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Peru's Political Instability No Longer Shocks Markets

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  Published in Politics and Government on Friday, February 20th 2026 at 18:53 GMT by KELO
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LIMA - February 20th, 2026 - Peru finds itself once again grappling with political instability following the impeachment of former President Pedro Castillo in December 2022 and the ascension of Dina Boluarte. While such upheavals were once guaranteed to send shockwaves through the nation's financial markets, the response this time has been remarkably... muted. What's even more striking is that this trend has continued, and even strengthened over the last three years. This isn't simply a brief lull before a storm, but a fascinating adaptation by investors who have, seemingly, grown accustomed to Peru's chronic political volatility.

For observers of Peruvian politics, this scenario feels tragically familiar. The country has become notorious for its revolving door of presidents, each facing a gauntlet of challenges and frequently experiencing truncated tenures. Castillo's removal is just the latest chapter in a saga that dates back decades, marked by accusations of corruption, power struggles, and profound public dissatisfaction.

"There's a definite sense of 'here we go again' amongst investors," explains Joaquin Grajales, an economist at BBVA Research in Lima, speaking today. "The market has learned to not only anticipate but accept a certain level of political volatility. It's largely been priced in - and that pricing has actually become more robust as time goes on."

Initially, in late 2022, many analysts predicted a significant downturn, fueled by the potential for social unrest and the uncertainty surrounding the new administration. However, those predictions have largely failed to materialize. While protests did erupt across several cities following Castillo's impeachment, and continue sporadically even today, they haven't translated into sustained economic disruption. The initial burst of anxiety quickly subsided, replaced by a cautious, almost weary, optimism.

Several interconnected factors contribute to this surprising resilience. Investor fatigue is undoubtedly a key component. Years of navigating political crises have desensitized investors to individual events. The constant cycle of instability has forced them to adopt a long-term perspective, focusing less on immediate political drama and more on underlying economic fundamentals.

Peru's economic engine, surprisingly, remains relatively strong. The nation is a major exporter of minerals - copper, gold, and silver, in particular - and agricultural products like coffee and asparagus. Demand for these commodities has remained steady, providing a crucial buffer against political headwinds. The expansion of the Southern Mining Corridor, initiated in 2024, has further bolstered this sector, attracting foreign investment despite the internal strife. While global commodity price fluctuations certainly impact Peru, the fundamental export base continues to provide stability.

Moreover, there's a growing perception that Peru's institutions, while far from perfect, are proving surprisingly resilient. The judiciary, the electoral authority (the Jurado Nacional de Elecciones), and even the central bank have maintained a degree of independence and functionality, navigating the political storms with a degree of professionalism. This institutional strength is crucial.

"The institutions are holding," confirms Daniel Velandia, a portfolio manager at Credicorp Capital. "They are doing their jobs, albeit under immense pressure. We've seen the judiciary withstand attempts at political interference, and the electoral authority has continued to plan for future elections, despite numerous challenges. This provides a critical level of comfort to investors, signaling that even in times of political turmoil, the rule of law still holds some sway."

However, the situation is far from secure. Social tensions remain high, particularly in rural areas and among Indigenous communities who felt marginalized by the Castillo administration and remain skeptical of Boluarte's government. Sporadic protests, demanding new elections and constitutional reforms, continue to disrupt daily life in some regions. The government's handling of these protests, often characterized by heavy-handed police tactics, has drawn criticism from human rights organizations and international observers.

Furthermore, the ongoing investigations into alleged corruption within previous administrations, including those of Castillo and his predecessors, continue to cast a shadow over the political landscape. The risk of further revelations and potential legal battles remains a constant source of uncertainty. The 2025 elections are also looming, and the political jockeying for position is already intensifying.

Despite these challenges, Peru's markets seem, for now, determined to remain unfazed. But the resilience observed isn't invincible. A significant escalation of social unrest, a major economic shock, or a sustained attack on Peru's institutional independence could easily shatter the fragile confidence that currently prevails. The next eighteen months will be critical in determining whether Peru can finally break free from its cycle of political instability and unlock its full economic potential.