Peru’s Castillo axes hard-left PM, cites political ‘instability’

LIMA (Reuters) -Peruvian President Pedro Castillo said he had accepted the resignation of his hard-left Prime Minister on Wednesday, decrying political “instability” after only two months in power, suggesting his government will adopt a more moderate stance.

Prime Minister Guido Bellido was little-known before taking the role, but his brash style rattled the opposition-led Congress as well as investors made nervous by a far-left administration.

In a tweet after the announcement, Bellido said he would fight back and posted a picture of fighting from the movie “Gladiator”, a hint at challenges to Castillo ahead.

Like Castillo, Bellido is a member of the Marxist-Leninist Free Peru party, although he was seen as a particularly far-left member of the government in comparison to a more pragmatic Castillo.

Financial markets are expected to react to the news on Thursday. Bellido’s appointment in late July triggered a widening in bond spreads and weakened the currency. The local sol lost close to 7% through last quarter and on Wednesday ended near its record low against the U.S. dollar.

Castillo said he would swear in a new Cabinet on Wednesday evening, raising questions about whether he would shift his administration toward the center.

President of Congress Maria del Carmen Alva, a member of right-wing Accion Popular, said on Twitter she supported Castillo’s decision to replace Bellido.

In recent weeks, Bellido had talked openly of nationalizing Peru’s natural gas resources, operated by a consortium led by Argentina’s Pluspetrol.

He had also defended his labor minister, who had been questioned by Congress in a formal hearing for allegedly having been a part of a Maoist insurgency in his youth.

Bellido said he would put the entire cabinet up for a confidence vote if Congress tried to censure the labor minister, Iver Maravi.

“The balance of powers is the bridge between the rule of law and democracy,” Castillo said in a message to the nation announcing Bellido’s resignation.

“Votes of confidence, (Congressional) hearings and censure should not be used to create political instability,” he added.

Castillo said his government supported the role of private investment in Peru.

A quechua-speaking Peruvian, Bellido had also had mixed results in negotiating accords with indigenous communities that overwhelmingly voted Castillo into office.

On Tuesday, Bellido reached an agreement with one province near the huge Las Bambas copper mine, operated by China’s MMG Ltd.

But on Wednesday, residents of a neighboring area started a protest themselves, demanding the prime minister’s resignation.

(Reporting by Marcelo Rochabrun and Marco Aquino; additional reporting by Rodrigo Campos in New York; editing by Richard Pullin)