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Peru's Financial Markets Show Resilience Amidst Political Turmoil

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  Published in Politics and Government on Friday, February 20th 2026 at 5:43 GMT by Reuters
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LIMA, Peru - February 20, 2026 - Despite a tumultuous period of political upheaval culminating in the impeachment and arrest of former President Pedro Castillo in December 2023, Peru's financial markets have demonstrated a surprising degree of resilience. While nationwide protests and road blockades initially sparked concerns of economic disruption, the Peruvian sol has remained remarkably stable, and the stock market has largely held its ground, defying expectations of a significant downturn. This analysis delves into the factors underpinning this resilience, the current state of the Peruvian economy, and potential risks that could still impact its future.

A History of Volatility: The 'New Normal' for Peruvian Markets

The relative calm within Peru's financial ecosystem isn't entirely unexpected, according to experts. As Shamyr Apestegui, chief economist at Macroconsult, notes, "Markets have gotten used to political volatility in Peru." This statement highlights a crucial understanding: Peru has a history of political instability, and its financial actors have, to a degree, factored this risk into their assessments. Impeachments, shifting governments, and social unrest have become recurring features of the Peruvian political landscape, creating a degree of desensitization within the markets. Investors appear to be applying a 'business as usual' approach, discounting short-term political drama in favor of long-term economic fundamentals.

Solid Economic Foundations Underpin Resilience

Beyond simply becoming accustomed to volatility, Peru possesses robust macroeconomic fundamentals that are acting as a shield against the worst effects of the political crisis. The nation enjoys a healthy trade balance, driven by its key exports of minerals - copper, gold, and silver - which continue to command strong global prices. Importantly, Peru has also managed to maintain relatively low inflation compared to many other Latin American economies. This combination of a positive trade balance and controlled inflation provides a solid base for economic stability.

Furthermore, Peru's consistent engagement with international financial institutions, particularly the International Monetary Fund (IMF), has played a vital role. The IMF has provided both financial loans and critical technical assistance, bolstering investor confidence. This support isn't merely monetary; it signals international faith in Peru's long-term economic prospects, acting as a buffer against perceived risks. The IMF's involvement effectively provides a safety net, reassuring investors that Peru won't be left to navigate the crisis alone.

Localized Disruptions, Limited National Impact

The protests following Castillo's removal, while tragic - resulting in at least 40 fatalities - have largely been geographically concentrated. Road blockades and demonstrations did disrupt economic activity in certain regions, particularly in the south of the country, impacting agricultural supply chains and mining operations. However, the government swiftly mobilized to clear key roads and prioritize the protection of vital infrastructure, mitigating the broader economic impact. While sectors like tourism experienced temporary setbacks, the overall effect on the national economy has been contained. The government's proactive approach, combined with the diversified nature of the Peruvian economy, prevented widespread paralysis.

Looking Ahead: Risks Remain on the Horizon

Despite the current stability, analysts caution against complacency. The situation remains undeniably fragile, and the potential for renewed unrest lingers. Carlos Lozada, chief strategist at Credit Suisse, emphasizes that "The key risk is that the protests escalate and lead to more widespread disruption." A sustained escalation of protests, potentially fueled by social and economic grievances, could damage investor sentiment and trigger a more significant market reaction. Specifically, prolonged disruptions to mining operations - a cornerstone of the Peruvian economy - would pose a severe threat.

Moreover, the current interim government led by Dina Boluarte faces challenges in establishing lasting political legitimacy and addressing the underlying causes of the discontent. The calling of early elections, while a positive step, requires transparent and fair implementation to restore public trust. Delays or perceived irregularities in the electoral process could reignite social tensions.

The Path Forward: Diversification and Institutional Strengthening

Peru's ability to weather this storm underscores the importance of economic diversification and institutional strengthening. While mining remains crucial, expanding into other sectors - such as renewable energy, technology, and sustainable tourism - will reduce the country's vulnerability to commodity price fluctuations. Furthermore, investing in robust legal frameworks, transparent governance, and independent institutions is vital to fostering a stable and predictable investment climate. By addressing the root causes of political and social unrest, Peru can lay the foundation for sustained economic growth and resilience, even amidst future challenges. The current period of relative calm presents an opportunity for Peru to reinforce its economic foundations and build a more stable future.