Peru’s far-left president tried to woo investors, but actions may betray his words

Peru’s far-left President Pedro Castillo deserves credit for trying to stop his country’s massive capital flight by vowing during a U.S. visit that he will not nationalize private companies. But there are good reasons why his words failed to calm down anxious investors.

Castillo, a former rural elementary school teacher, whose ruling party defines itself as “leftist socialist” and “embracing Marxism,” said in his Sept. 20 speech in Washington to the Organization of American States (OAS) that, “We’re not communists. We have not come to expropriate anybody. We have not come to scare away investments.”

Those were much-needed assurances, considering Peru has lost at least $13 billion in capital flight since January, according to the country’s central bank.

Many Peruvians are sending their savings abroad and buying apartments in Madrid and Miami, fearing that Castillo’s 2-month-old government will lead to a Venezuelanstyle economic disaster. Many remember that late Venezuelan ruler Hugo Chavez had also promised at the beginning of his term not to nationalize companies, only to start doing so shortly thereafter.

When I interviewed Pedro Francke, Peru’s economy and finance minister, a few days ago, he was very explicit about the country’s commitment to respect basic economic freedoms.

Francke, who was traveling with Castillo to Washington and New York, told me that Peru “has a market economy” and will pursue “fiscally responsible” policies. He added, “We have a public debt that is one of Latin America’s lowest, and we will keep it that way.”

But the business community remains nervous because many fear that Castillo is a puppet of his extreme-left Perú Libre party leader, Vladimir Cerrón.

Castillo was picked as a candidate by Cerrón, a Cuban-trained doctor who was barred from running himself because of a conviction on corruption charges. Castillo’s prime minister and several other key cabinet members, as well as most of the party’s legislators in Congress, are Cerrón loyalists.

In recent days, Cerrón and his party, following the Venezuelan playbook, launched a campaign to collect millions of signatures calling for a referendum to convene a constitutional assembly and change the constitution. However, such an assembly would be illegal, because Peru’s constitution specifically states that only Congress can decide to change the constitution.

When I asked Francke why should anybody trust that Castillo will prevail over Cerrón and not do anything outside the constitution, the economy minister responded that, “Pedro Castillo’s government is one thing, and the party is another. Like in any of our democracies, there is a separation between the government and the party.”

Asked more specifically whether Castillo will go ahead with his campaign promise to try convene a Constitutional Assembly with the support of Congress, as the law demands, Francke suggested that such plan no longer is a government priority.

Francke added that when Castillo’s prime minister, Guido Bellido, announced the government’s top priorities during the cabinet’s swearingin ceremony a few weeks ago, “The issue of the Constituent Assembly was not included in his message. It’s not part of the government program that was presented to the Congress and to the country.”

When I asked Francke about a bill presented by Perú Libre legislators to seek to regulate the media, the economy minister told me, “I’ve talked with President Castillo about this, and he showed his disagreement with that situation.”

All of these are positive messages from both from Castillo and from his economy minister.

Problem is, some of Castillo’s most recent actions raise concerns among business people and pro-democracy Peruvians. Why did Castillo meet with the dictators of Cuba and Venezuela during his trip to Mexico on his way to the United States, and not with any high-ranking Biden administration officials in Washington or New York?, they ask.

Most important, why didn’t Castillo use his first trip abroad to make a clear statement that he won’t seek an unconstitutional referendum to change the constitution?

To the contrary, Castillo said in his speech to the OAS that countries need to “self-convene” to update their constitutions. He has not given any extended interview or press conference to clarify that issue since taking office.

If Castillo wants to stop the capital flight, attract investments and reduce poverty, the most important thing he could do would be to nix his plan to change the constitution. That would make his promarket and pro-democracy statements much more credible.

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