Hiding money, Peruvian urban elite panic as socialist looks set to clinch presidency

In Lima, the Peruvian capital, fear is spreading among the city’s small but powerful urban elite about the likely electoral victory of a little-known socialist teacher.

Pedro Castillo is set to be named president ahead of his conservative rival Keiko Fujimori. With almost all the votes tallied, Castillo’s lead over Fujimori is narrow but seems sufficient, although the end result could take days, if not weeks, as legal challenges unfold.

During the campaign, Castillo pledged to sharply raise taxes on mining in the world No. 1. 2 copper producer to pay social spending and reformulate the constitution to give the government more weight in the management of the economy. He also hinted at potential land reforms.

Fujimori’s conservatives were quick to exaggerate fears about the rise of “communism” and stir up old ghosts of land grabbing and a Venezuelan-style collapse. Illuminated signs appeared in the capital warning, “Think about your future, say no to communism.” They did not mention Castillo by name and no one has claimed responsibility.

“(Castillo’s) party is Marxist-Leninist. It says it’s going to change the constitution, it’s going to expropriate. So if it does all of that, it shouldn’t come as a surprise,” Alfredo Thorne , former finance minister, told Reuters.

While his victory seemed more likely in recent weeks, Castillo has softened his rhetoric, pushing back comparisons with authoritarian leftists like Venezuela’s Hugo Chavez. He recruited more moderate advisers, sent a pro-market message, and denied his intention to nationalize or expropriate savings.

However, many residents of Lima’s wealthy neighborhoods – who overwhelmingly voted for Fujimori – are still scared.

“All my friends have taken their money overseas, I don’t know anyone who hasn’t withdrawn their money,” said a city lawyer who sits on the boards of several large companies and has also withdrawn funds.

“I would not keep any money in Peru, not a dime,” added the lawyer, asking not to be named because of the sensitivities created by the political situation.

The Sol currency has fallen 8% since Castillo was the surprise winner of a first-round vote on April 11, while Peru’s Selected Equity Index (.SPBLPSPT) is down about 9% as of during the same period, with banks and mining stocks among the most difficult. -hit.

Analysts say, however, that a fragmented congress will limit sweeping changes and force Castillo to be pragmatic, which could even create a silver lining for markets and potential buying opportunities for investors.

‘COLLECTIVE HYSTERY’

Collective fear seems real, whether or not it is justified.

Some families divide properties among members or put them in trust, the lawyer said, and even in some cases resort to withdrawing money in briefcases to put it away at home.

Banks have imported physical dollar bills in order to meet demand, according to two sources with knowledge of the situation.

“The purpose of importing dollar banknotes is to increase availability, in case people need more money,” one of the banking sources said, adding that Peruvian lenders had high liquidity and safe deposits.

“This is collective hysteria,” said Ramiro Llona, ​​a prominent artist who criticized Fujimori, the daughter of the former president who divides Alberto Fujimori. Llona said fear and prejudice were at the root of part of the crackdown on Castillo, the son of peasants in rural northern Peru.

“I firmly believe that there is a component of racism at play here… I fear that one person from the Andes wins.”

While 88% of residents of the capital San Isidro, Peru’s richest neighborhood, voted for Fujimori, in Peru’s poorest Andean region, Huancavelica, 85% supported Castillo. He galvanized the support of those who remain like no other politician over the past decades.

Reuters spoke to half a dozen wealthy Lima residents who said support for Fujimori was rooted in two historical traumas – land grabbing in the 1960s and hyperinflation in the 1980s, both under leaders of the left.

“Those with old fortunes are the ones who die of fear,” said a senior consultant who serves Peru’s largest companies, asking not to be named.

Those among the elite who spoke out against Fujimori found themselves ostracized.

“Being anti-fujimorista in this second round was like having leprosy,” said Ursula Castrat, podcast presenter and former editor-in-chief of Cosas, a magazine that chronicles the life of the upper classes. She vocally opposed Fujimori on social media.

Llona, ​​the artist, said his wife had come under pressure from friends to get her to stifle criticism of Fujimori.

Castrat also said her friends pressured her to support Fujimori.

“I ended up voting for Fujimori as a gift to one of my best friends,” Castrat said. “I had already bought her a present but she insisted, so I took a picture of my ballot and sent it to her.”

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