Perú
Castillo confirms orthodox president of the Central Bank of Peru and anticipates fiscal balance
Julio Velarde has been in charge of the organization since 2006 with Alan García and was ratified by all subsequent presidents.

Peru's recently proclaimed president, Pedro Castillo, continues to signal calm markets and promises to maintain the macroeconomic stability of recent decades.

As LPO reported earlier, Castillo placed World Bank adviser Pedro Francke, a defender of fiscal stability and inflation targets, at the helm of the economic team. He is also known for rejecting nationalization and expropriation policies.

Now, the candidate of Free Peru has declared himself in favor of the continuity of the Central Bank official, Julio Velarde, who has been at the head of the organization since 2006 with Alan Garcia and was ratified by all subsequent presidents.

Castillo confirmed the information on his Twitter account: "Our commitment is to maintain fiscal balance and improve the quality of public spending, promote investments and respect the independence and autonomy of the BCRP. That is why we want to ratify Dr. Julio Velarde as president of this important institution."

Peru's Central Bank President Julio Velarde at a pre-pandemic IMF summit.

However, it is not yet confirmed that Velarde will continue in office, and that creates uncertainty. Former Peruvian Economy Minister Alfredo Thorne welcomed the gesture but said that the new president must have a plan B. "As economists say, you need to have a plan B. Pedro Castillo should not only name him, but pick up the phone and call him directly. If he is not confirmed, we will have to look for a person who has the credentials to manage the BCR, then the Minister of Economy will need to be appointed as well as his premier," he said in a conversation with RPP News.

Our commitment is to maintain fiscal balance and improve the quality of public spending, promote investments and respect the independence and autonomy of the BCRP. That is why we want to ratify Dr. Julio Velarde as president of this important institution.

Castillo's statement aims to curb the pressure on the exchange rate, which surpassed the 4 soles-per-dollar last week as sovereign bonds were sold and people withdrew their deposits, and to built confidence in those who say they want to take a sharp turn to the left.

Sources close to Castillo's team confirmed that, if Velarde decides to leave the Central Bank, the shares will rise on Pedro Francke, who today guarantees some tranquility for the private and financial sectors. The challenge of the rural professor is not simple: to maintain the macroeconomic model, while designing distributive policies that aim to fight inequality and poverty.

The confirmation of his victory by the National Electoral Court and the pressure of Fujimorism on the streets, anticipates a scenario of polarization in which half of the population will not recognize the legitimacy of the winner.

Keiko Fujimori insists and asked president Francisco Sagasti for an audit, but this claim has no consensus in Peru or with the international community that demanded transparency during the electoral process. The new government is due to take office on July 28. 

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