Peru - Castillo’s moderate policy advisors are winning

Interviews with officials plus a new campaign document suggest Castillo is stepping away from the extremes of his party. But “moderate” is relative and still represents change.

Over the past two weeks, I’ve worked with Mitra Taj, an independent journalist based in Peru, to interview people in and around the two campaigns in Peru. The public perception that there is disorganization within the Castillo campaign and rivalries among potential advisors is absolutely true. The center and center-left won the internal campaign battles as Castillo’s lead over Fujimori shrank in opinion polls.

Yesterday evening, Pedro Castillo and Peru Libre published a plan for governing the first 100 days in office that is significantly more moderate than the one Vladimir Cerrón wrote and published prior to the first round. In a change many will find positive, unlike the previous plan, the first paragraph of the new plan doesn’t defend Marxism.

Above: The opening paragraph of Castillo’s new plan

A day earlier, Castillo dismissed Cerrón as having “nothing to do” with his evolving government plan in an interview and announced that a moderate left-leaning economist whom Cerrón had criticized hours, Kurt Burneo, would be joining his new team of advisors.

Kurt Burneo was finance minister under Alejandro Toledo and a production minister under Ollanta Humala, both centrist governments, and had been proposed by a moderate ally of Castillo. Other advisors whom Castillo has been evaluating bringing onto his team of advisors include Pedro Francke and Oscar Dancourt, both of whom were key members of Verónika Mendoza's team of advisors. (Mendoza’s party, Juntos por el Perú, has a large group of advisors armed with proposals and has offered to provide Castillo their support without conditions) 

The document on the 100 days, and Castillo’s defiance of Cerrón in naming Burneo as an advisor, are his first concrete steps toward moderating. However, Castillo has still not released a full government plan or unveiled all of his new team of advisors, indicating there is still friction within the campaign over how much he will moderate and who his key allies will be. Castillo's campaign said he may release a full government plan in coming days or weeks, and that Cerrón’s plan should not be used as a reference in the meantime.

“Moderate” policies still mean big changes for mining and gas

Even the “moderates” in this policy fight are proposing some substantial changes in Peru’s economic model. Verónika Mendoza, her party, and her advisors appear to be key players in Castillo’s new and more moderate stances and she is certainly not a centrist. In any other election, Castillo’s new proposals would be portrayed as left wing and anti-business. However, given the policies of the extreme elements of Castillo’s party and his previous statements in favor of expropriation, this document is a moderation and a concession to the reality of both the campaign and the Congress that Castillo will need to govern with if he wins.

According to both the document and interviews, Castillo would seek to renegotiate contracts with mining and energy companies to raise taxes and ensure more of their profits benefit Peru. Multiple advisors (as well as the document) suggested Peru follow the models of Chile and Colombia in taxing mining companies on “excessive” profits, particularly when the price of copper is higher as it is right now. They also indicated that royalties may be based on sales rather than operating profits to increase the money coming to the state and said reforms should be made to keep companies from avoiding taxes by filing judicial appeals.

Burneo said that he thinks Castillo should consider a temporary tax on industries that have done well and have enjoyed “excess profits” during the pandemic including retail, banks, pharmaceuticals and mining, and stressed he saw no need for the state to seize control of resources or assets in order to achieve Castillo's goals. 

Others who have met with Castillo also say he has no plans to expropriate companies or seize their assets and likely could not due to current legal limits and likely arbitration lawsuits. While the president’s candidate will continue to talk about "nationalizing" natural resources, he is redefining that to broadly mean putting resource extraction toward the country's development. He plans to propose a new constitution that would give the state a greater role in the economy but has publicly committed to doing so only within current legal limits, which make rapid and radical change unlikely without broad support.

Ensuring broader benefits from Peru’s natural gas is a priority for Castillo. Interviews suggest this will likely happen before similar efforts to target the mining sector. Castillo would likely seek to negotiate with the Camisea consortium to find ways to ensure a better and wider distribution of natural gas to homes, starting with southern Peru where Camisea gas is produced. If the consortium refuses, Castillo could opt to rescind its contract or have the state seize control of Camisea gas. While this may require a constitutional change, one person close to Castillo indicated it could be done under the current constitution. “Por ley es suficiente y constitucional.” Castillo’s focus on Camisea has broad support across the spectrum of Castillo’s advisors and they believe the Peruvian public and the new Congress will support it.

The policies towards Camisea are part of a broader plan by Castillo to build out a national gas pipeline network and make the distribution of natural gas a key state policy. Castillo also plans to restart a project to construct a gas pipeline in southern Peru that has been paused since the Odebrecht scandal took place. 

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For the Peru publications this week, there were interviews with: Roberto Sanchez, the president of Verónika Mendoza's party Juntos por el Perú and a congressman elect with her party; Jose de Echave, the first vice presidential candidate on Verónika’s ticket and a Juntos por el Peru party spokesman on mining policy; Kurt Burneo, a former government minister and potential advisor of Castillo; Hernando Guerra, an advisor to Keiko Fujimori and a congressman elect with her party; a source close to Castillo who spoke on condition of anonymity; and a former government minister who spoke on condition of anonymity.