Should the conduct of economic policy be refreshed?

“A management that has not produced results”

By Alfredo Thorne, former Minister of Economy

What I can say is that it is a management that has not produced results; It is the president and the prime minister who have to evaluate whether Contreras is the most suitable person for the economic recovery that the entire country needs. I, personally, think she is not. She has made too many mistakes.

The programs lacked punch. For example, budget execution, especially public investment, which closed at 3%, failed to provide the powers to local and regional governments so that they can execute. Budgets were taken away from very important entities such as MTC, Health and Housing, and the only ones who have been given budgets are congressmen or the monstrous allocation of salary increases at a time when they are suffering from the recession.

“United” has not had much of an impact on business expectations either: a large part, three months from now, is below level 50. It means that they are not going to invest. There are not many unblocked projects, we have problems with Line 2 and the only thing that is moving forward is the expansion of the Jorge Chávez airport. There are award commitments, but this does not generate greater spending or impact on GDP. The president must also be honest. If she is looking for another minister, she should say so.

“Changing drivers will not make a big difference”

By Luis Miguel Castilla, former Minister of Economy

The problem is not the conduct of economic policy, but rather the political conduct that affects the economy.

The MEF is worn out and other sectors have unknown people or little significance. The MEF cannot be given full responsibility when the decisions of the Government or other powers of the State affect it. Many projects and programs have been approved, but they are not implemented. The main problem of the Contreras administration is the lack of results. Right now changing pilots in the MEF would not make much of a difference.

There are projects that are not promoted for fear of generating social conflict or where the technical opinion of the MEF takes a backseat because the agreement between the Executive and Congress weighs more. No substantive reform is promoted for fear of political noise.

An example: there is a controversy over Metro Line 2 with the mayor of Lima. It does not involve the MEF, but what will happen will be to postpone it to avoid controversy. He lowers his head. This reduces the effectiveness of the agenda for promoting public-private partnerships, seen from the MEF’s side.

In the mining area, there is a strong effort with the Single Window and it is expected to unlock US$2,000 million from a portfolio of US$30,000 million. Without consistency or political will, changing the person will not make the biggest difference.

“You need to generate credibility and give trust”

By Luis Arias Minaya, former head of Sunat and BN

I am not the one to determine if Alex Contreras should continue in the MEF, that is for his bosses to answer; But I have always said that the minister was slow to recognize the recession and once he did, his response was inadequate: several months were lost and as a result we see that the recession is being long, and its exit is slow and fragile.

Credibility and confidence need to be generated to increase private investment and neither of those things were done effectively.

Furthermore, any change in the tax regime would only come into effect in January 2025 and, therefore, has been sent out of time. The reduction to two regimes—general and RUS—should be complemented by generally allowing MSEs and small businesses simplified accounting to facilitate compliance.

On the other hand, the tax benefits since Contreras was vice minister also complicate the picture, not to mention fudging the figures and it is not recognized that the fiscal deficit ceiling will be exceeded; and the worst thing is not going over a few hundredths, but that we are not on track to converge the deficit to 1% of GDP.

“MEF has the interests of power groups at the forefront”

By Germán Alarco, Professor at UP

The problem is not about people. The Government is extremely weak for the socio-political and institutional reasons that we all know.

He masters a very orthodox approach to economic policy. Minister Contreras has moved in that space trying to maintain certain reasonable balances. Obviously, his perspective is short-term, as is that of the Government. Likewise, it should not be forgotten that the minister is in charge of the groups of economic and media power that seek greater prerogatives, in this difficult situation, in exchange for offering some stability to the Government. His situation is very complex.

Some of the candidates mentioned to succeed him are even more orthodox and aligned with the interests of the power groups. They erroneously insist on deregulating the labor market, tax exemptions, making environmental regulations more flexible, among other elements. This package of measures is not a guarantee of social peace that contributes to growth. Without further details, a tax reform is required that increases mining royalties and direct taxes.