Peru’s economic stability is facing increased uncertainty as the new administration of President Dina Boluarte navigates a complex political landscape and potential shifts in economic policy. Concerns are mounting over potential government spending increases and the future of key economic positions, raising questions about the country’s fiscal consolidation efforts.
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Julio Velarde, the president of the Central Reserve Bank of Peru (BCRP), is reportedly preparing his technical team for a potential transition, though he has been asked by President José Jerí to extend his administration for another five years. According to Minister of Economy and Finance Denisse Miralles, Velarde is evaluating his departure and working on succession planning.
The announcement came after a meeting between executive authorities, led by President Jerí, and representatives from the private sector. Miralles stated that the president requested Velarde remain in his position for an additional five years, but Velarde is considering stepping down. This development underscores the importance of maintaining stability within Peru’s central bank.
However, concerns are growing about potential policy shifts within the Ministry of Economy and Finance (MEF). One analyst expressed worry about who will be appointed to lead the MEF, particularly given the current Congress’s discussion of another withdrawal from private pension funds (AFP), which could further strain private investment.
“These politicians, in the next five months, will have too much power. It is not a Congress that puts a limit on the Executive.”
The situation is further complicated by the actions of President Boluarte’s recently appointed Prime Minister, Gustavo Balcázar. Even as initially stating his intention to consult with Minister Miralles, Balcázar has also met with the Peru Libre party, which is advocating for the reversal of the Petro-Perú restructuring. He has already signed legislation in that direction, raising questions about the continuity of Miralles’s leadership.
“From her side, no; but some parties are asking that Miralles and the chancellor stay,” Miralles said. “If the restructuring of Petro-Perú is reversed, the market will react; it will say: where are you going to get the money to finance the inoperability of this institution, which is a permanent drain on expenses?”
Miralles emphasized the importance of maintaining a commitment to a lower fiscal deficit and fiscal consolidation, but noted that discussions of increased spending, salary increases, and addressing the “social debt” to teachers are already underway. “We are at a crucial moment where the commitment is to manage with a lower fiscal deficit to return to fiscal consolidation,” she stated.
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Analysts suggest that the current administration is operating in campaign mode, seeking to utilize the budget as a tool for spending. With the 2027 budget preparation beginning in April, questions remain about the clarity of direction and fiscal sustainability within the MEF.
“These politicians, in the next five months, will have too much power. It is not a Congress that puts a limit on the Executive”. (Photo: HUGO PEREZ / GEC)
/ HUGO PEREZ
The initial 48 hours of the Balcázar administration have already seen the value of the dollar increase, signaling growing uncertainty. Analysts suggest that this uncertainty could lead individuals to withdraw funds from the country, particularly if further withdrawals from AFP are considered.
“The uncertainty may build people say: ‘I’ll grab my money out of here, because we have no clarity,’ and if it comes with the announcements we’ve heard and the widespread support for a new withdrawal from the AFP, people will start to say: ‘Our options are not so good, at least in the short term; I’ll see where to put my money or withdraw my savings’,” one analyst explained.
The situation is being compared to the instability of 2021, when concerns about political uncertainty led to capital flight. The current Congress is being criticized for prioritizing electoral considerations over long-term economic development.
“We are at a crucial moment where the commitment is to manage with a lower fiscal deficit to return to fiscal consolidation.”
The current scenario mirrors the conditions of 2021, but with economic implications. Concerns also extend to Peru’s relationship with the United States, with the U.S. Ambassador recently meeting with President Balcázar.
Maintaining strong relationships with trading partners, based on respect for the rule of law and stable regulations, is seen as crucial.
The situation is further complicated by divisions within the right-wing political factions, with some benefiting from the current instability. The presence of Vladimir Cerrón’s allies, including a potential appointment as Secretary General of the Presidential Palace, is also raising concerns.
lima 21 de agosto del 2025 Mercedes Aráoz, presidenta de InPerú (Foto: Hugo Pérez / GEC)
/ HUGO PEREZ
Recent changes within Petro-Perú, including the removal of General Manager Rita López Saavedra during the restructuring process, have added to the uncertainty. Analysts suggest that President Balcázar is likely to alter the course of the restructuring, potentially jeopardizing the progress made under Minister Miralles.
“I don’t think she wants her,” one source said of Miralles. “She has continued to pursue a policy of returning to fiscal balance and trying to promote more private investment, which is an enemy to someone coming from the roots of Peru Libre, which is a communist party.”
“Vladimir Cerrón and his people have not stopped having power, they have been in the Boluarte government. Perhaps it went down a little with Jerí.”
Despite Peru’s history of political instability – having had eight presidents in the last ten years – some analysts argue that this has not significantly impacted the economy. However, others warn that the current situation is different, and the lack of checks and balances between the executive and legislative branches poses a significant risk.
“We have to exercise citizen oversight, and you, the press, are our permanent agents of vigilance,” one analyst stated. The situation calls for a period of observation until April 12th, with hopes that future candidates will prioritize clarity and stability in economic policy.
The current crisis, dating back to 2016, highlights a lost opportunity for economic growth. Peru, benefiting from favorable commodity prices, could have achieved significantly higher growth rates, comparable to the 8% seen during the Alan García administration.
