(Bloomberg) – Peru’s new president is having a rough start, selecting contentious ministers, alienating allies and paving the way for a brutal confrontation with Congress, all within days of taking office.

A rural teacher and union activist, Pedro Castillo won the election after making sure he was his own man, that he was not beholden to Marxist ideology or to the leader of his party.

But when he appointed his cabinet – including a prime minister who is under investigation for being a suspected apologist for terrorists – analysts, opposition figures and even some who had backed him expressed their concern, so much so that the word “impeachment” was heard. more than one time.

“Its political capital went up in smoke in 24 hours,” said Rodolfo Rojas, partner of the Lima-based Sequoia political advisory group. “If he doesn’t change course, there is no future for him.”

Impeachment is not imminent, Rojas said, but a clash with Congress seems likely. And while Peru has made a habit of ousting presidents, it is rare for such a discussion to take place in the days following the inauguration.

Investors are also very concerned. Stocks have slumped 6% in a single day, bonds are faltering and Peruvian sol has been the worst performing currency in the world since Castillo was sworn in. Barclays estimates that investors have withdrawn about $ 3 billion from the country each month since the April election.

Several key supporters split from Castillo, including Partido Morado, a centrist party, La Republica, a major national newspaper that supported him, as well as a teachers’ union.

Removing presidents in Peru is easier than almost anywhere on earth. Castillo’s opponents would only need 87 out of 130 votes in the one-chamber congress, and he could be ousted under the loosely defined “moral incapacity” clause. Former President Martin Vizcarra was impeached last year and nearly all Peruvian presidents elected since 1985 have been indicted, jailed or wanted in criminal investigations.

Castillo’s party has only 37 seats; including the allies, it is still less than 50. Its adversaries, in other words, dominate Congress.

Confrontation

Some suspect Castillo of the name of Bellido in order to organize a confrontation with the congress. Under the country’s unusual constitutional rules, if Congress twice rejects its cabinet, the president can dissolve the chamber and call new elections.

“If they don’t like the Bellido cabinet, they will give it a vote of no confidence and we will immediately present another cabinet,” said Guillermo Bermejo, congressman of the Peru Libre de Castillo party. “And if they don’t like this one, farewell to Congress!”

It could set the stage for what Castillo has said he wants – a constitutional assembly to rewrite the nation’s charter, something done by other Latin American radicals, like Hugo Chavez in Venezuela. Castillo is also seen as a harbinger of what could be a regional shift to the left of outstanding investors, with elections slated for the next 14 months in Chile, Colombia and Brazil.

Praise in Cuba

Castillo was a near-unknown before the presidential election when he finished at the head of a group of candidates, staging a run-off with Keiko Fujimori, from the most powerful political clan in the country. He overtook it by 40,000 votes and had to endure weeks of recounting and court challenges before being declared the winner.

Bellido is a Marxist who has never held high office and who considers the Communist government of Cuba to be a democracy. Other controversial cabinet choices include Foreign Minister Hector Bejar, who was a guerrilla leader in the 1960s.

Many new ministers lack the experience or qualifications for their new responsibilities, which will include trying to restore some normalcy after one of the world’s worst Covid-19 epidemics.

Even members of the new government seemed to have reservations about some of their colleagues. Shortly before the cabinet was sworn in on July 30, Castillo’s choices for economy minister and justice minister came out and were sworn in the next day, apparently after receiving assurances from Castillo.

Read more: Peru’s Finance Minister Says President Supports Economic Program

Investor reaction

The initial reaction of investors was close to panic. The sale of the country’s assets was briefly reversed when Pedro Francke, a former World Bank economist popular with investors, agreed to take on the role of economy minister.

Castillo had toned down his sweeping rhetoric ahead of the second round, as he tried to broaden his appeal beyond his heart in poor rural areas. But he “went back to his roots” when he took power, Rojas said.

The prime minister and some of the other appointments that have scared investors the most are those close to Vladimir Cerron, a Marxist neurosurgeon who heads Castillo’s party in Congress. Appeasing Cerron’s revolutionary supporters without driving out the more moderate left allies will require a lot of political skill, and it’s unclear if Castillo has it.

Although Castillo “shot himself in the foot” in his early days, his government is not on the verge of collapse, said Jo-Marie Burt, Peru specialist in the Washington office. Latin America, which promotes human rights and democracy. . And just as Congress has the ability to remove him, Castillo can dissolve Congress if he rejects two of his cabinets.

She added: “It seems that upon stepping out of the door, Pedro Castillo barely has that presidential scarf on, and the president and congress seem to be looking for these nuclear options from the start.”

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