Finance

Peru’s new president confirms moderate as finance minister

Peru updates

Peru’s new president Pedro Castillo has appointed a moderate leftist as his finance minister in a move that might go some way to calming markets after a turbulent couple of days.

In a late-night ceremony in Lima on Friday, Castillo confirmed former World Bank economist Pedro Francke in the post.

Francke had been widely expected to get the job — until Thursday, when Castillo unexpectedly named a hardline leftist, Guido Bellido, as his prime minister. That threw the ministerial appointments into doubt: moderates, including Francke, appeared to balk at the idea of working alongside Bellido.

When Castillo confirmed most of his cabinet on Thursday night, Francke was not there. He left the venue shortly before the swearing-in ceremony, raising questions over whether he had refused to take the job or had not been offered it. The post of finance minister was left vacant.

On Friday, markets responded badly. The Peruvian stock exchange dropped by as much as 6 per cent while the currency, the sol, posted its biggest one-day loss in seven years and, for the first time ever, fell through the psychological barrier of four soles to the dollar.

After markets closed, Bellido extended a peace offering to Francke, saying the 60-year-old economist had “our complete backing” to implement the economic programme that Castillo campaigned on in the second round of the election, which he won on June 6.

That programme is less radical than an earlier version, which had scared many investors, although it still calls for sweeping changes to the mining sector in Peru, the world’s second-biggest producer of copper.

Francke’s appointment comes after three roller-coaster days in Peru.

On Wednesday — the 200th anniversary of the nation’s independence from Spanish rule — Castillo was sworn into office in a ceremony rich in symbolism. A rural primary school teacher who has never held public office before, he hailed his rise to power as a victory for Peru’s downtrodden.

The following day he stunned everyone with his appointment of Bellido, a Marxist congressman viewed by many as an apologist for Shining Path, the Maoist guerrilla group that waged a bloody war against the Peruvian state in the 1970s and 1980s.

The appointment plunged Castillo’s government into crisis almost as soon as it had begun, alienating potential moderate and centrist allies.

Francke’s appointment may go some way to repairing that damage but Castillo is still likely to struggle to get his agenda through parliament.

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