Kurt Burneo: It must be a priority to reactivate the more than 2,400 paralyzed investment projects

Watch the interview at the following link: Former Minister Kurt Burneo Farfán in LR+ Economy.

—What is your comment on the events that mourn 17 families in Puno (1 of the PNP), but that there are already more than 40 those killed by the protests?

—A feeling of pity, because they are our compatriots. Secondly, it is the result of an accumulation of detachment and misunderstanding of our compatriots in the interior of the country. People can say, this man was Minister of Economy and had the opportunity to solve problems. What I can say is that in four months of management it is impossible to reverse all the accumulation of detachment, of disregard for the conditions in which our compatriots live. You spoke of imbalances, of having less inequality in the distribution of income, and of increasing people’s capacities, that our compatriots have access to health and education, provided by the State. There we are talking about economic development and that happens, perhaps a necessary but not sufficient condition for there to be economic growth. The task I have had since I took office, at the beginning of August of last year, was to prevent the economy from slowing down further, considering an adverse international context and that it could be more complicated in 2023, which implies greater challenges. And if you ask me, what is urgent to see? It would be to continue propping up the economic recovery. If we do not grow, there is no way to redistribute, and the second thing that is fundamental is the redistribution of income, that is, that access to that cake that is the wealth that the country generates is less unequal.

—On the other hand, Dr. Burneo. What feeling do you have after the events that occurred on December 7, which led us to the situation in which we find ourselves? Was it surprising to you that former President Pedro Castillo read that copy of what Alberto Fujimori did at the time, I mean the self-coup?

—A feeling of unease because, obviously, I never had any idea what was going to be done. And if I’d had an inkling of that, I would have immediately quit. My convictions do not allow me to be in an illegitimate government. In addition, I was out of the country for four days, in Montevideo, attending the annual meeting of the CAF, and I returned to Lima that day (December) 7 at around 10:30, or 10.45 am and I went to the ministry because I had a pending dispatch. And the surprise came at 12 noon. And I tell you that it was uneasy because I felt that there was no need to proceed in that way, definitely. And obviously he couldn’t be part of the government, which from every point of view was illegitimate. When an illegitimate government is installed, the country becomes an international pariah and all decisions, for example, regarding lines of credit, pass to a stand bybecause we are talking about a government that does not have a formal origin, a legitimate origin.

—And didn’t your political nose warn you that what we have seen on national television could happen?

—Not at all because that day in the afternoon a vacancy motion had to be voted on and it was known and it was more than well known that the necessary 87 votes had not been obtained to proceed with it. Evidently, nothing can justify the interruption of the democratic order in the country. I insist, I did not have much knowledge of that and the other thing is that it seemed quite absurd, quite complicated to understand, that knowing that you did not have 87 votes, you proceeded in that way, kicking the board and that generated a problem for everyone. There was no need to do such a thing. I will always say that you should never give up dialogue, conversation and reaching points of agreement. In addition, he felt that the relationship with Congress was not so bad on the economic side. So I had met with the members of the board of directors so that there is fluidity in the projects.

—According to the MEF, the economy recovered, but slowed down throughout the year. How did you leave the ministry to your new head, Álex Contreras?

—A friendship and work relationship unites us with Álex, because he joined my team as Vice Minister of Economy. When we talked about the reactivation plans, it was discussed with him, he agreed, but I think that no one can be against advocating economic reactivation. The challenge is that, for example, the growth projection for last year is 2.8% or 2.9% and it seems that, based on the preliminary results observed and leading indicators such as electricity production or tax collection, Internal IGV, the sale of cement, among others, reinforce that last year we would have grown by 2.9%. Now, the challenge is to face a complicated external context, which has worsened. Let’s not forget that economic activity in Peru depends 60% on external conditions and only 40% corresponds to local or internal conditions. The challenge is great but, I insist, if there is no economic reactivation, we could hardly think about the other great challenge that has to do with a less unequal distribution of income. And there an important issue has to do with management.

—Management in regional and municipal governments?

There are around 2,400 investment projects that are stopped due to different circumstances. The lack of continuity had a lot to do with the mismanagement of many governors and mayors. And why not say so, also in the case of some sectors of the Executive branch. Those 2,400 projects imply having silver stopped for S/ 28 billion. If you don’t care about these projects, which are only half done, then as time goes by, the technical files will become outdated and you have to update them again, and in the financial part you have to make a new valuation of the projects based on advanced and we have to avoid such a thing.
Many of these projects are in the interior of the country. I do think that there is a way to be able to act quickly and influencing, above all, those projects in the most abandoned areas of our country, where our compatriots emphasize various shortages, such as electricity, water, connection through roads that connect farmers with markets. We are talking about a series of economic factors that could be substantially improved, but focused not only on new projects, but also on those that are stopped and that implies a significant opportunity cost for the country’s economy.

—Did the pandemic and the measures to stop it in the country raise the poverty figure by nearly 10 points, to stand at just over 30%? This has dropped a bit, but according to what Minister Contreras pointed out, it will remain . What to do to reverse it?

—What the countries did to substantially reduce poverty is associated with the creation of employment opportunities. It is not true that poverty is resolved through social programs, which are palliative. Resolving poverty substantively and with continuity over time involves creating job opportunities and this has to be connected with economic reactivation. It makes sense when the minister says that we need this reactivation plan “With punche Peru” to definitely make the Peruvian economy grow faster and improve employment opportunities for people, who fundamentally depend on production.

—The “Con punche Perú” plan seeks to inject S/ 5.9 billion into the country’s economy, through which an impact on GDP of 1.2 percentage points is estimated in six months and generate 130,000 additional jobs. Is this proposal sufficient and appropriate?

“If it’s wise, in fact it is.” Now, how sufficient is, depends on the magnitude of the problem. Let’s not lose sight of the fact that we need to grow at rates of around 5% to be able to employ the almost 300,000 young people who enter the job market every year. It is going in the right direction, but a much more extended reactivation program is going to be needed to have a substantive effect in terms of the growth of the demand for employment. On the other hand, let’s not forget that the international economy defines variables that we do not manage, such as the international interest rate, the growth of the world economy or of our main trading partners. We do not manage the price of the dollar where we have limitations to keep them within a certain range as the Central Bank does. I insist. We are going in the right direction, but new measures will have to be developed in order to maintain the continuity of the economic recovery. The impact on the economy of these almost S/ 6 billion is multiplied. The impulse is not only the S/ 6 billion, that is the initial push, which is given to the economy so that multiplier effects are generated from there and as a consequence of that we can recover growth rates of the economy, and of course , the job. But always keeping in mind that for these forecasts there is a base scenario that is the international economy. Given the variables that depend on the international economy, the commitment to grow is represented by the figures presented by the Minister of Economy.

—Will the intensification of the protests make the situation of the country’s economy more complicated?

—It has an important effect on the side of stability. If you put yourself in the shoes of an investor, for example, it will be difficult to develop new projects or expand existing ones when there are these types of violent situations that are not focused in one place. Now, it also depends on the government’s ability to react. A large part of the claims behind the protests of our fellow citizens is to improve their living conditions and this is fundamentally associated with the execution of public investment projects. I say this because it is difficult for the private investor to invest given the unstable situation we are in, but that should not be a restriction for the public part. In addition, there are more than 2,400 projects that are half done and that are stopped and many of them are at the level of regions and municipalities. An important part of these projects must be continued, they must be prioritized, especially those focused on improving the living conditions of our compatriots in the interior of the country. And thus, the pressures of complaints are going to subside to the extent that there is an effective concern, especially on the side of the Executive Branch, to develop investment projects that are already underway. That seems like a priority to me. And we hope that this time the Congress will be able to approve with greater agility the bills raised by the Executive that are associated with these investment projects.

—What are the recommendations that you would give to your successor in the MEF to weather this abnormal storm in the country?

—There must be a lot of cool head in these things. It is essential, regardless of the emotions that certain types of abnormal situations in the country can generate in us. There has to be a lot of rationality in terms of cost benefit, and in that sense comparing how much it costs to restart an investment project, versus abandoning it, seems to me a central issue. Betting on new projects can be important for the moment, but the moment is very ephemeral. What is sought here is how public management decisions in general, and economics in particular, can impact more significantly and in a shorter period to improve the living conditions of citizens. And there I insist on looking at the more than 1,400 projects that are stopped and that must be a priority element in the management decisions of public and macroeconomic policy.

Watch the interview at the following link: Former Minister Kurt Burneo Farfán in LR+ Economy.