The Minister of Economy and Finance, José Arista, defended his jurisdiction after being openly criticized by Julio Velarde, who assured that the MEF has lost technical management and is subject to initiatives from Congress and the Constitutional Court.
Like a carefree boxer, Arista assured that the Central Reserve Bank (BCRP) does not allow the economic recovery to be accelerated.
“I would respond to Julio that he should listen to the ministry’s request (…) to be more proactive in reducing the BCRP interest rate. We see that the real interest rate is quite high and that does not help to reactivate the economy with the speed that we would like,” he assured calmly and with a hint of a smile.
He also assured that “he does not want to get into controversies” and that he “neither disagrees nor agrees with Velarde’s criticism, but quite the opposite.” In Arista’s opinion, the mortgage and credit market needs to “move more”, for which it is key that they work together with the BCRP.
It is necessary to specify that the reference interest rate sets the tone for the price of credit operations. For example, with the arrival of the pandemic, the BCRP took it to a historic floor of 0.5% in order to promote liquidity so that Peruvians could assume the expenses due to the health emergency, and by 2021 it began an upward cycle, up to 7.75%, to contain inflation. Currently, it is at 5.75%, and according to the BCRP, it is the lowest rate in the region, since it is up to 5 percentage points away from neighboring countries such as Colombia, Mexico and Brazil.
“Velarde feels protected”
According to Centrum PUCP professor Kurt Burneo, Arista is right in stating that the BCRP has not reduced the reference rate in a timely manner, and considers that this delay explains, in part, the recession seen in 2023 — which brought the worst GDP result in more than three decades, not counting 2020—as it translates into a high credit cost and therefore, into the contraction of private consumption—which closed 2023 at just 0.1%—.
In addition, he pointed out that Velarde feels protected by the autonomy that the BCRP enjoys; while the MEF has to deal with the decisions made by the issuing entity, “even if they get out of hand” and do not recognize it.
“Velarde’s attitude when referring to the fact that the MEF does not have technical management is unnecessary and useless. That is not true. What does he mean when he says that the MEF has no technical management? A handmade one? The MEF has to deal, as responsible for economic activity, with the decisions of the BCRP, such as keeping the reference rate high while they take their toll on the economy,” he told La República.
Furthermore, Burneo considers it inappropriate for Julio Velarde to question the work of the MEF in a business forum, instead of doing so in private so as not to further undermine trust.
“It does not help political stabilization. What do you gain by making unsupported claims? I understand what you think is personal. The board of directors is the one who sets monetary policy. Do the rest of the directors agree with what Velarde says? He is not the board,” said Burneo Farfán.
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Kurt Burneo, professor Centrum PUCP
“Velarde’s attitude is unnecessary and useless (…) The MEF has to deal with the decisions of the BCRP such as keeping rates high while they take a toll on the economy.”
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Another hook. Regarding the annual inflation rate of 2.2% predicted for the current by Velarde, the minister noted that “we will have to believe him,” but “hopefully he is not wrong like last year.”
Coincidence. However, Arista, like the banker, called it “excessive” that some economists estimate that poverty will take 26 years to return to the pre-pandemic level.
Source: Larepublica
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