LIMA — A knife-edge Peruvian election, fuelled by a relentless surge in violent crime, has put a lucrative British trade agreement on life support. Sources close to the negotiations confirm that UK officials are watching the 2 June runoff with mounting alarm. The frontrunner, a populist candidate promising a hardline crackdown, has already signalled he would review all foreign commercial pacts. His opponent, a centrist former finance minister, appears unable to stem the流血。
The race is a dead heat. Polls show the two candidates separated by less than two percentage points, with a third of voters still undecided. The driving issue: insecurity. Peru’s homicide rate has jumped 40 percent in three years. Carjackings, extortion and contract killings have become daily realities in once quiet suburbs. The state, hollowed out by corruption scandals, seems paralysed.
For Britain, the stakes are high. The two countries signed a continuity trade agreement in 2020, preserving access for UK financial services and machinery exporters worth around £500 million a year. But the deal is young. It requires periodic reviews and can be suspended if one party undergoes a fundamental change in economic circumstances. That clause, London fears, could be triggered by a new government hostile to foreign investment.
‘The deal is solid on paper,’ said a senior UK trade official who asked not to be named because he is not authorised to speak publicly. ‘But paper doesn’t buy security. If the new president starts nationalising industries or defaulting on debt, the agreement becomes worthless.’
Uncovered documents from the Peruvian Ministry of Economy show that the outgoing administration fast-tracked the trade deal to lock in terms before the election. One internal memo, dated February, warns that a populist victory could lead to ‘a rapid deterioration in the investment climate.’ The memo was marked ‘sensitive — do not circulate.’ It was leaked to this journalist by a former ministry employee who said he was ‘sick of watching the country burn.’
The populist candidate, whose name is omitted here for legal reasons, has built his campaign around restoring order. His platform: deploy the military into civilian policing, build new prisons, and expel foreign criminals. His rhetoric has spooked multinationals. Two mining firms told me they have delayed expansion plans until after the vote. A British bank has halted new lending to Peruvian infrastructure projects. ‘We cannot underwrite risk in a country where the rule of law is being dismantled,’ a director of the bank said in an internal email.
The centrist candidate, by contrast, promises to uphold existing agreements. But he lacks credibility. He was finance minister during a period of slow growth and rising debt. His party is linked to bribery scandals. Voters distrust him.
Meanwhile, organised crime thrives. A recent police raid on a warehouse in Callao, the port city, uncovered 12 tonnes of stolen copper destined for China. The copper came from a British-owned mine in the south. The gang, police said, had paid off local officials to ignore the operation.
The UK Foreign Office has issued travel warnings, but officials play down the trade risks. ‘We are confident that whichever candidate wins, Peru will honour its commitments,’ a spokesperson said. That confidence is not shared by the firms on the ground.
The election is a referendum not just on the candidates, but on whether Peru can escape the cycle of instability that has plagued it for decades. The winner inherits a country where the state is weak, the economy is slowing, and the streets are dangerous. And a trade deal that may be worth nothing at all.
