Luis Miguel Castilla: “I would encourage José Salardi not to yield to pressures from business groups”

At first glance, the Peruvian economy It seems to have recovered its dynamism, but two factors wear their walk. In the opinion of the former mef, Luis Miguel Castilla, the government’s merit on the growth of 2024, is barely minimal, considering the external winds in favor, the key role of the Central Reserve Bank and liquidity injections product of AFP and CTS withdrawals, which moved consumption.

Aims to a fiscal fiscal deficit that will inherit the next government and a MEFalthough oxygenated with the arrival of José Salardi, It is still weakened in credibility. It makes an order to the minister: to be firm and not open flanks to tax benefits that lack justification.

-What diagnosis does it give to the Peruvian economy?

The Peruvian economy is relatively well in the sense that it has managed to control inflation and recover after a recession of 2023. Most sectors are growing, but the two weak points are that the ongoing economic recovery has a ceiling of between 3% and 4%, which is low to reduce existing poverty levels.

It also has a fiscal deficit that has been accumulating over time, which places us well above the current rules, and that in order to recover credibility in the management of fiscal policy, it should be reduced from 3.7% to 2.2%.

–Having grown 3.3% in 2024 is the Government’s merit or for winds in favor?

To a large extent it is not attributable to the government, because in terms of growth engines have basically been the recovery of private consumption, and that is attributable to the Central Reserve Bank by having reduced inflation. It is based on external winds by having an exporter boom in high prices of exchange terms.

Perhaps the only thing that the government can have a certain level of responsibility, is in an increase in public investment. And this, more than anything, is a recovery of the spending of regional and local governments that after two years of management had learned to spend their budgets. The great pending task of the government is to ensure that there is a greater increase in private investment, which is what generates formal employment.

–Did the dynamism of consumption product of liquidity due to AFP and CTS withdrawals adjuded to GDP too?

These exceptional liquidity injections, with the release of the CTS and the AFP funds helped the formal worker, although in a transitory way. There was a greater liquidity that helped private consumption grow, after having zero growth.

–The MEF projects to grow 4%, but you have pointed out that it is not impossible. Isn’t it excess confidence?

Always make projections with so much uncertain factor is an Albur, but I believe that the conditions could be given, given that international prices would be maintained, especially the price of copper, despite the uncertainty and instability of international markets. There are two very short -term factors that have appeared and that can endanger that prognosis.
One is the impact that the closure of shopping centers can have, following the painful events of Trujillo.

This could stop intensive sectors such as trade and services. The second is that the possibility of alert for a coastal child has been opened, which could also affect the prognosis, especially in agriculture and fishing, which had recovered. The most difficult thing is that we are entering a pre -election year. Populist and public spending pressures may make compliance with the fiscal goal very difficult.

–Should the growth rate in any case converge around 3%?

4% is a rate that can be achieved from not giving these scenarios that can have a disruptive effect on economic activity, but I think the floor could be a growth of 3%, similar to last year. Now, I think it’s a little premature because we are just beginning March. The Peruvian economy has been quite resilient and if the announcement of the MEF has to unlock some projects through the addendas firm that could mobilize private investment for more than US $ 5,000 million in various infrastructure projects, that could certainly help inject more confidence. In the political spectrum, nothing has changed, and if you add the impact of insecurity, it is worse.

–Salardi prepares a deregulation package, but don’t you think there have been similar ads that fall in a broken bag?

The problem is that an amount of laws and norms are approved, but there are not compliance or there are fear of the state officials, because there have been two requests for delegations of faculties and nothing has happened. The unique digital window for the mining sector was announced and there have been some advances, but a bit slow. The issue is that simply approveing ​​a role is not enough. It must be ensured that what is established in that deregulation is fulfilled.

What Salardi promises, I think, it has to do more with accelerating private public associations, and in that sense he would like to enhance proinversion so that he has a much more active role. That is, not only stay in the award of the projects, but in the contractual execution and give much more weight to that activity. There I think the reform comes. It seems to me that Salardi’s entry has given oxygen to management, but the same political restrictions are in force. Nothing has changed and that can be a limiting to the effectiveness of the measures.

–What was the main error of former Minister of Economy José Arista?

I think the Achilles heel was to cling more than the account and allow the role of the MEF to devalue significantly. An economy minister in our country has the faculties, but requires the support of the president and the rest of the cabinet. Here he did not fight. I think that is what has weakened the MEF. Even having a majority in Congress, there are ways to file unconstitutionality actions to the TC, which never made an edge. That accommodates an irresponsible handling.

–What guarantees that Salardi does not make the same mistakes?

Good question. I think that Salardi brings a very recent trajectory to be a good manager having effectively created the conditions for private public associations to be recorded last year. But the truth is that nothing guarantees because political conditions are the same and may be worse.

As the elections approach, congressmen’s appetite for being populists will continue, they also have the mobile of the Senate re -election. The mayors and regional governors, who do not have the available re -election, will also try to take advantage of what they have left to take water to their mill. So, there is not a guarantee beyond its power of conviction, but it will be necessary to see it work on the field and take a little more time in office to make a judgment of its work.

–But in his first steps, he has been openly in favor of some unjustified tax exonerations such as drawback

Pretend that the agro -export boom responds to the fact that we have a preferential treatment where the margins of the exporting companies are subsidized, the truth is that I do not buy that justification. It is a blind subsidy and the truth that I believe that the minister, even starting with good foot, has to be very careful to be consistent.

If you have a large challenge of lowering the fiscal deficit of 3.7% to 2.2% of GDP, you have to try not to open sources of loss of fiscal resources. Both the drawback and the preferential rate of 0% of the income tax for the special economic zones are not a good measure. We have 2% of GDP or more than S/20,000 million tax exemptions every year and have not necessarily fulfilled their goal. The Tax Code establishes that these schemes be reviewed every three years, which has never happened.

–Does it make it see Salardi as a fiscally irresponsible?

I could not catalog it irresponsible with what we have seen to date, but it has to be much more careful not to open flanks and that will be seen when it formulates the budget of the next year; all the pressures you will have. It has to be very careful in the management of the public hacienda and I would encourage him not to give up the pressures of business groups. They are unnecessary measures to inject confidence.

–Open flanks refers to more pernicious measures of the private sector and Congress that could overwhelm it?

Exactly, because once you have said yes to something and already marked position, say no to something very similar, it is very difficult. As well as drawback, fiscal spaces have been reduced by the measures approved in Congress with anachronistic regimes such as subsidizing restaurants with 8% IGV and other pearls. The MEF has to be firm and planted because otherwise, it would not be fulfilling its work to ensure the responsible use of public resources.

–What does he feel that he has made credibility to the Ministry of Economy?

The same fact of having very weak governments, that has taken its toll to the MEF. Somehow it has been none by politicians and there have not been ministers who have defended the fueros as appropriate.

–The fiscal deficit is triggered and a third breach of the rule is noticed. What risk is the incoming government?

The legacy will be weakened public finances. You need to adjust public accounts very strongly, because I believe that this year the deficit top will not be met.
While business confidence numbers are in blue, they are still far from the historical average.

–Is there a space to recover it in this regime?

I doubt it frankly, because now what is weighing more is uncertainty in the short term. I do not necessarily see deterioration, but our country has become very unpredictable. That limits a greater improvement in trust, especially companies.

–The inauguration of the new Jorge Chávez is in the treasury, what image is projected?

It seems to me a shame what is happening with the airport because what it shows is a total lack of planning. They are more than 10 years that the terminal, the second track and the new tower have been brewing, and the measures have not been taken to deliver this that has postpones. Being less than a month after operation, it makes a bad image to the world.