Peru’s overseas bonds rallied the most in a year after President Pedro Castillo replaced a far-left prime minister with a more conventional choice in a bid to improve his administration’s relations with lawmakers and foreign investors, according to a Bloomberg report Oct. 7. Former Head of Congress Mirtha Vasquez was sworn in as Prime Minister, replacing Guido Bellido, a far-left member of Castillo’s left-leaning government who created turmoil last month by threatening to nationalize Peru’s biggest gas field.
President Castillo is keen on building a U.S. $800 million fertilizer plant in the country to help end the country’s dependence on imports. Negotiations with phosphate rock concessionaire Miski Mayo, which is controlled by The Mosaic Co., Tampa, will be central to those efforts, according to a recent report by BNAmericas. Mosaic did not respond to inquiries last week.
Investors are cheering signs that Castillo is seeking a conciliatory approach after the more radical members of his cabinet created fissures with conservative members of Congress and cast doubt on the country’s commitment to foreign investment, according to Bloomberg. Bellido’s exit marks the second high-profile departure from Castillo’s cabinet just a bit more than two months into his presidency as he signals a pragmatic, consensus-building approach in dealings with the energy sector and other industries critical to the economy.
“This is another affirmation of a more pragmatic approach to policy,” said Edwin Gutierrez, the Head of Emerging Market Sovereign Debt at Aberdeen Asset Management in London. For the time being, the cabinet reshuffle is a strong enough signal that Peru will remain a safe place to invest in Latin America, he added.
Castillo named six other new cabinet members, including ministers of mining, work, and interior. Finance Minister Pedro Francke, who is popular with investors, will stay on in the role.
“The changes seem designed to provide more tranquility to the markets,” said Jose Alejandro Godoy, a Professor of Social and Political Sciences at Pacifico University. “We will have a cabinet that engages in more debate, is more open to discussion, closer to a more moderate left.”
New Prime Minister Vasquez, 46, represents the Frente Amplio, or Broad Front coalition, which includes socialists, environmentalists, and center-left politicians
Castillo said the moves would improve “governability” adding that it was time to put Peru’s interests above ideology.
However, there is a risk that Castillo’s moves will rupture relations with his own socialist Peru Libre party, potentially imperiling his agenda in Congress. Waldemar Cerron, a Peru Libre congressman, described the new cabinet appointments as an act of treachery.
“Peru Libre members of Congress don’t support this cabinet, because we consider it to be a betrayal of all the majorities that have waited for many years to come to power,” he told reporters in Lima.