Institutional crisis in Peru: "The population must be vigilant so that the constitutional mandate is fully complied with”

After the latest political events in Peru, many are wondering what the future of the country and the South American region will look like, as they watch with astonishment and fear. More and more leaders of the Sao Paulo Forum and the Puebla Group are taking over countries that had been stable and democratic.

To better understand what we can expect after the arrest of coup leader Pedro Castillo, we interviewed the renowned Peruvian-American lawyer and analyst Victor de la Flor Kivaki, who was kind enough to give us his opinion on the possible repercussions of all this drama in economic and legal terms.

Question (Q): We have lived through a really dramatic but at the same time hopeful week for the region, with the six-year sentence for corruption against the Argentine vice-president, Cristina Fernández de Kirchner, and the attempted coup and immediate arrest of Pedro Castillo in Peru. The latter has not ceased to provoke political and identity crises since his rise to power. We all remember Castillo's unfortunate words at his inauguration, about his rejection of his country's Spanish past, a history rich in progress and syncretism between two different cultures.

Answer (R): Very true. It was really unfortunate how he began his term in office by disavowing our Hispanic past. Today, Peru is a multicultural country that should be proud of its Inca and Spanish past. In addition, during all this time he has managed to syncretize other great cultures, such as Asian, African and European. On the other hand, the populism flaunted by Castillo and the constant confrontation brought about by this president are nothing new. Castillo has the training of a union leader, it is his life experience, so the only way to reach agreements, very much in his style, is to try to put the opponent in an untenable situation and so to reestablish the Republic

Q: In Peru, there have been two failed impeachment attempts against Castillo in just 16 months, which had already generated a major political crisis and led rating agencies such as Fitch to downgrade the country's credit rating last month. What will happen now, with the new president?

A: Peru is going through a political crisis that has lasted for more than five years, with an incessant struggle between the Executive and the Legislative Branches; the latter has used vacancy motions before to force a sitting president out of office. This was the case with Pedro Pablo Kuczynski, who resigned before the second vacancy request against him was discussed in Congress. His successor, Martin Vizcarra, was removed from office when a second vacancy motion was approved. Subsequently, Congress presented two motions of vacancy against Pedro Castillo, which were not approved; but a third motion was pending discussion in Congress, which could not be carried out due to the self-coup d'état that Pedro Castillo initiated hours before the motion.

The new president is now the sixth person to hold this position in the last five years. I could not determine what she will or could do to solve these crises, which entail a lack of confidence in the Executive office. She was Castillo's vice-president and therefore has, theoretically, the same programmatic plan. However, in her first message to the nation she indicated that she wants to have a government of national unity, hopefully this will be the case. The population must be vigilant to ensure that the constitutional mandate is fully complied with.

Q: This dysfunctional political system has resulted, experts say, in the deterioration of country risk and the depreciation of the local currency, which could compromise the evolution of GDP in 2023. In fact, a slowdown is already estimated, with a growth rate of 2.1%. Is there hope for economic improvement after Castillo's departure?

A: In Peru it has always been said that the national economy is on autopilot and on separate strings with politics. Perhaps this was true before, but in the last 16 months, with the Castillo government, it has not been the case. The economy has been hit not only by the political crisis generated by this eternal fight between powers, but mainly by the evident and serious accusations of corruption against Castillo's government, including against Castillo himself, his closest family members and advisors, collaborators, ministers, etc. Never before has a political environment become so entrenched and so fast while deploying an omnivorous apparatus, whose intention is to take as much as it can as long as it is allowed.

The Central Reserve Bank of Peru, one of the few serious and reliable institutions of the state apparatus, had already issued its estimates in early December, in which the GDP growth expectation for 2022 was still very low, around 2.6%-2,7%, and for 2023 this range was between 2.3% and 2.8%.

Q: Will this situation generate an increase in Peruvian emigrants?

A: Yes. Peruvian immigration to the United States increased considerably during the Pedro Castillo administration. According to data from the Customs and Border Protection Agency, in the period between January and June 2022, 8,262 Peruvian citizens arrived to the U.S. illegally. This is a record in the case of my nationals, given that the number of illegal crossings by Peruvians has been very low in the last 20 years. It is a reflection of Peru's growing political instability, endemic corruption, rampant inflation and high crime rate.

Many Peruvian businessmen and entrepreneurs have also felt the need to seek economic refuge in the United States. I have personally been able to represent several businessmen and entrepreneurs in the last few months who came looking to open new ways of doing business and protect their assets. It is important to advise them on federal, state and local regulations, corporate issues, contracts, international trade, franchising, real estate and other business issues.