The political environment in February was marked by the revelation of alleged cases of corruption in the presidential circle and by the swearing in of two Cabinets in less than two weeks. Last weekend, the lobbyist Karelim López, used the legal mechanism of substantial assistance in exchange for a sentence reduction and declared that there is a criminal organization operating within the Ministry of Transport and Communications, directly involving President Castillo.
This situation has reinforced a series of acts of political control from Congress. Among these, the pressure for Juan Fransciso Silva (Minister of Transport and Communications) to step down; furthermore, the accusation of President Castillo for treason and constitutional infringement. It’s likely that this dynamic of interpellations and censure motions will continue in weeks to come.
This is the context within which the Torres Cabinet will present itself on March 8 before the Plenary of the Congress for the investiture vote. Despite the technical and moral questions concerning the composition of the Cabinet, the investiture vote is expected to win, in order to avoid the constitutional dissolution of Congress. Tensions between the Executive and the Legislative are expected to stay high.
In the face of alleged cases of corruption, the risk of a crisis of governance remains small in the short term. Although the legitimacy of a presidential impeachment currently promoted by the opposition is growing, there are currently not the 87 votes necessary to remove Castillo from his position. In consequence, it is expected that a scenario of prolonged mediocrity will persist, predominated by deterioration, scandals and erratic decisions.
Last month, we identified four pieces of good news for the business environment: (i) lower prices of certain imported goods, (ii) lower political risk, (iii) improved business confidence, and (iv) some stabilization in local financial variables.
Six months into the administration, signs of an impending deterioration in the relationship between the Executive and Congress are starting to surface.
After a challenging start of the year, characterized by social conflicts and heavy rains, the Peruvian economy has begun to show signs of recovery, albeit at a slow pace.
