Peru's Castillo swears in new prime minister in bid to calm political instability

Pedro Castillo, president of Peru, arrives for the 76th Session of the U.N. General Assembly in New York City, U.S., September 21, 2021. John Minchillo/Pool via REUTERS

LIMA, Oct 6 (Reuters) - Peru's President Pedro Castillo swore in Mirtha Vasquez, a left-wing former head of Congress, as prime minister on Wednesday, replacing her predecessor who resigned after two months in the job, as the administration grapples with political instability.

The move keeps Castillo, a member of a Marxist-Leninist party, on the left of the political spectrum. But it moderates his cabinet overall. Castillo kept center-left Economy Minister Pedro Francke in the role, and named a new energy & mines minister, Eduardo Gonzalez Toro.

Mining is a key industry for Peru, which is the world's second-biggest copper producer after neighboring Chile. Castillo has said he wants to increase tax revenue from the sector to fund social programs.

Former Prime Minister Guido Bellido was little-known before taking the role, but his brash style rattled the opposition-led Congress as investors fretted about the leftist administration.

Vasquez, the new prime minister, served as head of Congress between 2020 and 2021. She is a lawyer and defended Maxima Acuna, a peasant farmer, in a prominent case against Newmont Mining Corp's (NEM.N) Yanacocha gold mine that drew headlines around the world.

Bellido tweeted after the announcement of his resignation that 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 particularly far-left compared with the more pragmatic Castillo.

Vasquez is not a member of Free Peru and belongs to the left-wing Broad Front, which has made environmental concerns a key issue.

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

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 also defended his labor minister, Iver Maravi, 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 Maravi.

Reporting by Marcelo Rochabrun and Marco Aquino; Additional reporting by Rodrigo Campos in New York; Editing by Richard Pullin and Christopher Cushing

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