Peru President Calls for Gas Nationalization, New Constitutition
(Bloomberg) -- Peru’s President Pedro Castillo on Monday asked congress to pass a law to nationalize the Camisea gas field and called for a major reform of the constitution -- both moves that are feared by investors.
“We urge congress to make a law for the statization or the nationalization of Camisea gas, to give it to all Peruvians,” Castillo said from Amazonas province during a tour of cities in the north of Peru.
In a separate speech he said, “Peru shouts in the street that it’s necessary to make major constitutional reforms, and these constitutional reforms should be undertaken by the people.”
Peruvian assets have rallied this month after Castillo named a new cabinet, which some investors interpreted as a move toward moderation. Castillo’s radical speeches on Monday may revive their concerns, even though he would find it difficult to implement these policies, said Alvaro Vivanco, head of emerging-market strategy at NatWest Markets in Stamford.
“The risk of that kind of speech will always be there. What’s important is whether there’s political space to do it,” Vivanco said, in reply to written questions.
Peruvian assets sold off last month when former prime minister, Guido Bellido, first floated the idea that Camisea would be nationalized if didn’t pay higher taxes.
Meanwhile, in Lima, the new Prime Minister Mirtha Vasquez presented a tempered government plan to lawmakers in the opposition-led Congress. Since Vasquez and the new cabinet members were announced on Oct. 6, the currency has gained 4.1% against the dollar, while the nation’s bonds rallied, sending the yield on the benchmark local currency bond to 5.9%, a level last seen before Castillo took office.
Vasquez pledged a reform of the pension system, overhauling the tax system with the IMF’s guidance and the completion of a gas pipeline in the country’s south. She was in congress to ask lawmakers to back her and the cabinet in a vote of confidence.
Congress delayed the vote of confidence until November 4 after a lawmaker from Castillo’s party died of natural causes.
Castillo met a backlash from radical supporters of his own Peru Libre socialist party this month after he appointed Vasquez and other moderates to the cabinet.
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