Will President Boluarte be impeached? Economy booms in Q1 2025, but will slow in H2; BCRP to stand pat in 2025; Congress set to approve another pension fund withdrawal
Politics took center stage in Peru in May. This report analyzes the key issues. In the first section, we discuss the Cabinet crisis, and whether it constitutes a preamble for the impeachment of President Dina Boluarte, whose governance has become fragile. Next, we discuss the robust 4.7% real GDP growth rate in March, and whether this marks a new trend. Some commentators believe that the growth figure indicates a divide between politics and economics, but this is not our view. Finally, we discuss the interest rate cut executed on May 8th by the Board of the Banco Central de Reserva del Perú, and suggest that this may be the Board’s final cut for some time. We also discuss the likelihood of an eighth pension fund withdrawal.
On May 4th, the bodies of 13 missing miners, employees of Empresa R&R Sociedad Anonima Cerrada (SAC, a non-public company), a Peruvian firm that provided security for the Peruvian Poderosa gold mining company, were discovered in a mineshaft. The men, who had been declared missing several weeks earlier, were found in a mineshaft at the company’s gold mine in the province of Pataz, in the La Libertad region. Autopsy results indicated that they had been killed around a week prior to discovery of their bodies. Moreover, Pataz residents indicated that R&R employees, rather than the police, found the bodies. The Pataz region has been troubled by violent extorsion gangs in recent times, which have blown up electricity towers and perpetrated other crimes, in a bid to gain control of the Poderosa gold mine. The incident has shaken the government to its core, exposing serious failings in its internal security and mining formalization strategies. News reports from Pataz have indicated that four gangs have taken over the mine, and are intent on pushing formal mining operations out of the territory. Many regard the killing of these 13 miners as a warning to the Poderosa company and to the government.
The Instituto Nacional de Estadística e Informática’s March real GDP report confirmed that the economy outperformed in Q1 2025. According to this report, the economy grew at 3.9% oya in this period, and by a whopping 4.7% in March. This was the best March performance since 2021, when the economy rebounded from the pandemic-induced recession that started in 2020. Some commentators argue that this confirms the divide between politics and the economy. However, the seasonal effect from the Easter holiday (in April this year, and March in 2024) artificially boosted the March figures, adding two more working days to the month and increasing overall output. Using INEI’s seasonally adjusted time series to calculate q/q real-GDP performance in Q1 2025 yields less impressive results. In this comparison, real GDP advanced only 2.9% in Q1 2025, from 4.5% in Q4 2024, 2.3% in Q3 and 7% in Q2. Moreover, close inspection of the m/m seasonally adjusted comparison in Q1 2025 also indicates that growth has been less impressive than indicated by the y/y comparison.
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