Peru

Peru's sovereign credit profile remains strong: public debt at ~35% of GDP, investment-grade ratings from all three major agencies and low external indebtedness. The incoming Fujimori administration inherits these buffers intact but also carries latent fiscal risks. International arbitration claims total ~USD30bn across 14+ ICSID cases – eight targeting oil, gas and mining – representing a multi-billion-dollar contingent liability. In 2025, the banking sector reported USD3.2bn in credit write-offs, reflecting stress among borrowers in trade, manufacturing and communications. Formal insolvency proceedings have risen modestly, with lengthy backlogs delaying restructurings. The Fiscal Council has warned against the supplementary budget expansion (~9.6bn soles), signaling early tension between spending ambitions and fiscal discipline. The financial sector is well-capitalized overall, but tighter global funding conditions, a sustained commodity price decline or severe El Niño could pressure asset quality, particularly for SMEs operating outside the formal banking system and in climate-exposed sectors.

Peru's structural position is defined by a paradox: world-class macro buffers coexist with persistent institutional weakness. Despite remarkable economic stability through a succession of political crises, reform momentum has stalled since 2014 – growth has nearly halved, productivity has declined and private investment remains subdued relative to potential. Informality affects over 70% of the workforce, fragmenting the tax base and limiting access to finance and social protections. Regulatory complexity, weak subnational governance and inconsistent enforcement constrain public investment effectiveness. The Chancay megaport, operational since late 2024, represents a transformative connectivity asset, but its benefits risk being concentrated in Lima unless complementary logistics infrastructure is developed inland. Mining remains the backbone of export earnings but faces community opposition, permitting delays and environmental litigation. The new administration's pro-market stance and emphasis on PPPs signal intent to accelerate infrastructure development, but converting ambition into execution requires navigating the same institutional constraints that limited all predecessors. 

Keiko Fujimori was inaugurated on 28 July – Peru's ninth president in a decade, the first woman elected by popular vote, and the most polarizing figure in contemporary Peruvian politics. Her Fuerza Popular and allied Renovación Popular hold half the Senate, providing legislative stability unprecedented in recent Peruvian history. The administration's priorities – security modeled on Bukele's El Salvador, infrastructure via PPPs, mining-led growth – are broadly market-friendly. Economy Minister Elmer Cuba, a former central bank board member, reinforces the orthodox economic signal.

However, the margin of victory (fewer than 50,000 votes) and deep geographic polarization (coastal voters backing Fujimori, highland communities overwhelmingly supporting the left) suggest a mandate that is numerically thin and socially fragile. The Fujimori name carries both promise and baggage: it evokes 1990s macroeconomic stabilization but also authoritarianism and human rights violations. Opposition groups protested the inauguration itself, demanding investigation of 50 civilian deaths during 2022-2023 unrest. If economic benefits do not reach the highland periphery and particularly if El Niño compounds existing inequality, social friction could resurface rapidly, testing whether this administration breaks the cycle of presidential turnover or perpetuates it.