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How Peru’s Crisis Could Send Shockwaves Through the Region

The mass protests that have rocked Peru since December threaten to upend regional supply chains, intensify migration flows, and strain Lima’s bilateral relations.  

Peru has been rocked by almost-daily protests and roadblocks for more than two months, a crisis that began in December after Congress impeached President Pedro Castillo Terrones for attempting to illegally impose a one-man rule. Protests demanding new general elections ensued, some of which turned violent, and a police and military crackdown on the demonstrations has left more than fifty people dead. The turmoil puts pressure on the government of President Dina Boluarte Zegarra, whom many Peruvians consider to be an illegitimate successor to Castillo. While the protests have abated, it’s clear that Peru is facing a prolonged crisis that could have spillover effects for the rest of the region.

How Has Unrest Affected the Economy?

Amid Castillo’s chaotic presidency, investment and consumption dropped, and Peru’s credit outlook was cut to negative by Fitch Ratings. Tourism, a top industry, has yet to recover from the protests. Meanwhile, inflation has risen to its highest level in twenty-five years, though the country’s central bank paused interest rate hikes in February amid continuing unrest. 

Peru’s mining sector, the motor of its economy, has been hit particularly hard. Peru is the world’s second-largest supplier [PDF] of copper and a major source of zinc, silver, and tin, with mineral exports accounting for nearly 10 percent of the country’s gross domestic product (GDP). But Peru’s mining output flatlined last year as a result of the unrest, despite surging global demand for renewable resources and an international copper shortage expected to last until the end of the decade. The highlands of the Andes mountains, where most of Peru’s mines are located, have become the epicenter of anti-government protests.

Copper—used in solar panels, wind turbines, and electric car batteries—is indispensable for powering major economies’ transitions from fossil fuels to renewable energy. In late January, protesters’ roadblocks and invasions of mines forced work stoppages, putting an estimated 30 percent of Peru’s copper production at risk. As a result, global copper prices jumped overnight. While mining activity has since rebounded, that’s no safeguard against future disruptions; in early March, a community organization resumed a blockade of the Las Bambas mine—responsible for 2 percent of global copper production—their efforts proved short-lived. If Peru’s unrest continues to choke copper exports, economies near and far will feel the effects—not least, Peru’s own, which relies on mining for 60 percent of its exports. 

What Could Further Instability Mean for Migration?

If Peru’s economy continues to sputter, the country could join the ranks of Haiti, Nicaragua, and Venezuela as a major source of emigration in the region. 

Peru is home to about 1.5 million migrants, asylum seekers, and refugees—most of whom come from Venezuela—making it the second-largest receiver country in Latin America. Even though the Boluarte government has tightened border security, the number of Venezuelans living in Peru is expected to grow through the end of this year. Yet, 35 percent of Venezuelans already living in the country still lack the legal status needed to access social services and many jobs. 

If investment continues to slow and paltry growth becomes the norm, Venezuelans living in Peru are likely to head north, joining their many compatriots leaving Colombia, the region’s top migrant host country, in growing numbers. In 2022, Venezuelans were among the nationalities to illegally enter the United States in the greatest numbers, but Peru’s crisis, left unaddressed, could put Venezuelans in first place.

How Has Peru’s Political Crisis Challenged Regional Relations?

Peru’s crisis has opened diplomatic rifts between the Boluarte government and several regional neighbors. In the wake of Castillo’s arrest, the presidents of Argentina, Bolivia, Colombia, and Mexico, a grouping of left-wing leaders, denounced Castillo’s impeachment and subsequent detention, saying it violated international human rights law. Mexican officials later announced that members of Castillo’s family had accepted an offer to seek asylum in Mexico. In response, Boluarte recalled Peru’s ambassador from Mexico, further fueling tension between the two countries.      

Meanwhile, Colombian President Gustavo Petro called Castillo the “victim of a fascist coup,” and Petro has compared Boluarte’s government to Nazi Germany. Peru’s Congress rejected the statement and named Petro persona non grata; lawmakers had previously extended the same treatment to former Bolivian President Evo Morales for making similar remarks.      

During a time of mounting unrest, mass protests and political instability are becoming the norm in South America—flaring up in Chile, Colombia, and Ecuador—and Peru is no exception. If unresolved, its crisis could have ripple effects across the region for months, if not years.

Source: Council on Foreign Relations