Peru's Dysfunctional Politics Are an Economic Time Bomb

Peru has gone through three presidents since October, yet markets have largely yawned: Country risk has edged up only marginally, credit default swaps remain well below their five-year average and the currency has even gained against the dollar.

This peculiar resilience in the face of nonstop political turmoil invites a provocation: Is the libertarian fantasy of a government-less economy getting an unplanned trial run in the land of Machu Picchu? The interim president du jour, an 83-year-old former judge named José María Balcázar, has now spent seven weeks in office struggling to assemble a cabinet, to almost no one’s concern. Ministers rotate in and out within days, dismissed with little fanfare. And yet, outside Lima’s frenetic political bubble, life goes on. The economy continues to expand after growing over 3% for the second consecutive year in 2025, exports are hitting records and inflation remains among the lowest in Latin America (even if a fuel-price shock driven by the Middle East war pushed it sharply higher in March).