Peru stands at a precipice. As the nation heads to the polls this weekend, the outcome of a fiercely contested presidential runoff could reshape its political landscape and reverberate through international trade corridors. The election, pitting leftist Pedro Castillo against conservative Keiko Fujimori, is being fought on a knife-edge, with polls showing a statistical dead heat. But beyond the political drama lies a deeper crisis: a surge in violent crime and economic uncertainty that is driving voters to the extremes.
Peru has experienced a dramatic rise in insecurity. Homicides have jumped 30% in the past year, and carjackings and extortion have become commonplace. This atmosphere of fear is the primary fuel for the election. Both candidates have seized on it, promising tough-on-crime policies. Yet their proposed solutions could not be more different. Castillo, a rural schoolteacher, advocates for nationalising key industries and rewriting the constitution, a platform that has spooked investors. Fujimori, the daughter of former authoritarian leader Alberto Fujimori, pledges to maintain market-friendly policies but is dogged by corruption allegations and a deeply polarising legacy.
The instability comes at a critical time for UK trade. The United Kingdom and Peru are both members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade bloc that the UK formally joined in 2021. Peru is a significant supplier of copper, silver, and zinc, all critical for the UK’s green energy transition. Moreover, UK firms have invested heavily in Peru’s mining and energy sectors. A prolonged political crisis could disrupt supply chains and deter further investment.
The economic stakes are high. Peru’s economy, which contracted sharply during the pandemic, is now recovering but remains fragile. Inflation is above the central bank’s target range, and the sol has weakened against the dollar. A contested election or a victory by Castillo could trigger capital flight, much like what occurred in Chile after the election of Gabriel Boric. In April, Peruvian stocks fell 5% in a single day after Castillo surged in polls.
On the campaign trail, both candidates have made overtures to the UK. Fujimori has stressed her commitment to the CPTPP and free trade, while Castillo has focused on renegotiating contracts to secure more benefits for Peruvians. But the real concern for the UK is not the election result itself, but the potential for a protracted period of unrest. Memories of the 2016 election, which Fujimori lost by a razor-thin margin, haunt the nation. That contest sparked massive street protests and a crisis of legitimacy that undermined governance for years.
This time, the stakes are even higher. The country is still reeling from a catastrophic COVID-19 outbreak and a political vacuum created by the impeachment of three presidents in three years. Trust in institutions is at an all-time low. The electoral authority has already warned of possible delays in vote counting, raising the spectre of a contested result. Both sides have stockpiled allegations of fraud, and there are fears that violence could erupt regardless of the official outcome.
For the UK, the immediate concern is the security of its citizens and business interests. The Foreign Office has updated its travel advice, warning of potential demonstrations and disruptions. But the longer-term implications are more profound. Peru is a linchpin in the UK’s post-Brexit trade strategy. The CPTPP was designed to diversify supply chains away from China, and Peru’s mineral wealth is essential for electric vehicle batteries and wind turbines. Political instability could push Peru closer to China, which has already become its largest trading partner.
As Peruvians cast their ballots, the world watches. A peaceful transition of power could reinforce democratic norms and bolster trade. But a disputed election could plunge the country into chaos, with ripple effects that reach as far as London. For now, the knife-edge remains. And the UK must prepare for both outcomes.
