Peru Pandemic Plan Rebuffed by Surprising No-Confidence Vote

(Bloomberg) -- Peru's President Martin Vizcarra said he'll pick his second cabinet in less than a month after unexpectedly losing a congressional vote of confidence in a stinging rejection of his government's handling of the coronavirus pandemic.

Speaking in an televised address, Vizcarra said that while he accepted Congress' decision, it was disappointing given the country is in the middle of a devastating health crisis.

Lawmakers earlier Tuesday unexpectedly voted against the cabinet led by Pedro Cateriano, an experienced politician appointed by Vizcarra less than three weeks ago following criticism his government caused an economic crisis with strict lockdowns and failed to prevent Peru becoming a virus hotspot.

It's the first time Congress have refused to back a newly appointed cabinet chief. Vizcarra must now find a replacement who's palatable to a Congress where the government lacks any representation.

“This decision just creates unnecessary uncertainty in the current circumstances,” he said.

The president accused lawmakers of voting to defend personal interests and vowed to continue with a higher education reform opposed by some parties.

Pro-Mining

On Monday, Cateriano attended Congress with his cabinet and laid out plans to dig Peru out of its worst slump in a century. He said the government had made mistakes in fighting the virus, which has killed as many as 40,000 people in the country, and pledged to reorganize the public health system.

Yet lawmakers from several parties criticized Cateriano's pro-mining stance, saying his focus should be on helping small businesses, and said he failed to explain the government's new virus strategy.

Education policy was also a sticking point. Vizcarra supports education reform that has led to the closure of several private universities, including one owned by the founder of an opposition party. Speaking early Tuesday, Cateriano said he had been warned that his decision to ratify Education Minister Martin Benavides in his post, despite opposition from some lawmakers, could cost him the vote of confidence.

They debated his proposals through the night and voted 54-37 against the cabinet, with 34 abstentions.

“The political class represented in Congress, with few exceptions, is not up to the challenges of our country,” said Alonso Segura, a former finance minister with the previous administration who's been critical of the government's pandemic-response strategy. “It's one thing to have differences and another to bring down a cabinet in the middle of a health and economic crisis.”

Vizcarra has had a fractious relationship with Peru's legislature since assuming office amid a political crisis in March 2018. He dissolved Congress in September after frequent clashes over measures to fight corruption, and called a parliamentary election. That vote produced a fractured Congress with mostly first-time lawmakers and one in which the government has no representation. Political tensions rose as lawmakers passed legislation opposed by the government, such as the suspension of road tolls during the pandemic.

What Our Economist Says

“This adds evidence of the ongoing political instability and structural governance problems in Peru. It is likely to undermine the ability of the government to execute the ambitious fiscal stimulus plan announced earlier this year and points to a weaker than initially expected economic recovery.”

-- Felipe Hernandez, Latin America economist with Bloomberg Economics

Vizcara needs to rethink his political strategy for negotiating with an atomized opposition, without backtracking on plans for government, said Andres Calderon, a law professor at the Universidad del Pacifico in Lima.

“There was miscalculation by the government about the unpredictability of this Congress. But it would be a mistake to think it has to cede ground in major policy areas” such as education or mining, he said by phone.

The president has enjoyed high levels of public approval since shutting Congress, maintaining support even after a three-month nationwide lockdown failed to prevent the virus spreading.

Peru's central bank forecasts a 12.5% drop in gross domestic product this year, one of the deepest in Latin America, as a result of the coronavirus pandemic.

Read More: Virus Puts Peru on Path to Economic Suicide, Think Tank Says

The Lima Chamber of Commerce called for Vizcarra to appoint a “broad-based ministerial cabinet that creates consensus, confidence and credibility,” in an emailed statement.

Vizcarra can reappoint all the member of his cabinet except Cateriano. Some lawmakers said Health Minister Pilar Mazzetti is well suited for the post of cabinet chief.

©2020 Bloomberg L.P.