- ELECTION WATCH: Show and “Peru”-ve: Strong Showing for Mendoza Could Be Negative for Mining Stocks with Peru Exposure: Our Mining Research Team saying that Peruvians will head to the polls on Sunday April 10th to elect their national congress and president. The presidential election is a two-round process with the first round this Sunday and the second round run-off vote scheduled for June 5. A run-off is widely expected, with no individual candidate polling near the 50% threshold required for an outright win in the first round. In the latest polls, front-runner Keiko Fujimori came in at ~37% while contenders Veronika Mendoza and Pedro Pablo Kuczynski were neck-and-neck at around 15%. Recent polls also show that Ms. Fujimori is expected to only have a slight edge in a run-off scenario with either of the other two candidates, so each of these three candidates seems to have a legitimate chance at the presidency. Ms. Fujimori and Mr. Kuczynski appear to generally advocate for continuity in the country's economic and mining policies while Ms. Mendoza promises to introduce a new economic model for the country, which would rely less on extractive industries. More specifically, she proposes to halt a scheduled cut to the corporate tax rate and tighten Peru's already-strict environmental regulations for miners. Ms. Mendoza has been surging in the polls lately. A result on Sunday that puts Ms. Mendoza in a run-off could be perceived negatively for mining stocks with Peruvian exposure. We flag the companies in our precious and base metals mining coverage with exposure to Peru.
Come the evening of April 10th the most likely scenario at this point is:
- Keiko Fujimori wins the first round with over 30% of the vote (it could be as high as 38%), which won’t be enough to win outright.
- Pedro Pablo Kuczynski comes second with around 18% to 20% of the vote and runs off against Keiko in the ballotage set for June.We can consider the potential outcome of a PPK vs Keiko run-off in due course, let’s make sure it happens that way first though I can say at this point that voter intention polls have it very close between those two in the run-off, with some pollsters giving a slight edge to PPK, others an edge to Keiko (12). The potential fly in the ointment of this scenario is Veronika Mendoza, the only true left wing candidate who has made late strides in the intention polls and in some surveys is now in a technical dead heat with PPK. There are two things to say on that:1) Veronika Mendoza will not win against Keiko in round two. All voter intention polls show that clearly, the country collective is scared of “lefties” (it’s very easy to conjure images of lefty Commie terrorists in the mind of the average Peruvian). So even if she makes it, you up there will get your miner-friendly administration.2) As round two is going to be all about Keiko Fujimori vs “No Keiko” (or perhaps better said “No Fujimori”), I expect many “No Keikos” to switch from similar candidates such as Barbanchea and García to PPK, in order to keep Veronika out and give the “No Keiko” option a real chance at victory.