Boluarte survives; focus shifts to the economy; BCRP to cut rates in April

PERU - Report 21 Mar 2023 by Alfredo Thorne

In this report, we focus on our new forecasts. We first discuss how long President Dina Boluarte is likely to remain in power; then assess whether the Peruvian economy has fallen into recession; and, finally discuss our outlook for policy rate management by the Banco Central de Reserva del Perú (BCRP).

Against all odds, on March 17th Boluarte completed her first 100 days in office. Although many analysts, ourselves included, expected a short tenure, the president has clung tenaciously to office. But it remains unclear how much longer she can stay. We argue that her political survival owes largely to exogenous factors. Nevertheless, she could legitimize her position as president, and galvanize her medium-term political future.

Congress has been unable to agree on a constitutional amendment to call for early presidential and congressional elections. Moreover, public protests against Boluarte and her government have lost momentum, and have failed to turn into a popular movement that would force her to resign. Third, public sentiment has turned against former president Pedro Castillo. Finally, and probably most relevant, the floods resulting from Cyclone Yaku’s hitting the north of the country in early March have shifted public focus to the government’s ability to mitigate the repercussions of this natural disaster, and to support affected families.

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