Peru's Marxist PM supports moderate pick for Finance Minister in olive branch to markets

LIMA (Reuters) – Peru’s newly appointed hard-left prime minister came out in support on Friday of a more moderate economist vying for the key finance minister post, an apparent olive branch to rattled markets after President Pedro Castillo named members of his Marxist Free Peru party to several other cabinet positions.

FILE PHOTO: Peru’s President Pedro Castillo walks out the Congress after his swearing-in ceremony, in Lima, Peru July 28, 2021. REUTERS/Angela Ponce/File Photo

Guido Bellido, a hardliner and Marxist from the Andean city of Cuzco who is little known in Lima circles, was named prime minister on Thursday, dampening investor hopes for a more moderate cabinet, hammering bond markets and the sol currency.But Bellido late on Friday appeared to show support on social media for moderate left-wing economist Pedro Francke, a top adviser to Castillo who had helped the recently elected president soften his image.

“Pedro Francke has our full support for the application ofthe economic stability policy,” Bellido said on Twitter. “Wewill work together and together for the country.” Francke, a close confidant of Castillo and long a favorite for the finance job, left a ceremony to swear in newly appointed cabinet members just minutes before it started on Thursday, sparking questions over whether he had rejected or lost the job at the last minute.

Francke did not reply to calls and messages from Reuters seeking comment on Bellido’s social media post.Most of the rest of Castillo’s cabinet was sworn in onThursday.

Ivan Merino, a little known mining specialist close to FreePeru, was tapped during the ceremony to oversee the sprawling metals industry in the world’s No.2 copper producer. Castillo, a self-described Marxist-Leninist, campaigned on promises to hike taxes on miners to underwrite health and education reforms.

Markets remained on edge throughout the day Friday as investors anxiously awaited Castillo’s choice for the key finance minister position.

“Don’t worry. Everything’s going to be fine,” Bellido saidin brief comments to reporters early in the day.

Investors were not reassured and Peru’s currency, the sol, tumbled to a record low on its largest daily decline in over seven years. The local stock index dropped almost 6% at its session low and posted its lowest close since November.Castillo, inaugurated on Wednesday, took to Twitter in theearly hours of Friday to defend his new government.

“Our cabinet belongs to the people. It answers to the people,” Castillo wrote.

“Our commitment is to Peru and to no other interest than todedicate each and every one of our efforts to build a more just,free and dignified country. We will not disappoint your trust.”

Investors are growing wary about Peru’s prospects underCastillo, who won last month’s election against conservativeKeiko Fujimori by a razor-thin margin. After a campaign in whichhis pledges to distribute wealth more evenly spooked markets but won him votes from Peru’s rural poor, he had in recent weeks appeared to take a more moderate tack.

Political wrangling between the radical leftwing arm of hisFree Peru party and more centrist allies followed his win.

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