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Business / Archive
6 October, 2008 10:52:28 | in technology
Peru: Infrastructure for development
Info provided by theAmerican Chamber of Commerce of Peru (AmCham Peru)
Without doubts, the infrastructure gap in Peru is nowadays a very clear obstacle to development and, according to the Ministry of Economy, the gap amounts US$ 10,495 billion dollars (excluding telecommunications). Then, it is not surprising that several international reports locate us -year after year- in the bottom positions of the world ranking when evaluating this important competitiveness pillar. Up to the first semester of the year we had a fiscal surplus equivalent to 5.1% of the GDP, however, we are not only incapable of sustaining high growth rates in absence of adequate infrastructure, but our export sector is also being affected in terms of competitiveness. Then, it is difficult to understand the announcement of MEF of the objective of reducing public investment from 4% to 3.8% of GDP with the excuse of moderating the economy to face inflationary pressures and international turbulence.
The truth is that, with balanced fiscal accounts, a sustainable deficit in the current account (financed by direct foreign investment and explained mainly because of the increase of imports of capital goods that improve productivity) and a well supervised financial system, it should not be necessary to reduce investment.
On the other hand, it is clear that internal inflation has risen and the effect is mainly affecting the poorest, given the higher concentration of food on the consumption basket. Then, MEF faces a dilemma by choosing between maintaining the economic growth with the risk of increasing inflation and the option of moderating growth to reduce it. In this context, the reduction of the current expenses is positive but investment should not have followed the same path.
On the contrary, investment should have been encouraged. In this sense, the decrees promoted by the Executive Branch have pointed in the correct direction, even when regulations and more initiatives to increase the quality of public investment are still pending.
Finally, it is evident that our country needs to face the infrastructure bottle neck that restrains our economic growth but without neglecting inflation, especially between the least favoured groups. If we assure that investment keeps growing at 20% annual rates we will increase the export sector’s competitiveness and we will be able to fight inflation, because if we rise the potential GDP (with greater productivity), supply and demand would fit without recurring to desperate measures that distort the market and create unmeasured fiscal costs.
The truth is that, with balanced fiscal accounts, a sustainable deficit in the current account (financed by direct foreign investment and explained mainly because of the increase of imports of capital goods that improve productivity) and a well supervised financial system, it should not be necessary to reduce investment.
On the other hand, it is clear that internal inflation has risen and the effect is mainly affecting the poorest, given the higher concentration of food on the consumption basket. Then, MEF faces a dilemma by choosing between maintaining the economic growth with the risk of increasing inflation and the option of moderating growth to reduce it. In this context, the reduction of the current expenses is positive but investment should not have followed the same path.
On the contrary, investment should have been encouraged. In this sense, the decrees promoted by the Executive Branch have pointed in the correct direction, even when regulations and more initiatives to increase the quality of public investment are still pending.
Finally, it is evident that our country needs to face the infrastructure bottle neck that restrains our economic growth but without neglecting inflation, especially between the least favoured groups. If we assure that investment keeps growing at 20% annual rates we will increase the export sector’s competitiveness and we will be able to fight inflation, because if we rise the potential GDP (with greater productivity), supply and demand would fit without recurring to desperate measures that distort the market and create unmeasured fiscal costs.
5 Comments
# Patrick Butler says :
6 October, 2008 [ 12:07 ]
14 October, 2008 [ 04:05 ]
16 October, 2008 [ 01:01 ]
10 November, 2008 [ 11:05 ]
10 March, 2009 [ 01:41 ]
# Patrick Butler says :
6 October, 2008 [ 12:07 ]
# Rachel says :As a U.S. Expat for more than 28 years as a Business Development specialist in Infrastructure Development primarily in Saudi Arabia and Vietnam, I can assure developing cultures, their (political) leaders, economists and their indigineous societies that without a well defined plan to develop and execute with "integrity", required infrastructure programs (they) will fail as a contiguous society.
Look at this weekend's revelation, an absolute travesty for the people of Peru that the Minister of Energy and two Senior Officials were found to be conspiritors in international BRIBERY for its (Peru's) primary source of energy; Petro Peru.Primary Port facility(s)/Transportation require immediate development in order to get natural resources; O & G, Mining and critical Materials/Trade in and out of the country inorder to pay for Infrastructure and Social development.
WPBINTL Consulting
14 October, 2008 [ 04:05 ]
Not to be negative, but was this article originally in Spanish? It's written like a high school essay.# Patrick Butler says :
16 October, 2008 [ 01:01 ]
Thank you for your response to my "comment" regarding the article; Infrastructure for Development provided by AmCham Peru referencing; "our country needs to face the infrastructure bottle neck that restrains our economic growth".....# william patrick butler says :
My comment was not (originally written in Spanish). However, if the content was not clear enough, perhaps it would make more sense to certain Peruvian officials if you translated into Spanish for them.
As an investor in BPZ and the development of Peru's energy industry, I found the recent international O & G Bidding scandal absolutely appalling. The repercusions for Peru and its government have been enormous.
Talk about "..our country needs to face the infrastructure bottle neck that restrains our economic growth....", how do you like (your) new government now?
Maybe the American Chamber of Commerce should recruit more high school students instead of five dollar translators?
10 November, 2008 [ 11:05 ]
Relative to world financial and market conditions, it looks like Peru is getting a "vote of confidence" from the IFC, APEC, and EU investors.# william patrick butler says :
I think IFC's announcement this weekend that they will increase fundindig for advancement of BPZ's O & G program including Peru's energy program will substantially support infrastructure development.
In other news coming out of APEC is the signing of a comrehensive trade agreement with Japan and I am quite certain that The U.S trade mission will also produce some new strategic developments.
Shell Oil is expected to finalize a master working JV agreement with BPZ to provide certain expertise in the development of Peru's Natural resources to meet the country's rapidly growing energy requirements.
Down stream employment, infrastructure development while GDP will benefit and should continue to grow under difficult world market condition at around 7% - 9%.
Transparency and oversight is imparitive.
10 March, 2009 [ 01:41 ]
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