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7/14/08

Peru: The new finance minister is cause for cautious optimism

All smiles at the swearing-in ceremony today

Quite a few posts on Peru recently, so we'll wrap 'em up with this one. All went to plan in Lima today, and Peru's new Finance Minister, Luis Miguel Valdivieso Montano, swore in to the job, smiles, handshakes speeches and the lucky timing (cough cough) of the S&P debt ratings upgrade.

Time to give the guy fair crack at the whip; Let's put to one side other people's word on the guy (including my own...just for a second) and see what he has to say for himself. In this page from Peru's best news radio station, Luismi was quoted as saying the following:

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"We want to continue growing with the lowest possible (level of) inflation, and attempting to get these progressive benefits to all Peruvians; from now on the emphasis will be on this."

"My prime objective and area of concentration will be inflation in general and the raise in foodstuffs (in particular). We must visualize what we want to be in ten years' time, to guide our actions in the short term; we have entered a stage when we have to think big (alternative translation 'think about the long term')."

"We must take advantage of the investment grade to attract international capital to complement the national (capital). Inflation has an external source, but the excess in internal demand can also power it."

"For further growth, we must avoid bottlenecks, we must take actions to raise productivity and improve human resources in aspects such as health and education."

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Luismi aims for max 5% inflation, and uses terminology that
even Peruvian economy journalists can understand

So what to make of this? Of course, a lot of it was generalized stuff that promised nothing in particular and was eminently suitable for a swearing in ceremony day, but I have to be honest and say I was cautiously impressed. There was a subtle but clear message in Luismi's carefully chosen opening words, a change in emphasis the new Finance Minister decided to put on social (small 'S') issues such as admitting food inflation was a top issue/problem. Also encouraging was the way he mentioned the health and education sectors that have been bitter about the lack of funds headed their way under the Carranza regime at MEF.

I'm not quite sure how his message to help public services such as state schools and hospitals perform better sits with tightening public purse-strings to combat internal demand, but the mere fact that this Minister took time to mention non-financial and more social matters at his opening address is at the very worst neutral. Hopefully for the 40%+ of Peruvians under the poverty line it's better than that mere neutrality. Speeches are now over; time for action. Vamos a ver........