(Adds context on political dispute)
By Dante Alva and Maria Cervantes
LIMA, Oct 1 (Reuters) - About 20 dismissed Peruvian lawmakers remained cloistered in Congress on Tuesday in defiance of President Martin Vizcarra's decision to dissolve the body, with police in riot gear blocking others from reentering the building.
Streets surrounding Congress were put on police lockdown as downtown Lima became the focus of the latest chapter in Vizcarra's year-long power struggle with the opposition, which he accuses of obstructing his proposed anti-graft reforms.
Vizcarra has not commented publicly on the crisis since invoking a rarely-used presidential power late on Monday to dismiss lawmakers, a nuclear option written into Peru's constitution that also forced him to replace his entire Cabinet.
In a ceremony late on Monday that took place inside Congress amid protests outside, opposition members pledged their allegiance to Vice President Mercedes Araoz, declaring her "interim president" and Vizcarra a "dictator."
The military and police responded with statements that reaffirmed their loyalty to Vizcarra.
A majority of Peruvians polled before Vizcarra dissolved Congress said they backed new legislative elections, and thousands of his supporters took to the streets late on Monday to pressure rebel lawmakers to leave.
It was a stunning turn for Peru's relatively young democracy, which just two decades ago saw the country's authoritarian former president Alberto Fujimori resign as a mounting graft scandal paralyzed his rightwing government.
Vizcarra has blamed the opposition party led by Fujimori's daughter - jailed former presidential candidate Keiko Fujimori - of deploying anti-democratic tactics, from the promotion of fake news to excessive legalism, in order to shield a corrupt network of politicians from fast-moving criminal probes.
The current crisis caps three years of scandal, intrigue and back-stabbing among Peru's political elites after Brazilian builder Odebrecht announced it would help authorities prosecute Peruvian politicians the company bribed for over a decade.
The political crisis comes as growth in the copper-producing country has already slowed sharply this year due to the U.S.-China trade war. Peru's economy is one of the most robust in the region and has thus far shrugged off occasional bouts of political turmoil as graft scandals have rocked the country.
The opposition says Vizcarra has used the public's outrage over the scandals to override Congress' authority, vowing to take the matter to local and international courts.
"This is a coup d'etat," Salvador Heresi, one of the dismissed opposition lawmakers, told journalists in televised comments from the lobby of the chamber. "Congress has turned into the funeral for democracy."sonos sonos One (Gen 2) - Voice Controlled Smart Speaker with Amazon Alexa Built-in - Black read more
A former justice minister whom Vizcarra fired over his links to a criminally-suspect judge, Heresi was one of just around 20 lawmakers who remained in Congress since late on Monday, when their numbers appeared to stand at around 80.
Some observers said it would be better if Vizcarra waited until the rebel lawmakers left on their own for lack of food, instead of inflaming tensions by sending police to evict them.
"Mercedes Araoz technically should be jailed. But I wouldn't go that far," Marco Sifuentes, a Peruvian political columnist. "He has to show signs that this is not a coup like she's claiming."
In about a month, dismissed lawmakers will lose their parliamentary immunity from prosecution. Local media reported that two had already left the country.
As rumors swirled about how the dispute would end, Vizcarra was focused on forming a new Cabinet, a government source told Reuters. Local TV showed former finance minister Luis Carranza, a widely-respected orthodox economist, entering the presidential palace, a sign he may be talks with Vizcarra about replacing outgoing finance minister Carlos Oliva.
OAS BACKS ELECTIONS
As long as Vizcarra keeps up his approval ratings, the dispute with the opposition appears unlikely to turn into the kind of deep political divide that has unleashed months of turmoil in Venezuela, another South American country where there are two claims to the presidency.
It might even quicken lawmaking if Vizcarra can effectively legislate by decree until a new Congress takes office.
But the crisis will likely shape up into an ugly legal battle that could delegitimize Vizcarra's government in the future if it is handed an unfavorable ruling.
In a sign of the shaky legal ground that some legal scholars say Vizcarra is on, the country's ombudsman said it thought his basis for dissolving Congress went beyond the limits of the constitution.
The Organization of American States, a regional body that encouraged democracy in the Western Hemisphere, said only Peru's Constitutional Tribunal could determine the legality of Vizcarra's dissolution of Congress.
A statement put out by the body on Tuesday were the first to indicate it would not only refrain from weighing in on the dispute but also appeared to view the new congressional elections Vizcarra called as a legitimate way to end the impasse
"It's a constructive step that elections have been called in accordance with constitutional timeframes and that the definitive decision falls to the Peruvian people," the office of the OAS. "It's convenient the political polarization the country is suffering can be resolved at the ballot box."
The U.S. embassy in Lima declined to comment. Other foreign powers have yet to weigh in. (Reporting by Dante Alva and Maria Cervantes, Additional reporting and Writing By Mitra Taj Editing by Lisa Shumaker Editing by Alistair Bell)
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