January 4, 2018 / 9:08 PM / 6 months ago

UPDATE 1-Peru's finance minister warns political crisis not over yet

(Adds quotes from minister, political context, sources saying minister will stay in Cabinet)

By Teresa Cespedes

LIMA, Jan 4 (Reuters) - Peru’s finance minister warned on Thursday that the political crisis that roiled the country in the last days of 2017 was not over yet, but said it should not have any major impact on the economy as long as it is resolved “in a civilized way.”

In a rare press conference, Claudia Cooper maintained the ministry’s previous forecasts for a 4-percent economic expansion and 3.5 percent fiscal deficit this year as President Pedro Pablo Kuczynski’s center-right government continues to focus on increasing infrastructure spending to support a recovery.

Late last month, Kuczynski’s government was shaken by a bid in the opposition-controlled Congress to remove him from office after Odebrecht, a Brazilian company at the center of a massive graft scandal, disclosed it once had business ties with him that he had denied.

Kuczynski narrowly survived with the help of the country’s former authoritarian leader Alberto Fujimori, who called from prison on his loyalists to help defeat the motion and whom Kuczynski pardoned days later.

But Cooper said Peru could face fresh political uncertainty once Congress resumes its activities after a holiday break and local prosecutors question a former Odebrecht executive on the company’s connections with local politicians.

“The political crisis isn’t over yet,” said Cooper. “What we’re going to have is a bump in the road that’s not going to be significant...as long as the crisis is resolved in a civilized way as we’ve done several times before.”

A fresh clash between Kuczynski’s government and Congress could halt the sol currency’s recovery and slow the government’s already-delayed bid to rebuild infrastructure destroyed by severe flooding last year.

Cooper said public investments were suspended for two weeks amid the political turmoil last month, but have since resumed.

Cooper, whose two predecessors were ousted by votes in Congress last year, said it was up to Kuczynski whether she would remain in the Cabinet.

Kuczynski has yet to reveal a new Cabinet since promising to do so “very soon” a week ago amid a slew of political resignations after the Fujimori pardon.

Two government sources who asked not to be named said Kuczynski was not planning to replace Cooper.

Congress is controlled by a right-wing party led by Fujimori’s children, Keiko and Kenji, who vied for control of his populist political party while he was in prison for graft and human rights crimes. (Reporting By Teresa Cespedes, Additional Reporting and Writing By Mitra Taj, Editing by Chizu Nomiyama and Alistair Bell)

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