Peru Elections: Down-to-the-wire results, uncertain future

In this episode, we dive into the razor-thin presidential runoff in Peru, where right-wing candidate Keiko Fujimori and leftist Roberto Sanchez are separated by a very narrow margin. With overseas and rural ballots still trickling in, the nation remains in a state of suspense, waiting to see who will become Peru’s ninth president in ten years.

Join our hosts Andrew Thompson, Julian Seydoux, and Alberto Souviron as they unpack the underlying dynamics of this election. They explore how the country is experiencing a profound geographical divide and a "fear vote" rather than straightforward polarization. The panel discusses the political phenomenon of the "catastrophic draw"—where neither side can impose its will, leading to potential governmental paralysis—and questions the legitimacy of an election heavily influenced by voters in Miami and Madrid.

Despite the chronic political instability and deep-seated social inequalities, our experts highlight a fascinating paradox: Peru's economic resilience. With strong macroeconomic tailwinds, a relatively low debt-to-GDP ratio, and a wealth of key resources, the country continues to grow. Tune in as we analyze what the next administration must do to build essential bridges in a fragmented Congress and reassure international markets.

Production: Sustainable LatAm

Presenters 

• Andrew Thompson - International journalist & political-risk analyst with deep LatAm coverage (OBG, EIU, Latin News; ex-Head BBC Learning English).
• Alberto Souviron - International journalist and digital comms leader for EM investors; ex BBC/Newsweek/Lloyd’s Register. 
• Julian Seydoux - AI-driven finance entrepreneur (FirmView AI, Fast Audit AI); ex-Moody’s/Consilium; cross-border EM & LatAm focus. 

Transcript

SPEAKER_02 0:00

And uh whoever wins they are going to have a fragmented uh parliament first. But second, uh yes there the this is a fifty-fifty, but it looks like a geographical boat and a fair boat.

Welcome and Introduction

SPEAKER_00 0:35

Today we're talking about Peru, and we're talking about 0.23%, which is the gap separating the two rival presidential candidates after last Sunday's elections. Our listeners will have an advantage that by the time you hear this, you probably will have found a resolution, and either Keiko Fujimori of the populist right or Roberto Sanchez of a slightly more traditional left will have been proclaimed victor. But that's yet to come. We'll try and analyze how we're going to get there and what the implications are for Peruvian politics and economics in the next 40 minutes or so, helped by Julian Saidou, who's an economist and Latin America specialist, and Alberto Subiron, who's a journalist and also a specialist on Bolivia and other Andean countries. So I think I'll I'll start off with Alberto and ask him the one million dollar question, who's gonna win and what what will the political consequences be for the next government?

SPEAKER_02 1:45

Hi Andrew, hi Julian, thank you. Yeah, that definitely that's a million dollar questions. Uh uh actually I would put in this I'm not surprised. If something these results so far is showing is that anything can happen in Peru. And it's something that if you remember in in our past episodes on sustainable attack, we spoke that anything can happen in Peru because it's so fragmented, it's so uncertain that you really don't know what is going on.

The Geographical Divide and the Fear Vote

SPEAKER_02 2:22

At first view, you can see a country divided by 50-50, uh, and you can speak of polarization, but that's not the case. Actually, I think that's uh confirmation of the fragmentation in the country. Uh if you see that the two candidates who went to to the second round, Keiko Fugimori and Roberto Sanchez, between the two, they got no more than less than 30% of the of the support in the first round. And uh whoever wins, they are going to have a fragmented uh parliament first. But second, uh yes, there this is a 50-50, but it looks like a geographical vote and a fear vote. My reading on this is people are voting against Fujimori or pro-Fujimori or against uh Roberto Sanchez or pro-Roberto Sanchez, which represents an alternative left. And I think old left in Peru. The other interesting things to see is the geographical division. The South, that is clearly anti-Fujimori, has voted massively for Roberto Sanchez. But in Lima, certain areas of the coast, and in the north, Fujimori has strong support. So that shows the regional divide. Still a surprise that the economy of Peru is performing well with all these uncertainties. But one of the things that I'm seeing is that the next government, whoever wins, is going to have a problem of legitimacy from the beginning. So they will need to think in some kind of unique solution or build breaches, which is uh so far has been probably the the weakest point in in Peruvian politics.

The Decisive Power of Overseas Ballots

SPEAKER_00 4:22

Alberto, I I want to I want to jump in here just to remind our listeners of what you were telling me um a few minutes ago. Um as we speak, what what we know are that um balloting station returns have to be counted, and they seem to hold the balance of who will win and who will lose, and the various types of returns. There are some that have been observed, they have might have some technical irregularity, but they need to be assessed. There are those that come in from distant rural areas, which are thought to be generally pro-Sanchez, uh pro the left, and there are those, and this is what we were talking about, that come in from Peruvians resident overseas, where traditionally Keiko Fujimori supporters seem to be in larger numbers. So we were talking about the strange paradox that the determining uh factor in choosing a Peruvian president may be a voter in Miami or a voter in Madrid. And what does that say about the legitimacy of the elected president?

SPEAKER_02 5:30

Exactly, it is what I'm referring to as well. And yes, thank you for reminding me that. Yes, let's put in in that way. I think it's the first time that you have to ask yourself is it's right that the next president of a country, in that case Peru, is being decided by the votes in Miami, Madrid, or another part of the world. That's a uh a good question. I'm not pro or against uh any of it. It's really difficult to say because anyway, but it's raising at least a legitimacy question, uh uh uh uh as you say.

SPEAKER_00 6:15

I'm sorry for jumping in yet again. Uh one one detail caught my attention, which is the overseas polling booths, usually Peruvian consulates, they don't send uh the polling station returns. They send all the votes, which have to go back to Peru by the diplomatic bag. And one thing that we've that I've discovered is that a lot of those votes are not due to arrive until tomorrow, Wednesday the 10th of uh June. So we've it'll be after that that we start hearing perhaps who the real winner is.

SPEAKER_02 6:57

Which confirms what they say at the beginning. What the the the constant in in Peruvian politics is uncertainty. You don't know what is going to happen until the end, literally. So it is, but that raises a lot of questions actually of a political system that is a fragmented uh countries showing a lot of regional divides, uh divisions between Lima and the rest of the country, and a lot of challenges are gone. And let's not talk about the the geopolitical compete that we always talk about, but internally the country has has a lot of challenges ahead. Uh and if you I I mentioned you before when we were talking, I

Market Reactions to the "Catastrophic Draw"

SPEAKER_02 7:41

I have a good friend who coined the the the this term that is the catastrophical draw, because none of the of the sides can impose on the other, and that is gener uh generate uh some kind of paralysis inside the country.

SPEAKER_00 7:59

This this gives me a good opportunity to switch to Julian and ask him if the markets are uh seriously concerned by catastrophic uh draws, or are they much more taking what's happening in Peru in their stride?

SPEAKER_01 8:17

Yeah, I don't think there's you know there's a wait and see with a cautious uh being cautious about the tie and what he means and uh at this stage. Um you know the uh on on the one side, you know, this is in contrast with you know what's happening in Colombia where the you know where the um the right-wing candidate uh was ahead and we kind of have a semi-euphoria in in the in the markets with with uh uh you know in the bond market especially. Uh but Peru, you know, there's I think it will depend about you know, you know, there's a there's a lot of wait and see at the moment. Um and of course I think what you mentioned, you know, there's there's a the tie is what's a couple of is like 20,000 votes or so, which is nothing. Uh and you have all the people from you know still counting and then and then uh voters from outside of uh of uh of Peru, uh which accounts for quite a quite a big number by itself. Um and and could potentially bring the results, you know, you know, to knowing the full result may take another another month for all we know. And uh another month is uh another month of uncertainty. And that's not something that you know you you you want uh as a business person, you know, uncertainty is the is the worst thing, and the markets don't like it either. So you know the quicker the the quicker they can close this election, the the the easier then you know it becomes for for business to to continue.

SPEAKER_00 10:03

But just to uh play my frequent role of uh a terrible pessimist, um you could say that one outcome of these elections is uh a bit like uh Alberto was saying, um, a catastrophic continuation of where Peru is right now. And where Peru is right now is that over the last ten years, the country has had uh eight and now nine presidents taking in this last this last election. There's been an almost continuous deadlock between successive presidents and successive legislatures, and while there is uh enormous problems to deal with, uh problems of violence and criminal activity, problems of inequality of income, um low services, you know, health, education, and so on, um, we have a political system that's not really getting to grips with it. Um do you do you think that investors see that?

SPEAKER_01 11:10

You know, we we but you know Peru is is actually a pretty good place to invest. And over even over the past 10 years, um people have been investing, uh not just you know, private equity has moved in, is uh there's a lot of things. Peru has a lot of like a lot of parts in South America, lots of resources and lot of key resources in in the new economy which is emerging led by AI, and AI needs, artificial intelligence needs and supply chain and and and so on. And and so Peru has a lot to win, but even if I take the past 10 years or so, you know, growth has just been under 3% or 2.8%. And I think we mentioned that at some stage in the past, you know, yeah, industrial revolution was one 1.5%. So we're still uh this this is still pretty pretty decent growth by by by our respect, despite the uh you know, despite all the problems that you have at the political level. Uh on the economical level, you know, people do business, they just you know they just go along with it and and and manage through whichever government there is, which is in part, I think, reflected in the current in the market reaction so far to to what you know to the tie and uh and simply the fact that you know even though nothing's called in yet, uh the left-wing candidate is slightly ahead to the right-wing candidate. Um so um uh what does it mean? Well, you know, it just means that on the pessimistic, if we were talking about business as usual, I would say that we're still doing pretty well. Uh and plus in an environment where generally speaking, you know, on the macro side, you know, there are tailwinds for for countries like Peru, uh, because of the demands that of all of all its uh resources and and everything that it has to offer for the international uh markets and in and investors and and demands from outside. So and here we're talking mostly about of course the the US but also uh China and and as we mentioned all the time and coming back to the more you know broader view, you know, when you have people you know prepared to outbid for your assets, then you know it's it's increases price. So it uh you know to to some extent uh the Provision should be able, or the Peru as a country should be able to capture some of the value that is being created by that.

SPEAKER_00 13:43

So um I'm a little bit confused, and I'm gonna ask Alberto to resolve this. What seems to be happening is that I'm saying that the last 10 years in Peru were absolutely terrible. Uh and Julian is saying, referring to investors, oh no, they've been quite good. So are these two things possibly correct at the same time or not? What what do

The Paradox of Economic Resilience

SPEAKER_00 14:08

you think?

SPEAKER_02 14:09

Both both are correct. Uh the I I I think Julian put it thing. It it's a paradox that Purdue is performing predically well in economic terms despite the the political uncertainty. And that's a good question. What I put probably as a sound of alarm is the longer this uncertainty contains uh gets, I think could be harming the long term of the economy in Peru. But it's something that we have to see. I know that the Julian can say, well, let's see the last 10 years, which is quite a long time, and the economy is still doing well. But I was hearing today's uh an analyst from JP Morgan who was saying, yes, Peru is growing probably in in the growth in Peru is is around 3%. Can you imagine how would this growth in in a more stable political country? So, in a way, what he was trying to say is it is a little bit of luck that the economy is going really well because Peru has a lot of raw materials that are interesting. But this uncertainty in a way is affecting growth. So it could be even better if it weren't the political instability. But again, these are points of views. One of the things that I always say is fragmentation is not a good thing. And the other question that we have to ask are, and and I'm asking myself in this is why is this fragmentation? It shows two things. One, the rural vote, there is a huge divide between what is the rural vote and the urban vote in in Peru that is reflecting in other Andean countries. You can see that in Ecuador and you can see that in Bolivia. But but in Peru is it's quite marked sometimes and it's paralyzing politically the country. That can get worse in in if there are no way to find some kind of bridges between the the two sides, I think that can get worse. The risk for me is that that can be turned violent in the in the long term. And that's probably the challenges that the next governments are going to have. Legitimacy problems, yes, but uh if we still have seen uh like we have seen in the last 10 years in in Peru, one side trying to impose on the on the other and try to take advantage of the fragmentation in the parliament, which in a in a way has created situation of how many presidents in the last 10 years? A lot. Nine presidents in 10 years. So that that that that situation is not sustainable in time. So they need to to sit down on a way and try to find some kind of consensus. But for the moment, this is the big question from my point of view.

SPEAKER_00 17:21

Shall we um look at the two options, two different presidents? Um if uh Roberto Sanchez, who is in the lead with 0.2% of the advantage, if Sanchez wins, becomes president, what are the big problems he's likely to face?

SPEAKER_02 17:46

I think it's the the the the the problems of for him or fear. Fear of one half of the country that says what he's going to do. And that's interesting thing to see. He just following a little bit, what was the campaign for this second round? Sanchez has moderated his discourse, trying to put some distance from from the the the Castillo's views of the economy, and I think that favors uh a little bit him in this final round.

SPEAKER_00 18:17

Castillos was the preceding president in 2021-2022, who led a rather disastrous government.

SPEAKER_02 18:26

Exactly. So the that that's one of the lines, but the interesting thing is Sanchez was somebody he he used the Castillo symbol, the the hat and all the things to go, which helped him to win the to to get second in the second round, uh to the second round. But in this second round, from what I see, he moderated the discourse. But that for me is uh uh as you can say, wait and see what is going to go. But a government of Sanchez in in a way is going to have the challenge to convince the markets uh and the economical elite that it's possible to go go govern uh uh uh and make reforms in in in in a country with a huge levels of inequality. And I think that's the the the big problem.

SPEAKER_00 19:18

He has he has said that um he'll keep on the president of the central bank in an attempt to reassure the markets.

SPEAKER_02 19:26

Yeah. But we will see the the the problem as well is who what what is going to do the other actors with with a fragmented parliament, uh it's going to be difficult. But if he is again, that's a big if. If he wins, he would need to build some kind of bridges and convince the markets. In the case of Fujimori, it's a little bit different. I think the markets markets favor, but she would need to to build bridges, especially to the south of the country, and says you don't need to fear us. We are trying to be more inclusive and all the things. Again, that shows only uh the the big division of the country.

SPEAKER_00 20:10

Psychologically, do you think Keiko is a good person to build bridges? Does she have that sort of um negotiating skill and diplomacy to coax uh I mean to coax uh a majority coalition in in Congress? Because that's what she will she will have to do, won't she?

SPEAKER_02 20:31

That's a good question. I don't know. You you you can ask Julian now other questions.

SPEAKER_01 20:37

Okay, let's let's please no, please no. You know, I uh and you know, I don't have much of a few you know, I just want to come back on on an interesting thought about you know the political you know, you were mentioning how many presidents there were and uh the problems at political level uh over the past uh several years, and yes, and you know it's ideally it's not ideal for economic growth, and yet as as I say, 2.83% over the past ten years is is uh is is pretty remarkable still. Um and yes, possibly if if there was uh more stability, then then you would you know you would that would push growth even more so. But one interesting factor I think that for instance that uh you may want to to to consider is is that the the debt level of Peru, so debt to GDP level of Peru versus all its neighbors, it's is really really low. So you know it's best performing. I think it's at I don't remember exactly top of my head, but I'd say something like 35%. Uh and and that's that's pretty remarkable. And that could be as a result of having you know conflicting. government changing all the time because no one has time to actually spend any any any you know any money from uh you know that uh or or raise more debt at uh uh in in the economy so you know that's that could be a a safeguard by itself for for for all we know or or I'm afraid I'm taking my my pessimistic view it could be an opportunity for politicians to spend money so you know either either Sanchez or Fukimori might say I'm gonna run a big fiscal deficit because there's a bit of headroom to to increase debt and then seek you know popularity and um you know prolongation in power. Yeah yeah absolutely that could be that could be a way it's one of the you know one of the only countries uh sorry in from the rating agency world who is who's you know investment grade in in Latin America I mean it's higher than uh caveat but from than Brazil it's higher you know so it's it's it's uh from a credit perspective it it looks like a pretty good country uh and you know let alone it's it's its southern neighbors from whether we talk about Bolivia or Argentina who who are who are in the in in huge problems but um but yeah I mean it it is potentially that is something that that uh a new government could consider of course uh you know as a populist uh something to do um and that goes in line you know we talked about you know some of the one of the reasons for the for the blue wave was was a crime and Peru game similar to this debt to GDP crime levels are you know pretty pretty very low in comparison to the entire region

Crime Perception and Wealth Inequality

SPEAKER_01 23:55

yes one of the strange things is that Peru has a very low homicide rate but it is absolutely a hot electoral and political issue um that the the average Peruvian believes they're um under threat from from criminals all the time that's sorry to into interrupting that Andrew but here is a thing that's the problem well we are saying what we were talking before is the problem of perception versus reality maybe ground rates are low which are low if you understand you see but how people perceive that compared to another time clearly in Peru there is a perception that it's not the case regardless of what you say.

SPEAKER_00 24:48

To be fair um it may be that journalists and people such as myself are misinterpreting because we're looking at the homicide rate in Peru compared to Brazil and Colombia and Peru is much lower but the Peruvian citizen doesn't really care about those comparisons. He or she thinks it's worse than it was five, ten years ago that you know I feel less secure than I felt before and therefore it it is um an absolutely legitimate and realistic concern.

SPEAKER_02 25:20

Exactly it is is the perception in in in a way it has been a driven in in in this last election in in the first round I'm not sure how much it has been the driven of the second round it's really interesting to see that this technical tie that are the government the the the the the the the the elections at this moment it's a little bit from what I heard a vote of fear. But it's not fear of crime it's fear of what the candidates are going to do.

SPEAKER_01 25:56

As I say I think it can't this has been probably a vote of I vote against the other because I don't want the other and I have fear of of the other whether it is Fukimori or or Sanchez and and that has to be driving the vote which is a very irrational way to to vote but yeah but here you have this similar situation than in you know in no we have to think about the difference in voters from uh you know from the city and from the word in English countryside countryside yeah so from city and countryside which are reflected I believe in in the votes you know one's one side votes for one side and what the other votes for for the other and so the perception of crime or the or the perception of of the elder may be in part linked to the difference between the countryside and the city and you know uh and whether countryside people are moving into the city to work uh or not and that brings its own you know its own new dynamism dynamics into into the city and and then the fear about being you know being being left out we have to remember that even though the the the in in terms of GDP you know has been growing pretty steadily uh half of it or just under half of the GDP of of Peru is is is uh is generated by Lima and its region you know it's it's so it's it's it's very concentrated somewhere and therefore what that means that most of the value of you know most of the value being generated by uh by Peru is concentrated in in in this era which means that you do have some quite a lot it's a big country you know a lot of people who may feel you know well how come if we are if we're supposed to be generating that much wealth you know how come we're gonna feel that we're still at uh GDP per capita of around $8,500 which is not bad in in the in the entire world but for for for for country growing uh at the at at the human it is growing and so on it's not it's not that great either I yeah you you're you're showing pointing a very good point in in in in in the direct union and and I think that the the the divide is there the rural boat versus the Lima and and concentrating areas inequality that there is a bad distribution of of the wealth in Peru and and that can be shown through this is is historical that that's not the last 10 years I think it's a history but but but but in Peru it's quite quite marked and then comes and that's a question that I have myself also some kind of of the view or the vision that you have for a country it this rural divide where versus the Lima divide also can show a little bit divisions of the vision of how people have seen the the the the the people in the Andean areas in the rural areas have a different way of seeing things sometimes and they feel that they're not being listened or properly represent of of the way that they are seeing things.

SPEAKER_02 29:22

And that can be seen also in the vote and in these divisions it's not particularly on Peru but but definitely is a reflection in the andeal countries.

SPEAKER_00 29:32

I think there's another it's perhaps too much detail

Outlook and Governance Challenges

SPEAKER_00 29:36

but there is an issue with Sanchez in that he was a minister in the government of Pedro Castillo which was um eventually removed um but it was a government that was at an incredibly high turnover of ministers was in office for less than two years and achieved very little so I think it might be a legitimate question to ask whether um a Sanchez government uh would be more disciplined um and spend more time diagnosing problems and seeking solutions than happened under Castillo the question is did he learn the lessons of Castillo tried to do it yeah and I suppose I mean the problem with Fujimori is that she hasn't been in government uh this was her fourth um serious attempt at the presidency so even though uh Fujiro Fujimorismo um as represented by her father in the 1990s was um economically very successful um but was tainted by uh rather large scale violations of human rights and authoritarianism so I so I suppose what I'm trying to suggest is there are questions of about both candidates uh and depend depending on which of one of them comes through um it'll be interesting to see how how politics evolves in in in the as a result of that I'm conscious we we may be getting close to our to our time yeah we're we're we're we're getting closer to time but you're saying well one thing that uncertainty is is is probably the the the the main result whoever wins is going to to to this uncertainty is not resolved and some kind of consensus will we need to to for the next government we the next government will need to to build bridges to to generate some kind of consensus because if that or or forget about democracy become an authoritarian regime that imposes everything by force which see in Peru it's not necessarily possible to do it.

SPEAKER_02 32:01

Some governments tried to do this and didn't went well because countries very fragmented so we will see what what is going to happen. One just last thing that I want to mention and that's more at regional level is really interesting to see also make a comparison with the another election around the corner which is Colombia and the difference between one or the other the first round in Colombia has clearly clearly uh polarizations between two visions of the country the the left or the or the new right with uh the asperilla but both with over 40% of support yeah Peru and that's really the interesting thing is uh the the politics of fragmentations because even if this government wins and it doesn't matter that now they are 50-50 in fact is that the real support that they have is less than 30% which shows the fragmentation and give a lot of challenges and just on the economic terms the the I I'm going to follow a little bit what Julian says probably the political chaos is good for the economy.

SPEAKER_01 33:17

In the case of Peru has been showing maybe that's her SDP but they don't know Julian any any last thoughts I remember a couple of couple of episodes we discussed the upcoming elections and and you asked me who did I think would win and I said actually I don't know it seems I'm not the only one who doesn't who doesn't know who the country doesn't know at this at this present moment. In any case but you know Peru is resilient it's it's been doing fairly well over the past some time.

SPEAKER_00 33:58

There's some tail weight in the macro effect so you know as long as they don't squander it too much or there's not too much concentration of this you know it's it's uh I re I remain optimistic about the prospects of Peru uh generally and if I could could add to that um I suppose I you know if I were asked what's your immediate outlook on on Peru after the elections well first of all I'd avoid trying to say who would win because it's within the margin of error and it's terribly difficult to say if it's who will who will get through but for a more wider um political forecast I'd say there will be limited bridge building whoever is elected will make attempts to build up a majority in Congress perhaps issue by issue um and that will be because of the deep fragmentation that Alberto has been mentioning it will be very difficult to um have if you like an ambitious um political coalition running across left and right it's more likely that there will be some small gains um and the rest will be a kind of political muddle through made easier by the reasonably good economic condition that the country's in I will end just with the big uh question that that's going to go the the big incognito for me is going to be whoever wins the question is will we manage to end his mandate because this the history of the last 10 years has shown that that's not the case we'll see with with that thought um I'll say goodbye until next time