Moody’s assured this Monday that sees “unlikely” that the president of Peru, Pedro Castillo, complete his term in 2026. Through a statement, the risk rating agency assured that the country is experiencing a polarized political scenario that might lead to the president being vacated or resigning.
“Castillo is unlikely to finish his term, which runs until 2026, and that he will be removed or resign. We also expect that Peru’s orthodox macroeconomic policy framework will continue to support the country’s solvency.”
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Moody’s remembered that Castillo He has already faced two vacancy requests, as well as criticism for the questionable elections of his ministers. He also highlighted that since the beginning of his administration he has already appointed four cabinets.
On the other hand, Moody’s He highlighted the monetary policy of the Central Reserve Bank and the actions of the Ministry of Economy and Finance, which give investors “credibility” during Castillo’s term.
The report also projects that, in the event of a scenario with the departure of the president, political uncertainty would increase and depending on the results of the new elections “would increase the risk perception of investors regarding Peru”. However, the agency considers that “economic sentiment would recover […] [porque] the business community is eager to overcome the intense political uncertainty that has characterized the Castillo administration”.
signals
For the former Minister of Economy and Finance Alonso Segura, this statement explains the political situation in Peru in the eyes of the foreign investor. “Moody’s points out the risks that exist in Peru. He says that in his reading [Castillo] will not finish his mandate, that if that were to happen there would be uncertainty, but that the country will maintain its foundations“, he claimed.
Thus, investors would already be aware that, in the event of a possible exit from Castilloa new period of uncertainty and falling confidence would begin, but that Peruvian macroeconomic stability might solve this scenario.
“The point is that Moody’s points out that there are political factors of governability that might affect the economic situation […] but he also points out that Peru might not be worse off with a change of government”, explained Luis Miguel Castilla, former Minister of Economy and Finance.
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According to Hugo Perea, chief economist at BBVA Research, the drop in confidence in this situation might indeed reduce interest in making investments in Peru.
“Such a situation affects the possibilities of growth. If the policies that the Government will implement are not clear, businessmen live with uncertainty and that scares investment”, he remarked.
