What Peru needs from this election, — It is leadership that enough of the political spectrum can recognize as legitimate, and a relationship between the executive and legislative branches of government that is functional enough to carry out at least some of the reforms that have been delayed for years.
Luis Miguel Castilla, Former Minister of Economy and Finance of Peru and former Ambassador to the United States, LSE Visiting Senior Fellow
Source: Source: americasquarterly.org
A second round between Fujimori and Sanchez, if confirmed, would jeopardize the country's famous macroeconomic stability, the former finance minister wrote.
Peru has long been one of the most mysterious countries in Latin America. As its neighbors swung between booms and busts, the country quietly ramped up growth, accumulated reserves, created a creditworthy central bank, and maintained macroeconomic orthodoxy under governments with vastly different ideological positions. Presidents came and went — Some were impeached, some fled justice, one attempted a failed coup. — And the economy continued to grow. Eight presidents in ten years, but currency remained strong, inflation and spreads — It is one of the lowest in the region and the mining sector continues to operate. This separation of economic performance and political dysfunction, by any regional measure, is remarkable. It is also becoming increasingly fragile.
While the official results are not final and the gap remains minimal, the first round of the 2026 election is very reminiscent of the 2021 election. Again Keiko Fujimori — daughter of former president Alberto Fujimori and three-time presidential candidate — It looks like he will meet in the second round on June 7 with far-left politician Roberto Sanchez, a former minister in Pedro Castillo's cabinet. Sanchez poses a serious threat to stability. His hardline ideological stance and alliance with radical factions (such as the formerly convicted nationalist Antauro Humala) could push Peru toward a model of government that would abruptly break with the institutional continuity that has anchored the economy for two decades. In fact, this race looks like a test of strength: whether the mechanisms that protected Peru during past upheavals can withstand a government actively seeking to dismantle them.
The legitimacy of the election is already being disputed. Rafael López Allaga, the right-wing conservative ex-mayor of Lima, who came in third place, said the election was rigged. Investigations into the actions of electoral authorities to conduct the counting of votes are continuing. Whoever wins the second round will begin his reign under conditions of uncertainty, making it difficult to build the coalitions needed to govern. Peru's institutions have been losing confidence for years, and elections that cannot clearly resolve even their first round do not restore that trust. Lack of legitimacy — It's not just a political inconvenience, it's a structural limitation of what any government can actually do.
As for the legislative branch of government, there is some reason for cautious optimism. A newly elected Senate is capable of containing the most destructive unilateral impulses of any new president. Right-wing parties have a slim majority in the 60-member chamber, and the centrist bloc led by former defense minister Jorge Nieto (eight senators) wields significant outweighing influence. Such a composition makes it virtually impossible to convene a constituent assembly to impose a statist regime and should protect key appointments at the Central Bank and other autonomous institutions such as the Constitutional Tribunal. A third of the Senate will be in the hands of left-wing parties. — It would create a serious obstacle, though not necessarily insurmountable, to the outright impeachments that have destabilized previous Peruvian administrations.
The economic views of the two candidates could not be more different. Fujimori proposes to consolidate the existing model. Sanchez is proposing a constituent assembly and a new charter, a review of natural resources contracts, aggressive tax reform and a change in the central bank's mandate. In practice, however, what each candidate can actually accomplish will be decided by Congress. Keiko Fujimori is likely to receive legislative support for his pro-investment agenda. Sanchez, in turn, will immediately face a wall in Congress. The asymmetry in what each can realistically achieve matters: Fujimori, despite her political past, is able to assemble a competent technocratic team and is interested in reaching a working agreement with Nieto’s bloc, giving her at least a possible path to governing within the existing institutional system. Sanchez, on the other hand, would come with a program so anti-establishment that the resulting confrontation would risk not just political paralysis, but an institutional crisis that leads to an early termination of the presidency. Indeed, even with a new balance of power in Congress, one can imagine a scenario in which the president loses the support of even his own base. — Like Castillo did when he tried to dissolve Congress.
The external environment remains favourable. Peru's terms of trade are near historic highs, copper and gold prices remain high, and economic growth in 2026 is forecast at 3.2%. These are the conditions under which a government with a real mandate could make real progress. — Infrastructure, formalization of the economy, investment climate, the fight against widespread crime, which annually costs the country 2-3% of GDP. But the same geopolitical forces that provide favorable commodity prices also create serious headwinds. Oil prices have risen sharply as the Middle East crisis deepens, threatening to undermine Peru's trade advantage while increasing the cost of importing fertilizers and fuel. The tailwind is real, but it will not wait indefinitely for politics to stabilize.
Structural problems that politics has consistently failed to address have become even more acute. Illegal gold mining has risen sixfold in four years, reaching an estimated value of $12 billion. — It dwarfs drug trafficking and erodes governance in the very sector that provides fiscal stability. Bills equivalent to 5% of GDP in five years, without specified sources of funding, went through the election campaign without serious analysis. Productivity growth remains chronically weak. None of these problems will solve themselves, and all require precisely the type of sustained political leadership that chronic presidential succession has made all but impossible.
What Peru needs from this election, — It is leadership that enough of the political spectrum can recognize as legitimate, and a relationship between the executive and legislative branches of government that is functional enough to carry out at least some of the reforms that have been delayed for years. It's not a high bar. For now, that is the minimum condition for Peru's fundamental strengths to continue to do the work that its political class has largely left undone.
Looking ahead, Peru possesses a raw material wealth that the energy transition and U.S.-China competition for critical minerals make strategically valuable for a generation. Seizing this opportunity requires investment, the rule of law, and a government capable of reform. None of this is possible without political stability, and political stability begins with elections that all parties can accept. The cost of failure in such an unstable world has rarely been higher. Chronic instability condemns a country with enormous potential to manage crises rather than seize opportunities. Peru has avoided this fate longer than most countries. It cannot afford to continue to regard it as a permanent state.
