(Bloomberg) -- Peru's bonds and currency gained after an economist who spent most of his career at the central bank was sworn in as finance minister, calming the nerves of investors alarmed by recent political turmoil.
The sol appreciated 0.9% in early trading on Wednesday, leading gains among Latin American currencies, and the nation's dollar bonds due 2072 rose as much as 0.7 cent to trade at 87.8 cents on the dollar, the highest since Jan. 21.
President Pedro Castillo on Tuesday named Oscar Graham, who spent more than two decades working at the monetary authority, to take over from Pedro Francke. He also swore in a prime minister together with new chiefs of the interior, defense, and foreign affairs.
“The new cabinet isn't radical, which was the fear,” said Juan Prada, a currency strategist at Barclays in New York.
The appointment of Graham, who has a Masters in Economics from Queen Mary University of London and has also worked at the finance and planning ministries, reassures investors that Peru won't implement abrupt changes to its economic model, said Rodolfo Rojas, a partner at Lima-based Sequoia political advisory group.
“The presence of someone like Graham confirms that the president knows he can't touch the macroeconomy,” Rojas said. His appointment “gives signals to the markets that Peru will maintain macroeconomic stability.”
Castillo named Hector Valer, an ally in congress, to be prime minister. Although Valer has a conservative background, he backed the president in December when a group of opposition lawmakers tried to impeach him.
The departure of several center-left cabinet members may add to divisions within the rulling coalition and Castillo's political allies, according to UBS Group AG. “The latest cabinet changes don't mark a clear turn in any direction for the government's political stance, but instead likely increase concerns regarding governability in the short term,” analysts including Andrea Casaverde and Roque Montero wrote in a research report.
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Political Turmoil
Francke quit on Tuesday, and Prime Minister Mirtha Vasquez left a day earlier, as Castillo overhauled his cabinet amid political turmoil. The president is facing multiple crises, including a catastrophic oil spill, the resignation of his interior minister on Monday, and an surge in crime that has led to a state of emergency in Lima.
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Castillo has repeatedly made changes to his cabinet since taking office last July, as he has been torn between the need to appease socialists in his own party while also maintaining a working relationship with congress. Some ministers were also toppled by scandals.
The economy shrugged off the political turmoil, however, and bounced back last year to grow 12.7%, according to estimates of economists surveyed by Bloomberg.
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