Will Sagasti’s Leadership Defuse the Sharp Political Crisis in Peru?

For the past 35 years, Peruvians have witnessed criminal investigations carried out on government officials, the impeachment or imprisonment of all of their presidents, with only one exception. This year brought no surprises, as upon the departure of two presidents in a week and the deadly pro-democracy protests led by young voters, Peru’s Congress has chosen Francisco Sagasti, a legislator for the centrist Purple Party, as the country’s new interim president. Sagasti is the third named president of Peru in the span of a week, and the fourth named president of the country in the past four years. Amid the sharp political crisis, Sagasti’s leadership gives hope to some as it can act as a turning point for the highly politically divided country, currently struggling with the economic fallout from COVID-19. However, not every Peruvian seems to have faith in the current government, as a youth movement opposing the system has emerged in the country.

To fully understand the political turmoil in Peru, the fractious political establishment in the country must be understood. The weak party system in the country poses limitations to the elected president’s actions against Congress, divided among nine parties.  More than half of the 130-member Congress exploit their parliamentary immunity from being investigated under criminal investigations. Additionally, the prevailing corruption in all fractions of the society and the recent scandal outbreaks amongst the country’s elites contribute to the systemic instabilities. Notably, the 2018 judicial corruption case and the Carwash bribery scandal, which involved four of Peru’s presidents, increased anxieties among citizens. Upon the resignation of Pedro Pablo Kuczynski in 2018, due to allegations of electoral corruption, Martin Vizcarra came into power. Being a centrist and popular leader, Vizcarra clashed with the legislators on his anti-graft agenda. Although he had high public approval ratings, almost reaching 50%, no party defended Vizcarra when he got accused of past allegations. On November 9, 2020, Vizcarra’s impeachment trial took place, shifting the political dynamics in the country and terminating his presidency. 

Impeachment of Vizcarra sparked days of protests in Peru, leading to the death of two young men. Citizens took the streets of Peru’s capital Lima, raising their voices for constitutional reform and demanding “justice for the fallen.” An article in Peru’s constitution provides legal grounds for a president’s impeachment for “permanent moral incapacity”, leaving space for interpretation by the Constitutional Court due to its vagueness. In a poll conducted by Ipsos, an independent market research company, 78% of Peruvians opposed Vizcarra’s ouster, while 54% approved of his government. Five days after being sworn in following Vizcarra’s leave, amidst the wave of uprisings, interim leader Manuel Merino resigned from his position. Strikingly, only 22% had approved Merino’s presidency.

By receiving 97 votes in favour and 26 votes against, Sagasti will serve as the nation’s president until the current government’s mandate ends in July 2021, with the national elections scheduled for April 2021. It should be noted that Sagasti’s party, the Purple party, was the only party that voted against Vizcarra’s ouster. Based on Sagasti’s remarks, it seems that Sagasti will take an action-based approach during his term and will work to deliver his promises of restoring the trust towards the government and returning hope for Peruvians. Sagasti’s background as a former World-Bank official, vision, and inclusive approach makes him an apt choice for the country as of now. Sagasti needs to maintain a balanced approach while handling the demands of the opposition-dominated Congress that has the power to impeach him and the political movement driven by younger generations, demanding political change.

Upon Sagasti’s appointment, Peru’s currency showed an appreciation of 1.75% on November 17, the most significant daily rise in seven months, with sovereign bonds, also edging up. In terms of Sagasti’s economic agenda, Sagasti promised to prioritize fiscal stability in opposition to the demands from Congress to increase government spending. Aligned with his promise, on November 23rd, the Peruvian government sold $4 billion of notes, including century bonds sold at the lowest-yielding price by an emerging-market government. Implying increased foreign investors’ confidence, this transaction will help the government in achieving its financial goals, while also combatting one of the worst COVID-19 mortality rates in the world. Sagasti has named his 19 member cabinet on November 25th,  appointing veteran economist Walda Mendoza as the Finance Minister in hopes of further strengthening investor confidence.

With its geopolitical location, strong trade policy, and economic growth potential, Peru plays a significant role in the regional dynamics in Latin America. This year, Peru has not only grappled with one of the world’s deadliest per capita outbreaks of the pandemic but also its worst economic recession in a century. Thus, as the current president of Peru, Sagasti has a heavy burden on his shoulders. With his commitment to democratic values, Sagasti appears to have placated tensions temporarily, however, the legacy of mistrust and prejudice left by his predecessors will not likely fade over anytime soon. With their protests, Peruvians made clear their demands for a transitional government and eventual systematic change. Aligned with their citizens’ requests, during his short term, Sagasti ought to shift his focus towards defusing the political crisis, maintaining economic and political stability, while also bridging a highly divided citizenry.