Weekly Report - 07 April 2022 (WR-22-14)

PERU: Ukraine factor knocks Castillo into a tailspin

Russia’s war in Ukraine has been bad news for all major Latin American countries, offering a cocktail of global supply chain disruption, sharply increased energy prices, and a politically damaging squeeze on the cost of living. Some countries are absorbing and managing this ‘Ukraine factor’. But due to its political weakness, the administration of President Pedro Castillo in Peru seems to be turning an external shock into a fully-fledged domestic crisis.

Left-winger Castillo has been in office for eight months, during which he has survived two impeachment attempts by the right-leaning congress and constantly reeled from crisis to crisis, recycling his ministerial team as he goes along. On the same day that the second impeachment attempt failed (28 March), a new problem emerged – a strike by transport unions protesting increases in fuel prices. The stoppage led to demonstrations, clashes, and looting in cities like Huancayo (Junín region). In subsequent days roads were blocked and protests spread to the regions of Piura, Lambayeque, La Libertad, Amazonas, Cajamarca, San Martín, Ica, Huánuco, and Cusco, among others.

Despite angering the strikers by initially dismissing their claims, Castillo eventually announced concessions designed to defuse the situation. Sales taxes on petrol and diesel have been suspended until the end of June, a measure which could be extended to December. Responding to a spike in the 12-month inflation rate (7.45% in March, the highest in more than a decade) the government also announced a 10% increase in the minimum wage, raising it to PEN1,205 (US$281) a month. Although the protests had begun to spread to farmers – angered by rising fertiliser prices – and other sectors of the population, the transport unions agreed to a pause in their strike action.

At this point however, the Castillo government appears to have made a major miscalculation. Late in the evening on 4 April the government suddenly declared a draconian curfew in Lima and the neighbouring port city of Callao, effective from 2am on 5 April and running through to midnight on the same day. The capital until that point had remained relatively peaceful, so it is not clear why the curfew was imposed so abruptly; some government sources say it was in response to credible reports of imminent looting attacks. Taken by surprise, local inhabitants came out on the streets to defy the curfew, swamping the police which made little attempt to hold them back. Some set fire to buildings; there was also what the government described as a “premeditated” attack on Lima’s superior court of justice. The government then conducted a rapid U-turn, lifting the curfew ahead of time at 5pm on the same day.

It is hard to escape the conclusion that Castillo’s political weakness is a factor amplifying the protests. He is caught between popular protests and a hostile congress. While he has so far retained enough support to prevent the right-wing parties from gaining the two-thirds majority they need to impeach him, his allies are beginning to express their doubts. Mirtha Vázquez, who stepped down as his prime minister at the end of January, condemned the curfew as an “arbitrary measure”. Verónika Mendoza, leader of the Juntos por Perú (JPP) leftist coalition which has been supporting Castillo, said “the government has not only betrayed its promises of change, but is now trying to resolve conflicts using methods favoured by the right”. Castillo, whose approval rating has slumped to around 25%, faces an immediate problem: that the protests may not die down anytime soon. In a sign that they could spread further, the Sutep teachers’ union is set to commence its own protests as this issue goes to press on 7 April.

Another minister goes

On 1 April Castillo replaced his health minister, Hernán Yuri Condori, who was impeached by congress the previous day. He was accused of “lacking suitability” for his position, principally due to his past advertisement of pseudoscientific medical treatments. These include his promotion of ‘hexagonal water’ as a cure for a wide array of illnesses, which prompted Peru’s medical association (CMP) to call for his resignation.

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