Peru: Presidential Runoff Election too Close to Call

What happened: For the second time in a row, Peru's presidential runoff election is too close to call, with a virtual tie between right-wing candidate Keiko Fujimori and her leftist rival, Roberto Sánchez.

Why it matters: This means the political uncertainty will likely drag on until mid-July, with no clarity on whether investors will return to market continuity or face a statist overhaul over the next five years.

What happens next: Expect weeks of legal challenges and mounting street pressure from both camps before one of the candidates is formally proclaimed the winner.

With almost 98% of ballots tallied by 10 June, Peru's presidential runoff election is still ... unclear. Like in 2021, leftist candidate Roberto Sánchez is ahead of his right-wing rival, Keiko Fujimori, by some 10,000 votes.

Despite his razor-thin margin, we gave Sánchez the slightest of edges over Fujimori. We believe the ballots still to be counted — most from rural areas that overwhelmingly back Sánchez — will offset the overseas vote, which should favor Fujimori based on previous elections.

The election has, once again, laid bare Perú's deep political polarization. Given the razor-thin margin, external actors — the US in particular — may grow more vocal about the integrity of the process and tilt their rhetorical support toward Fujimori. Still, neither candidate is likely to sour relations with China, a key trading partner, and both have signaled a preference for positioning Perú as a Pacific gateway.

The polarization is not just ideological but also geographical: the results show that Fujimori and Sánchez have divided the country along urban-rural and coastal-sierra lines. Fujimori dominated in Lima and urban coastal regions, where her emphasis on security, economic stability and private investment resonated with voters.

In contrast, Sánchez swept rural areas and the Andean highlands, particularly in the south, where rural and indigenous populations backed his promises of institutional reform, increased social investment and greater support for underserved communities.

Such polarization will prolong the already endemic parliamentary obstructionism and the national sport of removing presidents, triggering another period of business uncertainty. The election will likely be contested in court, meaning Perú may not have an officially confirmed winner until mid-July, when the electoral authorities are due to issue a final ruling ahead of the 28 July inauguration. The coming weeks will be marked by legal challenges, political uncertainty, and competing allegations of electoral fraud.

Meanwhile, the newly elected bicameral Congress — the country's first in 33 years — will be fragmented among six political blocs. Although Fujimori's party won the most seats, it fell short of a majority and will need coalition partners to govern more or less successfully. If Sánchez prevails, he will face an even more puzzling legislative situation, raising the odds of a feeble and unstable administration.

Most Likely Scenario: First Tear Up the Contracts, Then Read the Room

In our view, a Sánchez win would likely deepen political instability: he wants to overhaul Peru's market-friendly 1990s constitution to redistribute wealth more fairly. This confrontational agenda that would collide with a fragmented Congress where his coalition lacks a majority, raising the risk of the same political gridlock and impeachment cycles that have produced nine presidents in a decade.

Sánchez advocates a state-led model characterized by national ownership of underground resources and by the government directly managing hydrocarbon and energy assets. For oil and gas specifically, this includes plans to renegotiate contracts on gas, minerals, and hydrocarbons, alongside reduced tax benefits. These changes would unsettle operators around Camisea and offshore blocks and likely halt new upstream investment if contract terms do not clarify.

While full delivery is unlikely given the fragmentation in Congress, the attempt itself could stall major projects.

Sánchez has repeatedly suggested "massifying" gas through forced renegotiations or state intervention to lower domestic prices. The leftist candidate has also hinted at plans to restart the Southern Gas Pipeline, a stalled multi-billion-dollar project

He has struck a more pragmatic tone after earlier plans to overhaul the mining sector rattled investors, leading to the harshest measures being diluted. Still, policy uncertainty and a weaker investment climate are the base case.

Less Likely Scenario: Same Model, New Riots

Fujimori offers a return to market-oriented stability, focusing on concession models that prioritize private investment. Her administration would offer regulatory certainty, uphold existing contracts and accelerate environmental certifications to accelerate project pipelines and attract foreign capital.

She wants to expand Camisea's physical infrastructure (pipelines) via private-public partnerships to reach southern regions without changing the core ownership structure. Fujimori would likely seek a new international tender on the Southern Gas Pipeline to limit fiscal exposure.

A Fujimori presidency would mean greater policy continuity for business, but it would not remove all instability risk. She is seen as the guarantor of the successful economic model instituted in the 1990s and campaigned on attracting more foreign investment by cutting red tape, which would broadly reassure oil and gas investors: stable contract terms, faster permitting and a friendlier stance toward expanding Camisea output and new exploration.

Yet her two problems are legitimacy and the streets: Fujimori is a polarizing figure accused of being a sore loser who made unfounded fraud accusations in 2021; a narrow win can trigger contested results and protests. A government with thin popular support and a divided legislative branch would stall the very reforms the energy sector is counting on.