EG Peru - Castillo's Lead Will Likely Shrink

PERU
Castillo’s lead will likely

shrink 19 Apr 2021 15:41 EDT
Maria Luisa Puig

Director, Latin America
Short-term trajectory: Long-term trajectory: +44 (0) 207.553.9836
[email protected]
Laura Duarte
Researcher, Latin America
+1 202.552.5394
[email protected]
Radical, left-wing teacher Pedro Castillo’s comfortable lead
over conservative former lawmaker Keiko Fujimori ahead
of the 6 June presidential runoff highlights his strength as a
candidate in an election driven by elevated
antiestablishment sentiment and demand for change.
But Castillo’s lead will likely shrink in the coming weeks;

Eurasia Group still thinks Fujimori will win the election,
though the probability has fallen from 60% to 55%.
If elected, Castillo would seek to change the constitution to

implement a new economic model, despite a fragmented
congress; a Fujimori-led administration would ensure
broad continuity of economic policy.
An Ipsos poll published on 18 April showed Castillo to be the

preferred candidate among 42% of respondents ahead of the
6 June presidential runoff, while conservative former lawmaker
and three-time presidential candidate Keiko Fujimori had the
support of 31%; the poll also showed 27% of respondents are
undecided or planning to cast blank or null votes.
These results suggest Castillo will be an extremely

competitive candidate in an election marked by strong
antiestablishment sentiment and demand for change. A
primary school teacher who gained prominence during a 2017
union strike, Castillo is the ultimate outsider. He surged in
polling just before the 11 April first-round election and finished
first with 19.1% of the valid vote, while Fujimori secured 13.4%
in an extremely fragmented race. His radical left-wing platform
is proving appealing to a large segment of the population,
particularly poor voters in the interior amid a profound
healthcare and economic crisis and following decades of
economic policy continuity.
Moreover, Castillo is benefitting from a matchup against a

divisive and unpopular opponent. While Fujimori’s rejection
rates have fallen by nearly 20 percentage points in recent
months, they remain high at 55%; Castillo’s are much lower, at
33%. The daughter of imprisoned former president Alberto
Fujimori (1990-2000), Fujimori lost both the 2011 and 2016
runoffs by a narrow margin. But since 2016, clashes with the
executive branch and investigations into alleged money
laundering have taken a toll on her popularity in a context of
deep distrust of the political class and widespread concerns
over corruption.
Even so, Castillo’s lead over Fujimori will likely shrink in the coming weeks. The campaign for the
second round has just started and voter preferences can shift significantly in the seven weeks
remaining until the 6 June vote. In the 2016 election, for instance, Fujimori lost to former president
Pedro Pablo Kuczynski after being both ahead and behind him in the polls, although the difference
was much narrower.
Castillo is far to the left on the ideological spectrum and will probably struggle to attract moderate
voters, while Fujimori can still gain among undecided and poor voters. Moreover, Castillo’s rejection
rates may grow as he becomes better known, while Fujimori already has very high levels of name
recognition and if anything, her rejection rates have been diminishing. Consequently, the basecase
remains that Fujimori will beat Castillo (please see Eurasia Group note: Peru: Castillo will likely lose
in the runoff, 12 April 2021). However, with the election deeply polarized and Castillo off to a strong
start, the odds of Fujimori’s victory have fallen from 60% to 55%.
Key signposts to watch over the coming weeks are Castillo’s ability to shift to the center with a
credible discourse (although this could undermine support among his core base) and if Fujimori
adopts a message that conveys change rather than continuity to tap into dissatisfied voters,
particularly in poor and rural areas. The evolution of the Covid-19 pandemic will also be a factor, as a
worsening outbreak would heighten voter discontent, probably to the benefit of Castillo. Deaths per
capita in Peru are the highest in the region behind those in Brazil, with the country setting a new daily
record yesterday, while the vaccination process has been advancing at a very slow pace.
If elected, Castillo would seek to change the constitution to implement a new economic model that
allows contract renegotiation and possible nationalizations, despite a fragmented congress. A
Fujimori-led administration would ensure broad continuity on economic policy.
Explanation of Political Trajectories (ie, “Trajectories”)
Eurasia Group's (EG) Political Trajectories are indicators of the net impact of political factors on the macro business environment in a country over specific timeframes. For each country,
two Trajectories are provided, a short-term (6 months) and a long term assessment (24 months). Trajectories are assigned by Eurasia Group’s country analysts through a structured
qualitative process. Each Trajectory represents a net assessment, indicating how political changes in a country impact the macro business environment, defined as the economic and
investment climate in the country. Once initiated, Trajectories are updated both periodically and as events warrant. Trajectories may be suspended from time to time if there is no active
analyst opinion or analyst coverage, but the opinion or coverage is expected to resume. Trajectories can be:
Positive: Political factors in the country are anticipated to have a positive impact on the macro business environment
Neutral: Political factors in the country are anticipated to have a neutral or negligible impact on the macro business environment
Negative: Political factors in the country are anticipated to have a negative impact on the macro business environment
Disclaimers: Trajectories are solely for informational purposes and should not be relied upon as investment advice. Trajectories do not indicate asset price movements, and
have no value in forecasting market prices. Trajectories are based on data and analysis we deem to be reliable; they are not guaranteed as to accuracy or completeness. The
Trajectories indicate the political outlook in a single country, over time. Trajectories do not address sector-specific or city/regional political risks that are often different than the country-
level outlook. Trajectories represent an analyst’s net qualitative assessment of a country's political outlook. EG sales, analytic staff and products may provide analysis reflecting different
opinions than those expressed by the Trajectories.
© 2021 Eurasia Group. All rights reserved. This material was produced by Eurasia Group for use by the recipient. This is intended as general background research and is not intended to
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PERU

Castillo’s lead will likely

Maria Luisa Puig

But Castillo’s lead will likely shrink in the coming weeks;

If elected, Castillo would seek to change the constitution to

An Ipsos poll published on 18 April showed Castillo to be the

These results suggest Castillo will be an extremely

Moreover, Castillo is benefitting from a matchup against a

Explanation of Political Trajectories (ie, “Trajectories”)

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