Peru Divided Congress Caps Structural Risk, JPMorgan Tells Clients
PERU · MARKETS
Key Facts
—The investor view: JPMorgan told clients on Thursday that a Peru divided Congress structurally limits the scope for deep policy reform after the June 7 runoff, citing the new bicameral legislature taking office in July.
—The buffer: Peru’s international reserves crossed US$100 billion on April 10, 2026, reaching US$100,076 million by April 15, around 28 percent of GDP, per Banco Central de Reserva data.
—The growth call: Fitch Ratings projects Peruvian growth slowing to roughly 2.8 percent in 2026 from 3.4 percent in 2025, citing electoral uncertainty and oil-price effects from the Middle East.
—The FX backdrop: The BCRP’s year-end exchange-rate band sits at S/3.34 to S/3.46 per US dollar, with private estimates clustering near S/3.40 to S/3.45 in the fourth quarter.
—Latin American impact: Peru’s institutional buffers signal to regional peers how reserves and divided legislatures can absorb political volatility without forcing constitutional resets.
JPMorgan told clients on Thursday that a Peru divided Congress will likely cap the scope of policy change after the June 7 runoff, regardless of which candidate wins. The bank’s note, summarized by Bloomberg Línea, frames the new bicameral legislature as a structural brake on rapid reform.
What JPMorgan said about the Peru divided Congress effect
In the note published Thursday morning and summarized by Bloomberg Línea, JPMorgan strategists argued that political uncertainty was driving more market volatility than the bank had previously expected. They cited very close polling and a high share of undecided voters as drivers of that volatility.
The bank’s structural point is that the new bicameral Congress, which begins operating in July, will limit any future government’s ability to push through deep policy or constitutional changes. JPMorgan said the legislative design makes a sharp regulatory reversal less probable, and favors gradual rather than dramatic political processes.
For market clients, the framing matters because some of the recent volatility in Lima-listed equities reflected fears of aggressive regulatory or constitutional change. JPMorgan now sees the architecture of the new Congress as a partial offset to that fear.
Reserves, the sol, and the BCRP toolkit
Peru’s Banco Central de Reserva confirmed in April that net international reserves had crossed US$100 billion for the first time. The April 10 reading was US$100,037 million, rising to US$100,076 million by April 15, around 28 percent of gross domestic product. That ratio is the highest in the region.
The BCRP intervened actively in foreign-exchange markets through 2025, buying US$3,260 million in the spot market, and another US$3,461 million in January and February 2026. Those purchases helped build the buffer ahead of the electoral calendar. The central bank under governor Julio Velarde retains operational independence.
The BCRP’s officially projected year-end exchange-rate range sits between S/3.34 and S/3.46 per US dollar, with private estimates clustering near the upper end. The dollar has traded near S/3.44 in recent sessions, well within the official band.
Fitch’s growth call and the oil-price overlay
Fitch Ratings recently said it expects Peruvian growth to decelerate to around 2.8 percent in 2026, after 3.4 percent in 2025. The agency cited electoral uncertainty and the international impact of the US-Iran war on the oil market as the principal drivers.
Higher copper and gold prices have offset some of the headwinds by boosting export receipts and FX accumulation. Peru is a top global copper exporter, and metal-price strength has been a structural support for the sol throughout the cycle. Fitch flagged inflation risks tied to higher crude prices as the offsetting concern.
The agency added that Peru’s return to a bicameral legislature could contribute to political stability over time. That structural view aligns with JPMorgan’s reading of the new Congress as a brake on extreme outcomes.
What the segunda vuelta calendar means for markets
The Peruvian runoff is scheduled for Sunday, June 7. The contest features Keiko Fujimori of Fuerza Popular against Roberto Sánchez of Juntos por el Perú, confirmed by the Oficina Nacional de Procesos Electorales after the first-round vote count. The Jurado Nacional de Elecciones expects to proclaim official results within a month after the runoff.
Peruvian dollar broker Rextie noted that the 2021 cycle saw the dollar rise from near S/3.60 before the second round to a record S/4.138 by September, an almost 15 percent move. The 2026 setup has stronger macroeconomic fundamentals than 2021, including the larger reserves stock and a more developed BCRP intervention toolkit.
For investors, the market base case as described by Rextie and other dollar analysts is a gradual easing of volatility after the runoff, conditional on the winner sending clear signals of macro continuity and respect for BCRP autonomy. That base case is not a forecast and depends on post-vote behaviour.
What the Peru divided Congress thesis implies for regional peers
For Brazil, Chile, Colombia and Mexico, the JPMorgan framing reinforces an investor-coverage idea worth tracking. Legislative architecture is being priced as a partial substitute for executive-branch certainty in Latin American markets. Divided chambers and counter-majoritarian institutions can act as buffers against political volatility.
For regional FX strategists, the Peruvian sol has been a relative outperformer in the Andean basket through May. The Chilean peso and Colombian peso have been more sensitive to commodity-price moves and to political-cycle news. The trade-offs between reserves stockpiles, central-bank independence and legislative dispersion are now a routine investment-process input.
This piece is not investment advice. Election dynamics can shift quickly, and the JPMorgan view is a probabilistic call rather than a guarantee. Readers should treat the framing as one well-resourced bank’s institutional read, not the only one available.
Frequently Asked Questions
When is the Peru presidential runoff?
The runoff is scheduled for Sunday, June 7, 2026. The Jurado Nacional de Elecciones expects to proclaim official results within a month after the vote. The new bicameral Congress is set to begin operating in July.
Why does JPMorgan emphasize the new Congress?
The bank argues that the bicameral legislature, with multiple parties unlikely to deliver any single bloc a working majority, will structurally limit the next executive’s ability to push through deep reform or constitutional revision. That brake reduces risk for equities and the local-currency curve.
How large are Peru’s international reserves?
Net international reserves crossed US$100 billion on April 10, 2026, the first time in Peruvian history. By April 15 they stood at US$100,076 million, equivalent to roughly 28 percent of gross domestic product, the highest reserves-to-output ratio in the region.
What is the BCRP’s exchange-rate projection for 2026?
The central bank has officially flagged a year-end range of S/3.34 to S/3.46 per US dollar. Private estimates cluster nearer the upper end, around S/3.40 to S/3.45. Actual spot trading in May ran close to S/3.44.
Should I treat this as financial advice?
No. The Rio Times does not provide financial, legal or tax advice. Bank research notes are one input among many and should be weighed against your own circumstances and professional guidance.
Connected Coverage
For the regional FX backdrop, see our coverage of the Morgan Stanley Latin American currency outlook. For the macro markets context, read about the global bond selloff and Latin America. For commercial real-estate trends, see our piece on Latin American office occupancy leaders.
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