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Julio Velarde: Peru’s Economic Buffer
Peru’s central bank governor has brought economic stability amidst political chaos.
BY JOACHIM BAMRUD
As Peru once again faces political uncertainty due to an unscheduled change of president, local and foreign investors take comfort in that the country’s Central Bank is managed by a veteran pro.
Julio Velarde is set to mark his 20th year at the helm in 2026.
During that time Peru has had nine different presidents, of which only two managed to serve their normal four-year term. In contrast, the last seven presidents have all served for short periods since 2018 due to political crises.
The current president José Jerí was sworn in by lawmakers in October as Peru’s new president less than an hour after unanimously voting to remove President Dina Boluarte, as anger mounted over rising crime and accusations of corruption, Reuters reported.
Yet, markets didn’t crash in large part because Velardo continues to call the shorts on monetary policy.
He has signaled he will not sign up for a fifth five-year term when his mandate ends in July next year just as the winner of Peru’s next presidential elections will assume office.
Velarde will clearly leave behind a strong legacy that stands out not only in Peru but Latin America.
“His main legacy is low and stable inflation despite the chaos surrounding him,” says Alberto Ramos, chief Latin America economist at Goldman Sachs. “He would remain a very solid anchor. The level and solidity of his management is quite impressive. The predictability with which he has conducted monetary policy has been very credible.”
Aldo Defilippi, Executive Director of the American Chamber of Commerce of Peru, concurs.
“Julio Velarde’s legacy is poised to reflect a pillar of stability in a nation frequently challenged by uncertainty,” he says. “His tenure at the Central Bank coincided with one of Peru’s most robust economic periods; between 2000 and 2019, the nation’s GDP expanded at an average rate of 5%, the highest in the region. Under his leadership, the Central Bank effectively managed inflation and stabilized the exchange rate, thereby reducing uncertainty and bolstering private consumption.”
This stability has been especially pronounced over the past seven years, a time marked by considerable domestic and international turbulence, Defilippi adds.
“In the face of these challenges, the Central Bank of Peru was among the first globally to lower interest rates while still maintaining a firm grip on inflation,” he says.
CASTILLO CHAOS
Perhaps Velarde’s biggest test was the 17-month presidency of Pedro Castillo, a Marxist teacher who assumed office in July 2021 but was ousted in December the following year. Castillo’s presidency was marked by total chaos every day, including a record change of cabinet ministers.
Julio Velarde with then-president Pedro Castillo in August 2021. (Photo: Peru’s Presidency)
“Velarde’s influence became particularly critical following Pedro Castillo’s election, as his steady leadership averted significant capital outflows,” Defilippi says. “These efforts contribute to Peru’s standing, boasting one of the strongest currencies in the region and considerable international reserves.”
Not surprisingly inflation grew to 7.87% in 2022, its highest in 25 years. Yet, experts are in no doubt it would have been significantly higher if Velarde had not been running the Central Bank.
Interestingly enough, Velarde had originally planned to leave when his term ended in July 2021. “I have already been in office a long time,” he said in June 2021.
Yet, Castillo urged him to stay on for another five years and in August Velarde agreed.
Another leftist president, Ollanta Humala, had renewed Velarde’s previous five-year term when he assumed office in 2011. His successor, Pedro Pablo Kuczynski, did the same in 2016.
“The fact that he remains at the help despite wild swings in the political world attests to the credibility with which he has run the institution,” Ramos says. “He has made himself indispensable, where neither center left nor center right dared to remove him.”
Current president Jerí made a point of visiting Velarde at the Central Bank within weeks of taking office and pledged to respect its autonomy.
Under Velarde, Peru has been able to maintain high international reserves, which constitutes a sufficient buffer to withstand external shocks and maintain market confidence. In August reserves stood at the equivalent to 28% of gross domestic product, the highest in all of Latin America.
The Peruvian Constitution guarantees the independence of the Central Bank, shielding it from political influence.
“This constitutional framework has empowered Velarde and his team to make decisions prioritizing economic stability, free from external pressures,” Defilippi points out.
SUCCESOR
The 73-year old Velarde recently told Bloomberg that he has a succession plan he hopes the next president in Peru might implement. He named two potential internal successors — chief economist Adrian Armas and general manager Paul Castillo. And he said there were two other potential picks too, which he declined to name.
“Velarde’s departure will undoubtedly be a significant moment for Peruvians,” Defilippi says. “However, he has dedicated years to training and mentoring potential successors. Currently, strong candidates such as Adrián Armas and Paul Castillo—both respected senior officials within the Central Bank—are poised to carry forward his legacy and uphold the institution’s role as a cornerstone of economic stability.”
Armas has held his chief economist post for 18 years and joined the Central Bank 39 years ago. Castillo has been general manager since April last year and previously served as Manager of Monetary Operations and Financial Stability (2020-2024), Manager of Monetary Policy (2016-2020) and as Deputy Manager of Monetary Policy Design (2008-2016). He joined the bank in 1996.
Both Armas and Castillo are seen as strong candidates from a market point of view.
“I believe he has prepared the institution,” Ramos says. “Whoever succeeds Velarde is always a tall order. It’s going to be very large shoes to fill.”
© Copyright Latinvex
This article was updated 12/18/25 to include comments from Aldo Defilippi.
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