ALSO READ: Reasons for Peruvian Optimism, According to Credicorp Capital
Shocks Changing in Real Time
Luis Miguel Castilla, former Minister of Economy and Finance (MEF), highlighted the current strength of several key economic indicators in Peru: private investment, inflation expected to remain within the 1% to 3% target range despite short-term pressures, private consumption, job creation, and rising real incomes. Peru also recorded a trade surplus, with exports nearing $100 billion due to historically high commodity prices.
Despite these positive signs, Castilla projected a Gross Domestic Product (GDP) growth rate of 3.2% for the year, settling at 3% going forward.
“If we have such an enviable macroeconomy, investment opportunities, and survived the [Pedro] Castillo factor, why do we have high growth compared to Latin America, but it turns out to be a fraction of what we could actually grow?” he questioned.
ALSO READ: Congress Puts “Lock” on Currency Exchange: BCRP Will Have Final Say
Castilla identified a build-up of internal risks that could strain the Peruvian economy, including the recent disruption of gas supply – which has been partially restored – revealing the fragility of the energy system. These risks are compounded by climate threats from El Niño Coastal.
potential approval of several legislative projects involving increased government spending could create a negative scenario.
Other challenges are also emerging. Citizen insecurity, affecting one in five Peruvians, has become, in Castilla’s words, a sort of “new tax” for the private sector. The expansion of illicit economies is also a concern.
A sign indicates the LPG supply area while dozens of vehicles wait to fuel up at the Jesús María gas station. (Photo: César Campos/@photo.gec)
The Political Dimension
“Understanding politics without the economic context doesn’t provide a complete view of the challenges,” Castilla noted.
While Peru is in a different situation than in 2021, the former minister questioned whether the disconnect between the economy and politics will continue. “You’ll see two key indicators: the exchange rate and the spread. There is a decoupling. When Dina Boluarte was vacated, the sol continued to strengthen and the country risk decreased. It’s not understood abroad how politics and the economy are moving in different directions, but the trend is changing,” he emphasized.
One consequence of the current situation is the limited tenure of ministers, particularly in key portfolios like Interior and Economy. Specifically, there are ministers with short average terms and 38% of the electorate does not support any presidential candidate. With a bicameral Congress starting in July 2026, the Senate will have significant power. “That, depending on who wins, will produce governing difficult,” he added.
Castilla also addressed the role of the Central Reserve Bank of Peru (BCRP) and the Ministry of Economy and Finance (MEF).
“Preserving the independence of the Central Bank (BCRP), which is the recurring question every time there are elections; the continuity of Julio Velarde, the board […]. And to restore a bit more empowerment to the MEF. […] We must take care of the assets we have developed, and address reforms that no one mentions, but that are absolutely fundamental to growing more and generating greater resilience in the future,” he remarked.
How did the BCRB manage price controls and the accelerated expansion of the money supply? (Photo: Andina)
ALSO READ: MEF Deploys Strategy in the Amazon to Unlock More Than 2,300 Works
How Peru Looks to Investors
With the internal context – economic and political – a bit clearer, César Cuervo, CIO of SURA Investments, discussed the external side, as well as the perspective of investors.
“[At a global level] we are facing an environment of many changes, which have a series of particular characteristics: they are highly difficult to predict; they are not of a financial nature; they have a binary outcome, they happen or they don’t,” he remarked.
In this scenario, he commented that one of the main areas in which an investor and asset manager must work is the ability to separate the noise from the circumstances that impact assets of interest.
“We are facing a new reality, where the normal distribution, which helped us predict the phenomena of nature or the markets, still works, but all these other events that are relatively close, that are relatively predictable, are not what generate noise in my portfolio. On the contrary, they are all these others that we were talking about: the recurring change of the president, political uncertainty, the change in the paradigms of geopolitics,” he explained.
When the peak of uncertainty is reviewed a year later, risk assets have performed positively. That doesn’t mean – he clarified – that when uncertainty increases, there is nothing to do. “It is also prudent, depending on the investor’s risk profile, to adjust exposures that have too much risk,” he emphasized.
“That’s what we’ve been doing with the portfolios. We’ve been a little more moderate, maintaining our vision, but the size of the exposures we have, we’ve moderated them,” he added.
The bottom line is clear for SURA Investments: long-term focused investment has clear advantages compared to more “hot and emotional” reactions.
“Why do we have a more positive view for risk assets, while a little more moderate? Because, in general terms, financial conditions in the United States and in the developed world are still favorable, and because the growth and fundamental performance of companies continue to benefit from long-term low rates,” he concluded.
This also comes with SURA Investments being more cautious with global fixed income, the other half of its positioning in the portfolios it manages in Peru and the rest of the region.
While he highlighted the United States, he also had reservations. Although traditionally considered a safe haven for investors, it is currently facing higher levels of political and geopolitical uncertainty.
However, this change in the perception of risk does not imply that the great power has lost its centrality in global portfolios. Its leadership in technological innovation and its ability to generate new industries continue to position it as a key player in the global economy.
Cuervo concluded: “What we have to do now is consider [the US] as a very crucial asset that weighs a lot in the portfolios, but we have to consider its own merits of expected return adjusted for risk”.
Is El Niño Coastal a shock to consider for investment? Image of Piura, the region most affected by El Niño Coastal in 2023. (Photo: Nilo Vilela)
