International investors maintain confidence in Peru, says Economy Minister

RIO DE JANEIRO, BRAZIL – The Minister of Economics and Finance, Pedro Francke, highlighted yesterday that the confidence of international markets in Peru is maintained and that there is also a positive change in the mood of local investors.

He referred that the country’s Gross Domestic Product (GDP) continues to recover after the considerable fall that was among the biggest in the whole continent due to the quarantine last year.

Read also: Check out our coverage on Peru

“But we have recovered quickly, we are now 3% above the pre-pandemic level, this is quite significant, we are growing, within the balances made by the International Monetary Fund we are the second country in Latin America that has recovered the most”, he explained, during his participation in the CADE Executives 2021.

He also pointed out that leading indicators of economic activity such as electricity consumption and imports of capital goods continue to increase.

He also pointed out that the fiscal management policy and the announcement that Peru will maintain the reduction of the budgetary deficit has allowed an international sovereign bond rate that is the lowest in Latin America, very close to that of Chile.

“The truth is that the bond rate in Peru is still extremely low, in previous weeks, we have issued 5.2 billion dollars in bonds, the demand was 2.4 times more, almost two and a half times more, there is an appetite for our bonds,” he said.

He mentioned that the bond rates of other countries with similar terms are higher than those of Peru.

He indicated that Peru pays 3.47% for 30-year bonds, while Panama pays 3.77% for its bonds at a shorter term, Brazil pays 4.93%, and Colombia pays 5.3%.

“Our country continues to be seen as a good place to invest internationally. I know that there is a lot of discussions, tension, sometimes doubts among national and international investors. As economists, we like to show the data, and the data indicate that confidence in Peru is maintained,” he said.

LOCAL INVESTORS

Regarding domestic investors, he referred that there was a lot of uncertainty and political conflict in June, July, August, and September that reduced the expectations of business people and entrepreneurs.

“However, the last survey made by the Central Reserve Bank shows that in 12 months the expectations are already in an optimistic range, in the economy, in general, there is a change of mood, quite positive”, he said.

He mentioned that this change in the trend led the president of the Central Reserve Bank (BCR), Julio Velarde, to point out recently that after thinking that next year private investment was not going to increase, possibly with this recovery of expectations, there will be an increase in private investment.

PEDRO FRANCKE: “TAX REFORM WOULD ALLOW COLLECTIONS OF  S/60 MILLION IN 5 YEARS”.

The Minister of Economy, Pedro Francke, stated during his presentation at the CADE Executives 2021 that to close the social gaps, more tax revenue is required, which could be generated with the tax reform promoted by the government of Pedro Castillo and for which reason they have requested the Congress to delegate extraordinary powers for 120 days, to legislate on tax, fiscal and financial matters.

In response to the questioning that, due to the effects of the pandemic on the economy, this is not the best moment for tax reform, Francke pointed out that all Latin America has made progress in tax revenues in the last years. Still, in Peru, there has been a significant setback in tax collection.

He argued that organizations such as the International Monetary Fund, ECLAC, and the OECD recommend “improving tax collection in a fair way”. He added that Colombia, Mexico, Ecuador, and Chile have already carried out their respective tax reforms in the region.

S/60 BILLION MORE

Francke assured that the tax reform would allow the State to collect S/60 billion in 5 years. “This is about 1.5% of additional GDP, and even with that, we are far from the Latin American average. This is just a step in the right direction,” he said.

“That would allow us to make a lot of progress in addressing basic needs. Of course, this has to be accompanied by efficiency in public spending,” he added.

In this line, he explained that the main problem is public procurement. That is why they are proposing a new contracting law that would provide the entities with an agile and effective tool to provide services to the population.

With information from Andina Agency