Newly sworn-in President Boluarte is likely to face challenges similar to those of her predecessor, meaning another presidential transition is possible before 2026
Firms should closely monitor the transition period, which is likely to set the tone for the upcoming months. If Boluarte selects moderate, technocratic Cabinet members, particularly for the finance ministry, it will be a positive signal that she is willing to play ball with Congress and could remain in the presidency until the end of the term. This would likely improve investment appetite and help ensure a more stable PEN. If, on the other hand, she elects a more ideological, left-leaning Cabinet with little public sector experience, firms should brace themselves for echoes of the Castillo presidency, with extended political volatility severely impacting government operations and weakening investment sentiment. For now, firms should continue to rely on scenario planning as the dust settles after the crisis and as what we can expect under a Boluarte administration becomes clearer.
- After attempting to dissolve Congress on unconstitutional grounds, former President Pedro Castillo has been removed from office and arrested for an attempted coup. As expected, he was replaced by former Vice President Dina Boluarte, who was sworn in on December 7, mere hours after Castillo’s impeachment. Per Peru’s Constitution, Boluarte is slated to finish out Castillo’s presidential term, which ends in July 2026.
- Following Castillo’s announcement, several members of his Cabinet resigned, including the ministers of finance, justice, labor, and foreign affairs, as well as the head of the armed forces. Peru’s constitutional tribunal declared the dissolution of Congress a “coup,” enabling Congress to follow through with the scheduled impeachment vote. While 87 votes were needed to impeach Castillo, 101 of 130 members of Congress supported the impeachment.
- Castillo’s 18 months in office were characterized by high levels of political turbulence. Numerous Cabinet shake-ups crippled public sector operations, while a fragmented Congress led to ongoing political gridlock. Boluarte is seen as a more pragmatic and experienced political figure. While she was initially investigated under similar corruption allegations as Castillo, the cases against her were archived earlier this week, fueling speculation that she was bracing to step up to the presidency. Still, she will face an uphill battle as she takes the reins of Peru’s government.
Castillo took the country by surprise with his attempt to dissolve Congress and rule by decree ahead of the impeachment vote. An increasingly isolated president, his failure to take over the government was largely a forgone conclusion; Castillo lacked support from other key centers of power, including the Peruvian population. Still, there were structural factors at play—he is one of five presidents that the country has had in seven years. In Peru, removing a president is easier than almost anywhere in the world, and the country’s unicameral system often pits the executive and the legislative against each other. As Boluarte prepares to run her administration, none of these factors have changed. Given that her corruption cases were archived, she likely currently has political support, but the tides can easily change in Peru, particularly since she is not currently affiliated with a political party. Moreover, like Castillo, she lacks popular support, which could lead to another push for early elections. While largely regarded as more politically savvy than Castillo, Boluarte is likely to have a short honeymoon period and could soon face similar challenges to her presidency as her predecessor. To that end, we cannot rule out another presidential transition before 2026.
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