinet and team he announces will tell us even more about the direction we’re headed in,” said Jeffrey Radzinsky, a Lima-based governance expert.

Sources close to Castillo have said the economy minister role will likely go to Pedro Francke, a moderate left-leaning economist, who has helped soften the outsider candidate’s image and calm jittery markets in recent months.

J.P. Morgan said in a note that the investment bank expected to review its fiscal and growth forecasts for Peru once Castillo unveiled his cabinet and confirmed whether the current central bank director Julio Velarde – who has been seen as a firm hand on the tiller in Peru through a period of turbulence – remains in post.

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Castillo, 51, edged out right-wing rival Keiko Fujimori in the election, though his win was not confirmed until last week. Fujimori had alleged fraud with no evidence and challenged the result, gaining comparisons with Donald Trump’s tactics after he lost the 2020 U.S. presidential election.

Castillo will have to contend with a fragmented Congress where he lacks support for key pledges, including his plans to redraw the constitution, as well as tensions with the hard-left wing of his party, led by Marxist doctor Vladimir Cerron.

He also faces a balancing act between maintaining the faith of investors while also bolstering government coffers to be able to improve life for the largely rural base that drove his unlikely rise to the presidency.

“Castillo needs to unite the hardcore of his party, but he has to do it without destroying the image the people have of him, which is that he is against radicalism,” Radzinsky said. (Reporting by Marco Aquino; Editing by Adam Jourdan, Marguerita Choy and Rosalba O’Brien)

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