Leftist inches ahead in Peru presidential race

Leftwing candidate Pedro Castillo inched into the lead in Peru’s presidential election on Monday, prompting the Peruvian currency, stocks and bonds to fall on expectations he would seal a dramatic victory.

With 94 per cent of the vote counted, Castillo had 50.1 per cent to 49.9 per cent for Keiko Fujimori, his rival — a difference of just 26,000 votes from a potential electorate of 24.3m people. Earlier on Monday Fujimori had been nearly 100,000 votes ahead.

Many of the remaining tallies were due to come in from rural areas, where Castillo is strongest. However, there were also ballots to be counted from Peruvians living abroad, which are likely to favour Fujimori.

“[It] is too close to call, but based on the vote counting dynamics of the last few hours it seems to be leaning very slightly in favour of . . . Castillo,” said Alberto Ramos, head of Latin American economics at Goldman Sachs.

The sol, which has depreciated sharply in recent weeks in anticipation of a possible Castillo victory, lost more than 2 per cent against the dollar to trade at about 3.90, an all-time low.

Peruvian stocks plummeted, with the S&P/BVL Peru General index roughly 7 per cent lower in afternoon trading in New York. The country’s dollar bonds also came under pressure. One note set to mature in 2050 saw its price drop roughly 1.5 per cent to 130 cents on the dollar. Another dollar bond maturing in 2030 fell more than 1 per cent to 99 cents on the dollar.

“We anticipate volatility for Peruvian assets and note that demonstrations against results from both sides is a possibility given the tightness of the race,” Citibank noted.

The election has been an extraordinary tussle between populists from opposite ends of the political spectrum.

Castillo is a rural primary school teacher turned hard-left crusader for the downtrodden, while Fujimori is the widely disliked daughter of Peru’s authoritarian former president Alberto Fujimori.

The prospect of a Castillo victory has sparked panic and capital flight among the Peruvian elite. The sol has depreciated further against the dollar than any other currency in the world since the first round of voting in April, when Castillo first emerged as a frontrunner. Dollar-sol transactions have jumped by about 20 per cent in the past month.

Free Peru, Castillo’s party, is led by a Marxist advocating nationalisation, higher taxes, a new constitution and a curb on imports in one of the world’s biggest producers of copper, zinc and precious metals. Fujimori, in contrast, largely defends Peru’s economic model.

Castillo has roused people in poor, neglected villages in the Andes with a simple but powerful message: “No more poor people in a rich country.” Fujimori’s bid to become Peru’s first female president, meanwhile, has been complicated by corruption allegations that she denies.

Whoever wins will not have a majority in congress. Castillo’s party has 37 of the 130 seats in Peru’s unicameral parliament while Fujimori’s has just 24, although the house is packed with other rightwing parties that might be prepared to cut deals with her and make Castillo’s life difficult.