Peru Opposition Moves to Force Out President Over Payments

Updated on
  • Firm tied to Kucyznski advised Odebrecht on project finance
  • Brazil’s Carwash bribery probe has rocked Peruvian politics

Pedro Pablo Kuczynski

Photographer: Guillermo Gutierrez/Bloomberg

Opposition lawmakers began an effort to force Peruvian President Pedro Pablo Kuczynski out of office after he rebuffed calls to resign over his ties to companies that received payments from disgraced Brazilian builder Odebrecht SA.

Congressmen from three parties Friday presented a motion to remove the center-right president on the grounds of moral incapacity. The unicameral Congress will hold an initial vote whether to accept the motion at 4 p.m. in Lima and may make a final decision Dec. 21, Speaker Luis Galarreta told reporters.

Peru’s currency and bonds slumped amid concern that the 79-year-old veteran of Wall Street might be forced out after only 16 months heading one of Latin America’s fastest-growing economies. Since Brazil-based Odebrecht admitted bribing officials in several nations in the so-called Carwash case, a corruption investigation has rocked Peru’s establishment and damped economic growth. The probe has implicated former presidents, government officials and businessmen, and prosecutors are looking into Kuczynski’s role in a highway contract awarded to Odebrecht when he was a government minister.

Efforts to reach Kuczynski on Friday weren’t immediately successful, but the president took to state television Thursday to opposition claims that he received payments as a public official. He promised to allow investigators to examine his bank accounts.

“He had an opportunity to resign, and we see that he’s not capable of doing that. He wants to cling onto power,” Hector Becerril, an opposition lawmaker, told the Lima-based Canal N television network. His Popular Force party will seek consensus in Congress “to take the decision that Peru requires for its growth and development.”

Lawmakers claim the president lied in recent months when he said he didn’t receive payments from Odebrecht for consultancy work, according to the motion posted on the Congress website.

Given the strength of the opposition, the president’s days are numbered, said Fernando Rospigliosi, who served under Kuczynski in the 2001-2006 government of Alejandro Toledo. “There’s no way he can survive this crisis,” he said.

Read more: Why Kuczynski’s relationship with Congress is so fractious

The prospect of the president’s removal sapped demand for the Peruvian currency. The sol fell 1.7 percent to 3.3 per U.S. dollar at the close of trading in Lima, the biggest one-day drop since 2008, according to Datatec.

In the event Kuczynski is unseated, he would be replaced by one of two vice presidents: Martin Vizcarra, the ambassador in Canada, or Mercedes Araoz, the cabinet chief.

It’s unlikely either would be able to head a minority government through 2021, when the government’s mandate ends, and early elections are the best solution, said Rospigliosi.

“In any of the scenarios, the current political situation will move into a period of tension with no way back,” said Larrain Vial SA, a Santiago-based brokerage, in a note to clients.

The crisis escalated rapidly after the committee said this week it obtained information from Odebrecht showing it made payments to a consultancy that Kuczynski set up more than a decade ago. Kuczynski, a former central banker and finance minister, said Thursday he had no involvement in the firm while he held public office.

Pedro Pablo Kuczynski

Photographer: Guillermo Gutierrez/Bloomberg

“I’m an honest man, and have been all my life. I’m prepared to defend the truth before the Carwash committee and the Attorney General’s Office,’’ Kuczynski said, a reference to the congressional panel investigating corruption. “I’m not going to abdicate my honor, my values or my responsibilities as president.’’

Read more: No One Has Ever Made a Corruption Machine Like This One

Kuczynski was elected last year on expectations his decades of experience in investment banking and government would revive a flagging economy. Congress granted him legislative powers to speed infrastructure investment and modernize Peru’s bureaucracy. Relations with Congress became strained as prosecutors widened their investigation into Carwash and started probes into Kuczynski and leaders of other parties.

Signs the economic recovery is taking hold emerged in recent months, with construction activity rising at the fastest pace in four years thanks to public works and a revival in mining outlays.

The president had turned down repeated requests to speak to the Carwash committee, which is led by Popular Force lawmakers, insisting he would respond only to questions in writing. On Thursday, he agreed to meet the committee Dec. 22. Opposition lawmaker Victor Andres Garcia said any decision to force out Kuczynski should be made after he’s addressed the group.

Peru’s business confederation, Confiep, urged all parties and the judiciary to act prudently, “respecting due process, the constitutional order” with the aim of guaranteeing economic, social and political stability.

— With assistance by Aline Oyamada

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