Peru: With Politics Behind Us, What‘s Next for Markets?

Research evidence excerpt

Peru: With Politics Behind Us, What‘s Next for Markets?

IdeaM

Latin America Macro Strategy

Peru | With Politics Behind Us, What's Next for Markets?

Ioana Zamfir

MORGAN STANLEY & CO. LLC

Ioana.Zamfir@morganstanley.com +1 212 761-4012

Sofia Palacios

MORGAN STANLEY & CO. LLC +1 212 761-0428

Sofia.Palacios@morganstanley.com

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Political uncertainty has narrowed, but governability risk

remains

The official confirmation of Keiko Fujimori's victory and the decision to keep Julio

Velarde at the BCRP significantly reduce policy uncertainty ahead of the July 28

transition. Together with expectations of an orthodox economic team, the

announcements reinforce Peru's position as one of the most stable macro stories in the

region. This improvement in the political backdrop has already been reflected across

Peruvian assets, with PEN valuations recovering and local rates rallying ( Exhibit 1 , Exhibit

2 ).

That said, Fujimori won by a razor-thin margin (roughly 49,600 votes, or just over

0.25pp), highlighting that political divisions remain despite the election outcome.

Markets will now watch whether the new administration can broaden support beyond its

electoral base and govern effectively. Her Fuerza Popular party holds only 22 of 60

Senate seats, enough to block impeachment but short of a majority. Any fiscal or reform

agenda will require cross-party negotiation.