Changes and expectations

Patricio Quintanilla Paulet, rector of La Salle University

It is sometimes claimed that politics and economics go by separate strings, but they are not; it is undeniable that there is a relationship between the two.

There has been a change in the composition of the Ministerial Cabinet, decided by the President of the Republic, which we consider to be an important shift in political leadership, with a positive impact on the expectations of economic agents.

Additionally, the appointment of Julio Velarde has been confirmed as President of the Central Reserve Bank and of three directors appointed by the Executive Power, all of them highly qualified professionals.

Immediate Effects

Inflation is a problem that affects families, especially the most vulnerable, caused by the price of the dollar and imported goods.

The first effect after the confirmation of the change in the composition of the Cabinet has been the drop in the exchange rate, with a reduction of more than one percent in one day, from S / 4.14 on the last Wednesday to 4.09 on the day. following.

In relation to products from abroad, there has been an increase in prices that affect the basic family basket. Oil has increased 135% in one year; wheat increased by 37%; soybeans go from USD 1,021.00 to USD 1,667.00 per bushel; hard yellow corn increased 94.3% in the last 12 months.

It is to be expected that the decline in the dollar will continue and that this will contribute to the reduction of inflation, which affects families.

Monetary politics

The role of the Central Reserve Bank (BCR) is fundamental for the monetary and economic stability of the country and for this it uses different monetary policy instruments.

The interest rate is freely fixed in the market; However, the BCR sets the so-called reference interest rate, an indicator for interbank operations, that is, the one carried out between the institutions of the financial system and that influences the market rate, which the banks charge and pay. This is a policy applied by all central banks, including the US Fed.

In inflation situations like the current one, the BCR can increase this rate, as it did last Thursday, going from 1.0% to 1.5% annually.

conclusion

The outlook is complex, but some of the recent actions of the Government can be viewed with optimism, such as the recomposition of the Ministerial Cabinet and the appointment of BCR authorities.

Good expectations should allow all of us to support the process of economic recovery, especially private investment and pessimists about changes, should give “the benefit of the doubt.”