Exclusive-Peru's Castillo plans technocrat-heavy cabinet, moderate in economy role -sources

By Marco Aquino

LIMA (Reuters) - Socialist Pedro Castillo, expected to be confirmed as Peru's next president, is drawing up a "hybrid" Cabinet of technocrats and political allies, with a moderate in line to run the economy ministry, three sources close to the plans said.

Castillo's center-left adviser, economist Pedro Francke, who told Reuters https://www.reuters.com/world/americas/exclusive-perus-castillo-expects-mining-firms-accept-prudent-tax-changes-adviser-2021-07-06 on Tuesday that he has had dozens of meetings with businesses and investors to reassure them since the June 6 run-off election caused market jitters, is in the driving seat to be named to lead the economy portfolio, said two of the sources.

Markets and investors are seeking clues to how Castillo, a political novice, will enact his pledged reforms, which include plans to redraft the constitution and hike mining taxes in the world's no. 2 copper producer.

The socially conservative former teacher, running for a Marxist party, has rattled Peru's traditional political and business elite since emerging from relative obscurity to edge out right-wing rival Keiko Fujimori in the June vote.

The result has yet to be officially confirmed, with electoral authorities reviewing ballots challenged by Fujimori, who has made allegations of fraud with little solid evidence. International election observers and the U.S. State Department have said the election was fair.

One person in Castillo's inner circle said that the candidate was working with his transfer team to draw up plans for the 18 members of his cabinet once confirmed. Peru's next president is expected to take office on July 28.

"It will be a hybrid technical and political cabinet, which will prioritize economic issues and social demands," the source said, asking not be named as the plans were still not public.

A spokesman for Castillo declined to comment on details about the potential cabinet.

Markets could rebound if there were "market-friendly" picks in the Cabinet, Nikhil Sanghani from Capital Economics said in a note last week. "Peru's president-in-waiting Pedro Castillo seems more moderate than many initially feared," he said.

ECONOMY PICK?

The first source and a second person close to Castillo said Francke, who is also leading efforts to convince current central bank head Julio Velarde to stay in his post, was in line to be named minister of economy.

"He is the strongest, most qualified candidate," the first source said.

Francke told Reuters on Tuesday that investors have put aside many of their concerns and he expected to win over mining firms to "prudent" tax reforms needed to bolster social spending on health and education.

Castillo said last weekend that he already has a group of competent people for a cabinet and his priority will be the economy, which has been hit hard by the world's deadliest per capita COVID-19 outbreak.

Manuel Rodriguez Cuadros, a former Peruvian foreign minister who met in recent weeks with Castillo, told Reuters he expected a cabinet that balanced social reforms with economic stability. He did not foresee "ideologically-led" foreign policy.

A third source close to Castillo said the leftist retained a strong relationship with his Marxist Free Peru party, which would play a key role in the government's plans. The party will have 37 legislators out of the 130 members of the fragmented unicameral parliament where no party will hold a majority.

(Reporting by Marco Aquino; Editing by Adam Jourdan and Rosalba O'Brien)