Alex Contreras: “A strong Niño is the worst risk scenario at this moment”

After recognizing a economic recessionthe Minister of Economy outlines more lights than shadows for the remainder of the year and 2024. However, it does not lose sight of El Niño, which will be received with a significant deployment of resources.

—Do you consider 2023 to be a lost year?

—I would say that progress has been made. This year we hope to approve the pension reform, the new contracting law. Measures have been approved to boost private and public investment. It is a complicated situation with regard to job growth or the possibilities that the country has. More than defining whether it is a lost year, it is to continue on the path of recovery. What we want to avoid is falling into a longer phase of stagnation.

—Is there a mea culpa from the MEF about the current situation?

—As MEF you can always do things better and faster. We must remember that when it was my turn to take over, their credit rating had already been lowered, we had a negative outlook. Fortunately, they did not lower our grade, despite everything that has happened. There has been progress. Regaining trust, awarding projects, everything; but in a country like Peru you can always do more and that is what we are trying to do. Correct the errors. We have found a country on the verge of bankruptcy, of a deep crisis.

—What factors influenced you to recognize that we are in recession?

—There was a significant deviation in the July and August projections. So, that meant that part of these shocks have affected other sectors in a more structural way. It’s a strange recession. There are variables that remain strong, such as employment. What we have sought to do is focus on recovery beyond the term.

—How will this be reversed?

—What has happened, wrongly, is that many have thought that the MEF has waited to recognize that we are in a recession to act, and that is not true, because from the beginning of the administration the central objective has been to promote reactivation and increase potential growth. We have taken measures since December, before starting the year. We also announced this second supplementary credit months in advance. And that is why we are going to announce new additional measures. He MEF will advance this process of promoting growth.

—What is expected for October and the end of the year?

—October is a little better than September, but in August and September we had said that the indicators were a little weak. We officially only make two reviews: one in August and another in April, but, in order to continue being transparent and more proactive, we are going to advance that update to the month of January-February. And regarding the result of the year, given the deviations, at this moment the objective is to execute the maximum expenditure for El Niño and what remains of Con Punche, which includes this supplementary credit. We are talking about about 11,000 million soles in total. The entire Con Punche Perú plan is close to almost 18,000 million. That is going to be an important driver of economic activity.

—What situation does El Niño find us in?

—The boy It is a risk for which we are preparing. The risk is that it is moderate or strong. A strong El Niño is the worst risk scenario at this time. What is the difference? They are clearing the rivers, we have machinery, we have equipment and mitigation plans. I give the example of helicopters, where we had two available for emergencies, and now we have more than 30. I think this makes a difference. 1,000 pieces of machinery have been acquired, we have a prevention plan. Looking at Yaku’s experience, for example, we are already injecting resources into the municipalities so that they have those resources available and can use them for the remainder of the year. And we are going to make another injection when the rains start, precisely so that the economic issue is not a problem.

—On July 28, the president said that she hoped to announce the increase in the minimum wage soon. Considering the context, is it feasible?

—Production deviations make us postpone this decision. However, what I do believe is on the agenda is the methodology, and with a view to recovery I believe that this issue could be discussed again.

—2024?

—Next year, yes, I think it is more appropriate, post-recovery, post-Niño, to start looking at this issue, because El Niño is an important risk.

—As inflation is slowing, how key will it be for monetary policy to accompany the MEF measures?

—This is a context where the Central Bank is making an effort to fight inflation. We have high reference rate levels, both real and nominal. That also impacts activity. Fortunately, the BCR has already begun to reduce the interest rate. So, the speed will depend, let’s say, on the perception that the members of the Board of Directors and the president of the Central Bank have. Without a doubt, lowering the rate helps in a context where you expect higher rates. And especially in a context where there is a reduction in credit. Credit is contracting, so that can generate more negative effects.

Pension reform

—The pension increase is tied to the pension reform, what will happen if it is not approved in Congress?

—Any change in pensions, even updating the parameters, has to be with a comprehensive vision. The patches are not positive. I hope we can reach consensus. What must be recognized is that, first, pension reform is needed. Second, this is one that attacks the structural problems of the pension system; and most importantly, it is fiscally sustainable. The other proposals that are currently in Congress generate an enormous fiscal cost, which is unaffordable and puts the health of fiscal finances at risk. One of the great consensuses that we have to reach is precisely that, to have a new pension reform, a new contracting law for 2024.

—What scenario do you handle?

—Our base scenario is to defend the Executive’s proposal, but always seeking balance. This reform is needed, it cannot be postponed for another year and that is why we have also incorporated the adjustment, because the idea of ​​the reform is for it to be realistic as well. Starting with a low pension level, which does not respond to the current reality, we believe was not appropriate.

—In the diagnosis you made, what problems did you find in the AFP?

—An important issue, for example, is that flow commissions represented 70% of the profits of the companies. AFP. The flow commissions could have been reformed a little more. A second problem is that there was no entry of new participants, a competition that will generate an adjustment in commissions. And another is that in 30 years no progress has been made in terms of formalizing the labor market, which is not an issue for the AFPs, but rather an issue for the State.

—Will it be considered a contribution from the employer?

—No, as an initial measure we are not considering it, we are open to discussing with the other proposals, but our most important point is, one, that it be realistic in the situation of the labor market, in fiscal terms as well, but what is The truth is that a comprehensive reform is required, and we believe that the Executive’s proposal is the correct route to this problem.

—You recommended that the withdrawal of the AFP be focused on the unemployed. What would be the benefited universe?

— A focused withdrawal would limit the withdrawal to a third, in the worst scenario.

-How much will it be?

—As it stands there are more than 30,000 million. Limiting it, depending on the conditions, it can be a withdrawal of up to 5,000 million, and depending on the other ways it would be limited, it can reach up to 10,000. Although we are against any retirement measure, understanding the situation of citizens who do not have a job at this time, or have a similar problem, we have said, well, if Congress wants to respond to a need for citizens, that it be a limited measure.

—If the Constitutional Court dismisses your lawsuit regarding the recognition bonus in the ONP, would it undermine the reform?

—Without a doubt it undermines the reform and any progress in the country’s pension matters. And it would undermine the fiscal accounts because this reform is a necessary reform. We have confidence that the Constitution will be respected and the T.C. will respond to this request that we believe is for justice and that guarantees the stability of the country.

“We are in favor of returning the money to the Fonavistas”

—The autograph has already been sent to authorize partial payments to the Fonavistas. Will they enact it?

—I take advantage of this space to clarify that at all times, since my administration, we have been in favor of returning the money to the Fonavistas. It is something, it seems to me, of justice, but there was an imperfection in the law. And we, as MEF, have supported the Fonavi commission so that they can, precisely, send this necessary correction. Otherwise, the resources would never be returned to the Fonavistas, so this administration will gladly sign the autograph that allows the resources to be returned to the Fonavistas.

—The Ad Hoc Commission, of which the MEF is a part, agreed that payments would begin in the fortnight of December. Is this going to happen like this?

—I’m going to talk to the commission. Precisely, we have this commission to isolate it from any other objective other than returning resources to the Fonavistas. And we are going to do it so that it is like that, because Fonavi has like 2,400 (million) who are in cash and who can pay, and would help give a boost to these workers who contributed a lot to the country years ago and are now, many of them, in a vulnerable situation. So, whatever the MEF has to do to accelerate payment, rest assured that we will do it.

—With this autograph there is already a legal framework for the return to begin…

—Yes, I understand so, because if this autograph already includes the correction that the commission had to send and that was coordinated with the MEF, this quick payment should be allowed.