Internal security to the fore; Congress approves pension reform; BCRP to pause in November
We cover three topics in this report. First, we discuss the recent security issues challenging Congress, and President Dina Boluarte. Then we summarize and analyze the new pension fund reform published on September 24th. Finally, we discuss the decision by the Board of the Banco Central de Reserva del Perú (BCRP, the central bank) at its October 10th meeting to pause its rate cuts, and the consequent adjustments to our forecasts.
In a surprising move, on September 26th urban transport unions in metropolitan Lima went on strike, paralyzing the city. The unions demanded greater protection from the government, in light of recent demands for protection money and related killings of union members by criminal gangs.
To date, Congress and the government have failed to deal adequately with the security situation. In fact, Congress is partly to blame for the situation, having passed legislation that offers some protection to criminals, eroding the rule of law. Beyond purely legislative issues, the dismantling of the national police force has had a strong liberating effect on criminal operatives.
It is clear that the public is beginning to lose patience with this situation, but the government response has so far been tepid. It is true that last week three ministers were threatened with impeachment, including Economy and Finance Minister José Arista, although he managed to avoid the process. This week it was the turn of Defense Minister Walter Astudillo, whose proposal to spend $3.5 billion in government money on 24 fighter planes has been widely criticized. More surprisingly, Congress has failed to gather the votes required to impeach Interior Minister Juan José Santivañez, who is probably the most controversial of the three. Santivañez apparently enjoys the support of Fuerza Popular and Perú Libre, the two powerful parties that control Congress.
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