Peru: This is why the congressional election matters

The real risks to assets prices currently come from the growing, congressional far-left ideology. Not because these politicians would be able to pass radical proposals by way, for example, of amending the constitution, but because a charismatic leader could emerge among the newly elected congress members. In the context of a fragmented political system, with the dominant center-right party Fuerza Popular losing strength due to corruption scandals, it is not unlikely that a leader from the hard-left becomes a serious political option in the April 2021 elections. But, this risk is currently low given that the overwhelming majority in congress is economically center-right. But in a country like Peru, with still low income per capita and high inequality, albeit improving the temptation to sell a quick solution via populist/hard-left solutions, is latent. The Peruvian economy has been well managed in the past decades. It is one of the few economies in Latin America with fiscal savings--which amounts to a whopping 15.5% of GDP. Also, it also has low debt to GDP, a high level of international reserves and is among the fastest growing economies in the region since 2000. However, politics have been a risk factor and could become a source of strong volatility as the April 2021 presidential elections approach.