(Bloomberg) -- Peru President Pedro Castillo announced the dissolution of congress and called for legislative elections to draft a new constitution hours before an impeachment debate, escalating a political crisis and putting the Latin American nation's democracy under threat. Members of the constitutional court decribed the move as "a coup."
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"We took the decision of establishing a government of exception toward re-establishing the rule of law and democracy," Castillo said in a televised speech Wednesday, adding that the incoming congress will draft a new constitution within nine months. "From today and until the new congress is established, we will govern through decrees."
Castillo also announced a curfew and the "reorganization" of Peru's justice system including the top courts at the same time he pledged to respect private property and business freedom. He also said all illegal arms in possession of Peruvians must be handed back to the police within 72 hours.
He faced immediate pushback from the constitutional court, with members declaring that Castillo was no longer in charge of the country.
Castillo's unexpected move comes as congress was preparing to discuss a third impeachment attempt against him after failing to remove him from power twice. The president has had a rocky relationship with lawmakers since the start of his administration in July 2021, yet the measure risks creating a backlash as its legality will be questioned.
A sign of that came quickly after Castillo's speech, when Finance Minister Kurt Burneo, Foreign Minister Cesar Landa, and Justice Minister Felix Chero presented their resignations. RPP Noticias showed images of lawmakers still meeting in Congress.
"The army's attitude toward this will be decisive over the next hours," Rodolfo Rojas, a partner at Lima-based Sequoia political advisory group. "If they back Castillo, he could stay in power temporarily, but if not, he's going to fall."
Peru's sol tumbled as much 1.7% against the dollar after the announcement, the biggest intraday decline since July last year. Dollar-denominated bonds were among the worst in emerging markets, with the nation's century bond sliding 1.3 cents to 60 cents on the dollar after the news. Peru's benchmark stock index dropping 2.4% to the lowest in over a month.
Brian Nichols, the US Assistant Secretary of State for Western Hemisphere Affairs, said that the US "categorically" rejects any acts by Castillo to prevent Congress from carrying out its mandate.
"We strongly urge President Castillo to reverse his attempt to close Congress and allow Peru's democratic institutions to function as outlined in Peru's constitution," Nichols, the top diplomat focused on Latin America, said in a statement.
Castillo Risks Being Toppled by Impeachment Vote: Peru Timeline
"This dissolution is completely illegal," Andrea Moncada, a political analyst, said.
The move brought back memories of the decision by former leader Alberto Fujimori in 1992 to dissolve congress. At that time, he was supported by his ministers and the military.
Former President Ollanta Humala said Castillo's announcement was akin to that of a dictator and that he should be detained. He called on the Armed Forces to stand on the right side of the constitution.
"What should happen is that Castillo should be detained since he's gone outside the law," Humala told RPP Noticias. "This decision should have been supported by the cabinet of ministers, those who haven't resigned yet are in the same situation as Castillo."
--With assistance from Maria Elena Vizcaino, Stephan Kueffner and Philip Sanders.
(Updates with cabinet resignations in fifth paragraph.)
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