Peru's general election took place on 11 April. No candidate has secured a majority, triggering a run-off poll on 6 June.

Preliminary results show that with 98.74% of the votes counted, Pedro Castillo from the far-left Perú Libre party is currently the frontrunner with 19.09% of the vote. He is followed by Keiko Fujimori from the conservative Fuerza Popular (FP) party with 13.37%, right-of-centre candidate Rafael López Aliaga from the Renovación Popular (RP) party with 11.78%, and Hernando De Soto from the right-centre Avanza País party with 11.59%. With more than 1.6% separating Fujimori from López Aliaga and De Soto, Fujimori is likely to run against Castillo in the second-stage poll. Voters would choose between two candidates with views from opposite sides of the political spectrum.

Castillo proposes redrafting the constitution, restructuring the pension system, and renegotiating the contracts of Peru's main mining sites. Castillo gained public recognition in 2017 when he led teacher strikes that lasted for two months. Castillo's programme proposes an increase in the role of the state with the revision of the 1993 constitution to "recover strategic resources", including the expropriation of natural gas, oil, and the main mining sites such as Yanacocha, Antamina, Toromocho, Marcona, Cuajone, Quellaveco, and Toquepala, among others. He has said that expropriation will be carried out with compensation to companies and the administration of mining sites will be moved to the respective regional government. He has also promised to overhaul Peru's Constitutional Court (TC). In the second round, he is likely to try to appeal to voters of left-of-centre Verónika Mendoza from Juntos por el Perú (JPP), who preliminarily obtained 7.83% and has proposed an increase in mining royalties and an overhaul of the national system of mining concessions.

Keiko Fujimori is very likely to compete against Castillo in the second round; restructuring tax administration will be a key policy if she is elected. Fujimori's campaign has focused on restructuring the National Superintendency of Customs and Tax Administration (Superintendencia Nacional de Aduanas y de Administración Tributaria: SUNAT) with the aim of incorporating informal workers. She has also proposed a reform of the pension system to incorporate informal and independent workers. Fujimori supports foreign investment in key sectors, including extractives, and is unlikely to adopt policies that negatively affect these investment flows. She is most likely to garner support from those who voted for the third- and fourth-placed candidates, López Aliaga and De Soto.

Whoever wins the presidency will face difficulties in passing legislation as the new congress will be highly fragmented with as many as eleven parties represented. A majority in favour of amending the constitution or the existing mining law is unlikely. Preliminary results show that with 85% of the votes counted, Castillo's Perú Libre will be the largest in congress with 36 of 130 seats. It is estimated that Fujimori's FP will hold around 24 seats and centre-right Acción Popular (AP) will have about 14 seats. The most likely coalition in congress will be between AP and FP, which will give them 38 seats if preliminary results are maintained. Although the majority of congress is unlikely to support the contract revisions proposed under Castillo, there is likely to be greater consideration by deputies to seek changes to increase environmental scrutiny, especially over water resources, and to increase prior consultation with local communities before project approval. New measures are likely to permit local communities to delay new extractive projects during the consultation process, but are unlikely to lead to outright project cancellations. The president will also be vulnerable to being removed through an impeachment vote if he or she is unable to form a solid coalition in congress, needing at least 44 votes to avoid being impeached.

This post was written by Veronica Retamales Burford, an analyst with our risk team at IHS Markit.

Posted 15 April 2021 by Veronica Retamales Burford, Senior Research Analyst, Latin America Country Risk, S&P Global Market Intelligence