By Augusto Álvarez Rodrich for La República
Translated and edited by Jorge Riveros-Cayo
|Velarde is an "intelligent, honest and capable economist," according to Álvarez Rodrich, but he hardly will please Humala’s die-hard allies within Gana Perú. (Photo: Jack Ramón)|
Ollanta Humala’s intention of keeping Julio Velarde as the head of Peru’s Central Reserve Bank (BCR) during his administration is a good decision. At the same time, however, it raises some uncomfortable questions and a certain feeling of improvisation.
A disclaimer: The head of state does not appoint the president of the BCR but proposes a name to Congress that is ratified or vetoed. Likewise, the Executive and Congress appoint three members each to the BCR’s directory, making a total of seven members.
Julio Velarde is a magnificent election to conduct the financial and monetary policies. He is an intelligent, honest and capable economist who has headed the BCR with great skill during García’s administration (2006-2011). His permanence for five more years would be approved by the financial markets. So far the stock exchange raised five percent.
This is why two days after the first election (on April 12), when Humala started to trigger uncertainty in the markets, I suggested that ratifying Velarde at the BCR was a convenient move. This would give a sign of tranquility, along with the announcement of calling in the economic team of Toledo’s Perú Posible political party, as well as other independent professionals.
Something of this happened. Among those that supported Humala starting the runoff campaign was Óscar Dancourt, another smart, honest and capable economist. He also headed the BCR skillfully, between 2003 and 2006, during president Toledo’s administration.
Both – Velarde and Dancourt – can direct the BCR with the autonomy and independence that the position requires. To elect Velarde means a fast way to inject a doses of confidence to the markets. But that also implies to split the confidence of the team that backed up Humala during the campaign and the transition process. It doesn’t get better with the appointment of the finance ex-minister Miguel Castilla (who resigned last week), who is also another brilliant economist.
Velarde/Castilla is good news for the markets but bad news for Humala’s team. But that wouldn’t be a major problem if additionally the technical teams of the current administration and Gana Perú were not confronted. The reason: the constant struggles over a long list of issues that include raising the minimum wage, regulating AFP’s (retirement funds administrators), and admitting or denying if the García administration is leaving a frozen economy for the incoming government.
If Humala agreed with the criticisms made by his technical team to the current administration – not very justified in my opinion – why is he choosing to keep the finance vice minister and BCR president of García’s government? Or was he using the economy subject exclusively to discuss politics? This would obviously trigger another question: How interested is the president-elect in economic issues?