Carlos Oliva: “MEF has to explain the transfer of S/100 million for a stadium in Ayacucho”

Exactly one month ago, the MEF transferred S/100 million from the contingency reserve for the expansion of the Cuna de la Libertad Americana stadium in Ayacucho. Carlos Oliva, president of the Fiscal Council, sees inconsistencies with the new fiscal austerity policy, in days when Governor Oscorima gives the time before the Prosecutor’s Office.

—Why transfer S/100 million from the contingency reserve for a stadium?

—The one who has to give the explanation is the Ministry of Economy and Finance (MEF). And I think he has given it, in some way. I have seen a statement somewhere in which they explain that, like Ayacucho, money has been given to other regions. It is not unusual for some extra money to be given throughout the year to finance certain projects.

—Does the project justify it?

—I don’t know if it is well justified, if the technical file is correct, if they want to build a stadium, well, according to the circumstances of Ayacucho, right? In other words, it would be crazy to build a stadium for a type of monument in Ayacucho or for an event.. In Ayacucho, the population is much less than that of Lima; So a stadium of 20,000 or 25,000 people may be suitable. I don’t know if the stadium is for that. Yes, there are a lot of technical issues that I don’t have the answer to because I haven’t seen the project. What we did say at the time is that the situation was not for that.

—Because of the tax rules.

– Fairly. If you want to comply with the tax rule, then don’t start giving money that you don’t have. But, let’s say, beyond the macro issue, honestly, it is not so unusual that throughout the year money is given to some projects that were not included in the budget law. And so one has a greater suspicion that there has been some kind of problem. A kind of corruptionLet’s say, they give money in exchange for something; That’s another topic.

—Emergency Decree 006-2024 came out in March.

—It is striking that it was at the beginning of 2024, because, generally, when you make these transfers, you do them later in the year. Your budget is complete. So, if the regional governments, in this case, have practically their entire budget, why do they get more money? But, well, in the end, that decision was made by MEF.

—And, above all, taking into account that last year’s execution was low.

– Exactly. And it is a predictable project. I suppose that the venue for the Bolivarian Games in Ayacucho must have been awarded two, three years ago, I don’t know, but well in advance. So, it is not a project that you have come up with under the ground. It is a project that was already known. The question really is why didn’t you include that project in the budget law that was approved six or five months ago?

—Let’s assume it’s not corruption. At least, is it an issue of spending inefficiency?

—Poor planning, I would say. Because, if you are going to have an international event that is already known, you have to provide that money. That’s where the question should be focused: why didn’t you include it at the time? Well, the previous minister has the answer. [Contreras].

—And was it necessary to take money from the contingency reserve? Was there no other place?

—There is no other place, unless you want to ‘chocolate’ Ayacucho’s budget. That is, you stop doing one work to do another. One by another, let’s say. But if you want it to be additional during execution, the contingency reserve is the mechanism that is normally used. The other is supplemental credits, but that happens when you have income above what was planned.

—That’s more common, right?

—No, because generally the income is below what was planned. So, except in the time of Castillo, when they became, let’s say, very… generous, and began to distribute money everywhere. Because, precisely, if you remember, when Castillo entered, the price of copper rose a lot and there were unexpected income. And instead of saving them or putting them to good use, they began to issue emergency decrees to finance a lot of projects, many of which are in the Prosecutor’s Office.

—What is the contingency reserve for? So that readers understand it.

—It has two functions. One is emergency money for unforeseen events. Imagine there was an earthquake, a cyclone like Yaku, which was more or less unexpected, or, let’s say, something that is difficult to foresee. So, by law, 1% of regular resources have to be saved, as money in the contingency reserve, mainly for these unexpected effects.

—And the second justification?

—It is including money that you know you are going to spend, but you don’t know how much you are going to spend. For example, the Government plans to increase the minimum wage, but you don’t know in what month you are going to do it or how much you are going to increase. So, in this case, for example, a forecast is also usually made, you do your numbers and say, look, I’m going to put, so to speak, S/200 million in the contingency reserve to be able to finance an increase in the minimum wage and that’s it. When that increase happens, I’m going to get it out of there, right? Therefore, that, let’s say, is a second justification for putting money in the reserve.

—That is to say, are they resources that could not be made available just like that, much less at the beginning of the year?

—They are expenses that you know are going to occur, but that you do not have the detailed calculations for. Mainly, in the contingency reserve you put these moneys reserved for these two things: unexpected events and events that you know are going to happen, but you don’t have the calculations. Throughout the year, as the months go by, you can spend it. If you arrive in September or October, and there has been no unforeseen event, then you can decide that the probability of something happening is much lower, so I am going to use that money that I had put in to finance these investment projects, for example. to tell you something. Normally, the money in the contingency reserve tends to be spent more towards the second half of the year, when things are clearer to you.

—How are the Presidency and the MEF in this case?

—The truth is that, from a political point of view, it was not the most appropriate, precisely when there is the whole issue of the governor. But that is more of a political issue than a technical one. I mean, technically, there may be a justification, it’s possible. But, politically, it was not the most appropriate. And, above all, when the MEF is also announcing austerity measures.

The austerity of the MEF

—Don’t these transfers contrast with the MEF’s new fiscal austerity policy?

—The MEF does not agree. Because, in the same decree that calls for austerity, they give millions to this. So, again, the most we can ask for is explanations, right? In the end, they are decisions that are made within the legal framework, but it is striking that they may not have had sufficient technical support.

—Will these cuts in public spending be enough to ensure that there is no lack of resources at the end of the year?

—If you really want to reach a 2% deficit, it will help. But I think it will not be enough. We need a couple more things. First, continue with the optimization of spending. Secondly, increase income. And for that it is extremely important to recover the growth rate. We have already had a couple of relatively good months compared to last year, although March seems not to be going as well.

—Would the withdrawal of AFP funds change the scenario?

—The fact that expectations are improving, albeit slightly, gives us some hope that we can reach that 3% of GDP that MEF and BCRP were planning. Now, the withdrawal of money from the AFP can give an extra boost. We could already be talking about a figure close to 4% and that will definitely have a positive impact on collection, especially on VAT.

Excessive funding to the MML

—But if we talk about austerity, there is still the issue of the Municipality of Lima.

—The Fiscal Council has been clear about this, and it is the responsibility until the end of the MEF as well. The numbers show excessive and at the same time relatively expensive financing. Commits resources for 20 years. The mayor, in the end, is taking advantage of the circumstances and is doing what he thinks, but the rector of public finances is the Minister of Economy.

—What can be noticed?

— That resources are committed for the next five administrations, five mayors. To us (Tax Council) the numbers show that it is complicated for the Municipality of Lima. The MEF would have to say what they think there, because the Fiscal Council, in the end, simply issues opinions, but if there is any type of risk, it is the MEF that has to assume it.

—Do you consider that there has not yet been a forceful statement from the MEF on the case? —What there has been in any case is this back and forth, because at some point they cut the pipe, and then, two or three weeks later, they take out another one. Finally, I believe that the mayor is taking advantage of the circumstances and is doing what he thinks, but the rector of public finances is the MEF. So, the MEF is the one that has to rule on the matter and say if, in fact, the Municipality of Lima has the financial backing to do what it intends to do, or if it is a matter of imprudence. As I say, the Ministry of Economy is the rector and cannot stand aside when these things happen.