Living in Peru : your everyday companion

Do you trust the economic team?

Minister Valdivieso is a very solvent profession who understands the relationship between the Peruvian and the international economy. We may have differing views regarding Peruvian social reality but that does not take away his merit. The Prime Minister has good intentions and he knows the regions well. However, the plan is incomplete, it should contain different scenarios: a pessimistic one and an optimistic one. It should also say what impact the other 20 thousand million, not just the 10 thousand million which are in the budget, will have on the fiscal deficit and inflation. Another important issue which is overlooked is how many jobs we intend to create with these 30 thousand million. We must know what this will mean for interest rates and exports. 

Your 12 proposals have been criticized because they are already been considered by the government: a search for new markets, an acquisitions committee, etc. Your plan to generate employment has been picked up though.

Our observations are very precise. For example, I believe we must face the crisis taking care of those who will be the worst affected first: those who have low salaries and those who will have to suffer unemployment. We have suggested that those 30 thousand million be invested in an urgent temporary work plan. 

By having the Government spend over 4thousand million on construction projects and infrastructure doesn’t that mean they are working to generate employment in a sense?

Certainly, it is true that construction generates intensive hard labor, but not enough to take in those who will be pushed out of the textile industry, the agricultural industry, from the “Gamarra’s” of Peru. It will not be enough to withstand the magnitude of the crisis…

How many jobs do you estimate will be lost in 2009?

I do not have the information necessary to give a precise number at the moment. I estimate the economy will grow between 4 and 6 % in the best of cases. The U.S. will have negative 4% growth! Latin America was estimated to grow by 5% and now that is down to 1, 9%

What alternatives do you suggest to increase employment?

In spite of the recession we must hold on to what we can and keep agricultural exports going. We must support medium, small and micro agriculture; it is hard labor and it provides nourishment. This is the sector which will be hit the hardest by the crisis. Peru has growth but what is coming means thousands will be out of work. It is not true that we are generalizing the situation.

What has been said is that your solutions have already been considered, for example, not cutting the budgets of social projects…

Careful now; I have information that last year the Juntos program’s budget was cut and I know that in the face of a crisis it is most tempting to cut the string on the weakest end. This is why I ask that you not cut social development projects. I have also said that business owners have been given ways to facilitate the payment of their taxes until 2010 and pay by sorts while the common citizen, when he buys something or the year ends, and he pays his taxes, he does it in cash. It is very unfair treatment. The norm was released two months ago.   

What does it propose?

That we tighten our belts equally. The FMI has already said that any special benefit given to producers has no positive effect on the economy. I have made a concrete suggestion, that the focus be placed on the micro, small and medium enterprise. That is the basket we need to put our eggs in. The “Gamarra’s” of Peru are the ones to generate the most employment. I am prepared to defend them fiercely.

The anti-crisis plan proposes the “million dollar purchase”, a similar measure was enforced during the crisis of 1998 of Mypes school uniforms…

That helps, but it is not in the heart of the State.

300 million soles have been assigned in that sector via Cofide.

There is an incapability to spend which is increasing due to the recent tendency of technicians to work for the private sector: it is then that the money goes through the banks and makes credit scarce and they also normally don’t take risks, because their administrative costs are too high. Lets’ think then of the municipal boxes and in the National bank, let’s create mechanisms to really channel credit without increasing its cost. The National Bank can carefully select who is viable for credit selection…

Do they have that capacity? 

Of course they do. They already give credit to many public officials; they can quickly put a team together to evaluate who is viable for credit in micro and small enterprises. Commercial banks can also open a branch to see who is eligible. I am glad the government corrected itself after saying it was 100% impermeable and that only  China and Peru would solve the crisis. But don’t say that an anti-crisis plan has been drawn up. I also regret we acted so late…

Were the governments reflects too slow?  
 
Absolutely and there has been much arrogance in saying that Peru suffered a growth crisis. But let’s go forward and face the crisis together. It is true that Latin America is in better shape to face the crisis than before. As constructive criticism I would also like to add that thousands of Peruvians are suffering terrible anguish in silence because they received consumer credit through credit cards and they have no way to pay it now. In 2008 those numbers grew to 40%. We have a serious problem because those people, if they lose their job, won’t be able to pay their debt back even if they wanted to. There will be a flood; those were businesses which made their money not from selling the blender but rather from the interest of the purchase. 

Nobody saw the crisis coming…

Listen, the U.S. treasurer warned there would be a crisis back in 2006. I am sure that my friend Valdivieso knew there was something going on in Wall Street. On a different note, there is the fact that petrol dipped by 75% and that that does not translate into the price of Gasoline in Peru. It has dropped, at the most, by two soles…

When Petrol went through the roof, the price of gasoline in Peru did not increase.

Right, we created the stabilization fund. I am aware that we owe some businesses but that is only because we want to pay them the full amount in only one installment. It’s like paying the debt beforehand. We have to administrate the crisis. The price of gas plays a part in the cost of food due to transport costs and the poor spend all they have on food. Wheat tariffs were lowered to zero because they were expensive, now the price has decreased by 50% but bread prices are still the same. The same has happened with oil and soy. Corn has decreased but chicken has not done so in the same proportion. Who is benefiting from this…

How will we lower the prices? Manu militarily?

There needs to be some kind of regulation, I believe in the market but I am not a fan. Without interfering we could meet with the business owners and see what is going on. In 2008 we broke all the inflation norms, we went from 3% to 6, 65% and in the provinces it went higher. In 2009 prices will decrease, but due to the crisis and employment will be a big issue. I share President Garcia’s optimism but we have to be straight about the facts.

Which are the facts you would like to be straight about?

For example, I would like to know what the inflation level on food products is and how it’s affecting the regions. By 2009 we should be sharing the burden with mayors, regional presidents and they should report the amount of jobs lost in each region back to us so that we can have an idea as to how to distribute our scarce resources. That is a plan. We must have this with a realistic and unified mindset without letting ourselves fall into optimistic excesses, no curtains and smoke. Let’s call the business owners but also the workers, the civilians and the producers so that we can solve this together. 

What do you think of President Garcia’s Presidency?

I am glad he corrected his surreal evaluation of the crisis. The problem with President Garcia is that he is unable to admit when he’s wrong…

Lourdes Flores says he is proud, what do you think?

He has an incredible Teflon ability, nothing sticks to him. He washes his hands of everything like Pontius Pilot, everyone is guilty but he won’t incriminate himself. I’d rather stop calling him out though because I like to work with facts. I would like him to summon all the different sectors so we could face the crisis together. By the way the commercial balance in November has been negative, that is a sign that the crisis has reached us already.

The President has said that in the world there is talk of the economic miracle which is Peru.

Of course, the economy has grown for seven consecutive years by 6% and 9%. But it won’t be like that in 2009 or in 2010. We must assimilate that so that we can have concrete measures and without smoke in our eyes which blinds us from seeing the facts clearly. I have no problem in particular, or in offering my contacts in the international arena.     
 
What smoke have you encountered?

I think that this business of “life is a carnival” does not fit. Life in Peru is not a carnival, especially for the poor.

And what is the thickest curtain of smoke?

I thought the Teleton was a good thing, we all contributed. But including “vedettes”, well I’m not going to discuss that further because everybody has their own style when dealing with things.

It didn’t work, you calling the President out for his showy behavior given that the Teleton raised 3 million dollars.

Asking a TV personality to dance while wearing a sequence gown at the Presidential Palace seems to me to be… But, in the end each to his own.

Why do you say that with each passing day you grow more disillusioned of with President Garcia?

I refer to the inconsistencies, first he said he would sell the presidential plane and he didn’t. He took advantage of the delegation to regulate the Free Trade Agreements to put in a train and he took a step backwards with the farmers in the jungle. He wanted to sell the Pentagonito and he had to go back on that. He says that Peru is protected from everything but then he has to develop an anti-crisis plan. He keeps pulling us forward and then making us march backwards again.

Your government was criticized for much the same thing.

No, no, no. I might have many critics but the problems in my government were all resolved by discussing the issues and by getting the facts right. As a democratic representative what worries me is the authoritarian look of this administration. The judicial branch is used to stone those who disagree. But, anyway, let us search for unity before the crisis.   

Will you run for office in 2011?

Peru Posible will participate in the regional elections, municipal and presidential. The party is beginning to grow stronger. We have 58 youths preparing themselves all over the world with scholarships. We are making the party stronger. None of the candidacies have been confirmed by now, not even the presidential one.

Would you like to be President again?
 
President Garcia has served only for two and a half years. It is not the time to discuss this.

Would Carlos Bruce be a good candidate for Mayor of Lima?

I didn’t know he was thinking of running for office. He is a congressman and at the moment he cannot resign from that position.

How is the crisis being lived in the U.S.?

There are projections and figures but what is unclear is how long it will all last. Obama says that the sooner action is taken the sooner it will be over. There is a plan to be unveiled on the day of the inauguration. Two and a half million jobs have already been lost, that is why people are reacting. The European Union and China already have an anti-crisis plan. Japan has declared itself in a recession. The crisis will hit and we need to be ready.

And what is it like day to day in the U.S.?

There has been a heavy drop in consumerism, many stores are closing. Traveling has decreased and the restaurants have less and less people. Everything which is service related has fallen a bit. There are 3.800 toy manufacturers which have been forced to close…

That is going on in China?

Yes, but many of the companies closing are American, they went to China for the cheap labor. In China, 10 million people have lost their jobs. The World Bank estimates that China will grow by 3%, I hope they are wrong, because that would be like and earthquake for us. It would be terrible.  

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I have been looking for clear, precise information about Peru's economic situation. This is an excellent source of information to keep in mind to compare with the official one, then I may have a better understanding and opinion about the crisis.
One thing is clear to me, THERE IS A WORLD CRISIS and we should all work together, otherwise we will all suffer the consequences.
Europe and Asia are already suffering terribly.
Another thought of mine, I was astonished to see the amounts of money top executives were paid (by the millions), how much money companies were bought for (by the billions). I couldn't find a reason why. Probably, we needed this catastrophe to go back to normal.
I am afraid billions of people are going to feel it, me included... you included.

Glad to read this.  Sure thought it was strange to read Mr. Garcia's comments over and over again that Peru would not be affected.  Dangerous denial.