Peru - President-elect Castillo’s first six months

My base scenario: Pedro Castillo will start as a moderate during a successful honeymoon and become more extreme as political clashes increase.

Fujimori’s challenge will fail in the short term.

[Cue up the Hamilton soundtrack singing “You don’t have the votes.”]

Fujimori simply doesn’t have the votes to win and there are no indications that her challenges will change anything.

So if the results won’t change, why is she challenging?

Fujimori was never committed to democracy. Fujimori made clear during her campaign that she viewed her father’s dictatorship positively and wanted a “hard democracy” that included some light authoritarianism because she thought it would be good for the country. Overturning an election via undemocratic means is absolutely within her beliefs (to be fair, there is an alternate universe where I write a similar point about Castillo, who probably would not have accepted his loss any better than his opponent). 

When she loses, she goes to prison. Fujimori has some clear incentives to win at any cost because the price of losing is a return to facing corruption charges and likely prison time. Fujimori does not appear to be playing for an immunity deal at the moment and Castillo would be dumb to offer her one (it would be toxic in the current political environment and undermine Castillo among many who voted for him). However, it’s possible that these challenges give her some leverage in the coming years related to her own legal issues.

Fujimori is hoping to degrade Castillo’s legitimacy, setting him up to fail in the coming years. There is a medium term political game being played by Fujimori in which she is harming Castillos ability to be an effective president. 

Castillo still gets a honeymoon and will appear moderate in his early months

My base scenario is that two months from now things are looking pretty good for President Castillo. He is going to surprise people with an ability to move his policies through both decree and through an ad-hoc legislative coalition. Like most presidents, he is going to get a brief honeymoon of popular support and some political capital. A majority of Peruvians larger than those that voted for Castillo want to see some reforms and Castillo can likely deliver a few early wins as long as he doesn’t push for too extreme policies too early.

Castillo will succeed because he is embracing moderate policy advisors and appears willing to compromise on key issues to push center-left agenda items through the Congress. “Moderate” is a relative term here. It’s moderate compared to the radical policies of Vladimir Cerron and some of the more extreme things said by Castillo himself in the first round. The Castillo team will still represent change in Peru. 

What could be on that “moderate” agenda? A mass vaccination campaign combined with a rapid reopening of the economy and schools. A push to reform education policies broadly including those impacting universities. Potential nationalization of natural gas related projects. Higher taxes (but not immediate nationalization) on mining projects. A relatively orthodox macroeconomic policy and Central Bank management.

When the honeymoon is over, the executive-legislative clashes resume and Castillo turns more extreme

Castillo’s first few months of success, popularity and moderation are likely to then come crashing down. The various political clashes and polarization are likely to push Castillo towards more extreme policies in the months following the honeymoon. There is little doubt that Fujimori and other political opponents will scheme behind the scenes to try to bring his term to an early end.

With his own legitimacy questioned by Fujimori and a growing opposition in the legislature, Castillo is going to have a chip on his shoulder and will be more focused on consolidating power and control. This could push Castillo to move swiftly on removing judges, pushing a constitutional rewrite referendum, and changing military commanders for those who support his political agenda. More extreme figures could be proposed to replace the moderates he initially names to his cabinet. Those actions, particularly anything threatening the independence of the judiciary, will be correctly seen as a threat to Peru’s democracy. It’s possible Castillo would have taken these actions at some point anyway, but he will feel additional pressure knowing Fujimori’s coalition tried to undermine his victory.

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Have a good afternoon.