Peru Politics January 2018

Peru

Peru: President Kuczynski reshuffles cabinet after surviving impeachment vote

January 16, 2018

Peruvian center-right President Pedro Pablo Kuczynski reshuffled his cabinet on 9 January, replacing 8 of his 19 Cabinet members to form what he called a “cabinet of reconciliation”. The President has been under pressure since his links to Odebrecht were uncovered, culminating in a motion for impeachment on 21 December. Kuczynski managed to avert impeachment thanks to a breakaway group of 10 opposition lawmakers, led by Kenji Fujimori, who abstained from voting with his party for the measure. Kenji Fujimori is the son of controversial jailed former President Alberto Fujimori, who was subsequently pardoned by the president a few days after the vote. Fujimori is a polarizing figure in Peru, and the pardon sparked political outrage and protests in part of the society. Both the Finance and Trade Ministers kept their posts in the on 9 January reshuffle, which suggests that economic policy is likely to be unaffected. However, due to the clash between Kuczynski and the main opposition in parliament, it could become harder to pass needed reforms.

The actions against President Kuczynski stemmed from his connection to Odebrecht, a Brazilian conglomerate implicated in a vast corruption scandal that had repercussions across Latin America. In October, President Kuczynski declared in writing that he had no links to Odebrecht. However, in December documents were revealed showing that Odebrecht had awarded consultancy contracts to companies linked to Kuczynski. After these revelations, Kuczynski admitted he had links with these companies, but he also denied any corruption. President Kuczynski survived the impeachment vote, as lawmakers fell short of the two-thirds majority required to remove the president from office. He subsequently pardoned Alberto Fujimori on 24 December.

Although President Kuczynski gave medical reasons for Fujimori’s pardon on humanitarian grounds, political observers interpreted his decision as a successful attempt to guarantee his survival by striking a political deal with Fujimori’s son Kenji Fujimori, likely reached before the impeachment vote. Kenji Fujimori is the brother of Keiko Fujimori, leader of the right-wing Popular Force party (FP). The two siblings lead separate factions of the party, and their political rivalry manifested itself in their opposing views on the motion of impeachment.

Alberto Fujimori was serving a 25-year prison sentence for corruption and complicity in a death squad, for which he ended up serving 10 years. Fujimori, who was president from 1990 to 2000, is accused by critics of having turned Peru into an autocracy, corruption and engaging in numerous human rights violations. His supporters, however, highlight his fight against hyperinflation and the Maoist terrorism group Shining Path, as well as his successful management of the economy. Some polls suggested that more than half the population approved of Kuczynski’s pardon of Fujimori. Nevertheless, the move prompted large street protests and led to several Ministers, members of congress and officials to resign.

It is uncertain whether President Kuczynski can now count on smooth political sailing, as he will remain dependent on at least part of the Fujimorista vote in the Congress. Although there is substantial agreement on the direction of macroeconomic policy between Kuczynski and the FP, it remains to be seen if the turbulent past few weeks will affect the relationship between the president and the congress. Since the beginning of his term on 28 July 2016, Kuczynski has struggled to secure support from lawmakers, as his center-right Peruvians For Change party (PPK) holds just 18 out of 130 seats, while the FP holds an absolute majority of 71.

However, Peru badly needs economic reforms, and the government has delivered too few, mainly cutting some red tape for public services. Structural reforms should focus on upgrading infrastructure, increasing public sector efficiency and labor market flexibility, and improving the business environment. Growth is firming up after being hit in the first half of 2017 by the effects of the Coastal El Niño, and it would greatly benefit from political stability and a solid reformist agenda.


Author: Massimo Bassetti, Economist

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