- Peru: New Finance Minister, what does it mean?; Home sales soar past expectations in 1Q25
PERU: NEW FINANCE MINISTER, WHAT DOES IT MEAN?
We had already written this note on the new Finance Minister, Raúl Pérez-Reyes, when news came out that the head of the cabinet, Gustavo Adrianzén, had resigned. This means that the whole cabinet must quit and while many cabinet members can be ratified, it gives President Boluarte the opportunity to reshuffle. A couple of names are being voiced to replace Adrianzen, but the news at this point seems to have to high a quota of speculation to delve into the names.
Prior to Adrianzén’s resignation, President Boluarte hat removed two cabinet members: the Finance Minister and the Minister of the Interior, and has moved Raúl Peréz-Reyes from the Ministry of Transportation to the Ministry of Finance.
We had already noted that the timing had been curious, as the removals came as cabinet head Gustavo Adrianzén was being called to Congress for impeachment procedures. Apparently, Adrianzén resigned to avoid his impeachment. The three cabinet changes made earlier on May 13 do not seem to be linked the Adrianzén impeachment process, and are now at risk of finding their tenures shortened.
At the same time, there is a good chance that the newly appointed cabinet members may continue. Of the changes made on May 13th, the one that stands out was the removal of José Salardi from the Ministry of Finance. Salardi has been replaced by Raúl Pérez-Reyes, formerly the Minister of Transportation, and one of the more serious and prestigious members of the Adrianzén cabinet. He is an economist and has been a very sensible cabinet member who had frequently taken upon himself the role of spokesperson for the Boluarte administration.
Although it is too soon to know what Pérez-Reyes plans to do, and to evaluate him in depth as an economic policy maker, in general we see little cause for concern over Pérez-Reyes as Salardi’s replacement. But we do wonder about the reasons for the removal of Salardi. The rumour mill is running full tilt speculating on why Salardi was ousted. He did not seem to be at risk. He didn’t seem like a contentious person within the cabinet, although one can never be certain about internal relationships and aversions. However, rather than adding to the rumour mill, we shall focus on what his removal might mean to policy.
Salardi was widely viewed as a decent finance minister with a proper handle on economic management. This does not appear to have been enough for President Boluarte. Economic management per se, then, does not appear to be of foremost interest for the Boluarte administration.
Salardi’s tenure focused on promoting infrastructure investment, especially through Proinversión, the State entity in charge of formulating and tendering infrastructure projects. There is no reason to believe that Minister Pérez-Reyes will change what Proinversión is doing per se. Having said that, whether the Ministry of Finance, MEF, continues to give infrastructure projects the level of backing that Salardi did will depend a lot on whether Pérez-Reyes retains Vice-Minister Denisse Miralles. Miralles, who worked previously at Proinversión, together with Salardi, is the main remaining link between the Ministry of Finance and Proinversión.
Another fixture of Salardi’s time at the MEF was a broad effort to de-regulate private and public investment. It is not clear what Minister Pérez-Reyes’ stance is on de-regulation. He may continue to favour the effort, although perhaps not with the same energy or insights.
Salardi had also been championing awarding tax benefits to industrial parks, and to investment surrounding the new Chancay port. Pérez-Reyes has showed little interest in this as Minister of Transportation, which suggest he could be less proactive. However, the issue is being visited by Congress, and if a bill emerges, Pérez-Reyes would conceivably go along with it.
Raúl Pérez-Reyes is a 60 year-old economist. He is one of the longest-serving cabinet members of the Boluarte regime, having begun as Minister of Production in January 2023, before moving to Minister of Transportation, and now at the MEF. His longevity as a cabinet member in the face of a Congress that has been very prone to impeaching cabinet members shows his political acumen, which is something that, perhaps, Salardi did not have.
The MEF has a long history of maintaining macroeconomic stability. Both Salardi and José Arista before him, were, perhaps, more interested in stimulating growth than in complying with the legal fiscal deficit limits, although they never put fiscal management at risk. It’s not clear exactly how important reducing the fiscal deficit will be for Pérez-Reyes, but there is no particular reason to be concerned. Especially not with metal prices playing in his favour. Overall, if Pérez-Reyes has lasted as long as he has as part of the Boluarte administration, it is in large part because he has avoided rocking the boat.
—Guillermo Arbe
HOME SALES SOAR PAST EXPECTATIONS IN 1Q25
The real estate sector exceeded our expectations in 1Q25. According to statistics from the Superintendencia de Banca y Seguros (SBS), the placement of new mortgage loans in the banking system reached 9,790, marking a 36.5% increase in 1Q25. This is the highest quarterly figure since 4Q21.
Several factors contributed to this significant growth. Notably, there was a gradual reduction in the average mortgage rate within the banking system, which closed at 7.75% in April, its lowest level since May 2022. This trend followed the decrease in the Central Bank’s reference rate, currently at 4.50%, and the yield on the local 10-year bond, which closed at 6.55% at the end of April. As a result, mortgage rates are now below their historical average. Additionally, the recent improvement in formal employment, particularly in the private sector, and lower inflationary pressures have increased the willingness of individuals to invest in new homes. These factors have collectively stimulated borrowing for new housing. It is also worth noting that there were two additional working days in March this year, as the two Easter holidays in March 2024 fell in April in 2025.
The results were driven by increased sales of high-end homes, especially in Lima. Conversely, sales of public housing declined during the first two months of the year. For instance, according to the Association of Real Estate Companies of Peru (Asociacion de Empresas Inmobiliarias, ASEI), home sales in Lima rose by 30% in the 1Q25, totaling 6,237 homes—this figure exceeded our expectations and is the highest recorded quarterly figure since data became available in 2019 (chart 1). The lower mortgage rates, coupled with a notable improvement in formal employment, particularly in Lima, and a sustained supply of new housing at relatively stable average prices, all contributed to heightened demand for new homes (chart 2).
However, the sales of social housing have seen a decline in recent months. The placement of New Mivivienda loans, a proxy for social housing sales, dropped by 8% during the first two months of the year, marking the third consecutive month of annual decline as of February. Restrictions on granting loans for higher-end social housing, alongside challenges in developing new social housing projects in certain districts of Lima, may have adversely affected the performance of this sector. Nevertheless, this trend could potentially reverse in the coming months due to the early availability of public funds for loan placements in this sector, a situation that did not occur in previous years.
Looking ahead, we expect the real estate sector to experience growth again this year. Specifically, we anticipate approximately 36,000 new mortgage loans to be issued, an increase of about 8% compared to 2024. Our forecast assumes greater dynamism in sales in 1H25. However, in 2H25, the decision to purchase new homes could be influenced by the approaching 2026 elections. By segment, we expect sales of new homes in Lima to grow by around 10% in 2025, potentially reaching nearly 24,000 homes sold. If realized, this would represent the highest annual sales since 2019, based on ASEI figures. Lastly, we anticipate that sales of social housing will also contribute to sector growth this year, as, despite a weak performance in February, sales in this segment are expected to rebound due to the early availability of public funds.
—Carlos Asmat
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