Alonso Segura, Minister of Economy and Finance: Interview

Interview:  Alonso Segura

Considering the slow external economic environment, what actions can the government take to support sustained economic growth?

ALONSO SEGURA: The international environment has been characterised by a decline in commodity prices, an increase of risk perception and lower global demand. Nevertheless, the Peruvian economy has been resilient and is showing a gradual recovery that is not shared by other regional economies. For example, in 2015, while the Latin American economy was expected to contract 0.3%, Peru’s was predicted to grow around 3%.

Henceforth, Peru will recover its dynamism due to measures taken on several fronts. For example, an important number of infrastructure projects worth over $20bn have been granted under the public-private partnership scheme. Some of them have already begun work during 2015 and will continue construction in the coming years. These projects will speed up public and private investment as well as provide a boost to employment levels and household consumption.

Moreover, the high level of fiscal stimulus will continue, but it will be withdrawn gradually to avoid affecting Peru’s economic recovery. An example of this is the significant growth of the public budget (6.6% for 2016), which has focused on the government’s priority sectors: education and infrastructure. Mining production will also maintain a strong momentum, given that projects such as Las Bambas and the Cerro Verde mine expansion are now starting.

Household consumption will also grow at high rates due to strong job creation and the consolidation of the middle class. In consideration of a medium-term strategy, the government has taken other steps to bolster growth, such as launching the National Plan for the Diversification of Production (Plan Nacional de Diversificación Productiva, PNDP) that seeks to trigger the development of other key sectors; implementing measures to reduce red tape; and increasing the educational budget. This has been made possible due to the macroeconomic and fiscal strengths of Peru’s economy, which are recognised internationally.  

What strategies can the government pursue to further diversify the economy away from its reliance on the mining sector?

SEGURA: Clearly, Peru’s competitive advantages still lie in its natural resources. However, there are good examples of countries that have used this same advantage as leverage to move the economy towards further diversification.

This is not about picking “winners” but is about providing broad-based opportunities and infrastructure for businesses; human capital development; infrastructure; innovation ecosystems; and a friendly business environment, among other things. These are some of the objectives of the PNDP. For example, Peru is working to better align the training of our workforce with the demands of firms, and to improve the supply of our firms to achieve the international quality standards that are required by our trade partners.

These two aspects are important to enable participation in more global value chains. In terms of workforce training, we are working with the OECD to gather experience on best practices, both in measuring the skills of our workforce through the OECD’s Programme for the International Assessment of Adult Competencies and through improving the generation and utilisation of skills.

In terms of quality of production, we are working to improve standardisation and accreditation services by refocusing the National Institute of Quality on fostering the normalisation and accreditation services that our exporters need.