Peru’s finance chief says free-market policies to stay

Peru’s finance chief says free-market policies to stay

Peru’s finance minister has sought to allay fears that a change at the helm of the finance ministry could spell a retreat from the investor-friendly economic policies of his nearly three-year tenure, following intense speculation that he is set to step down from his post.

“If there was a change in the management of the finance ministry this year, be assured that whoever was in charge would continue with the policies we’ve been pursuing,” Miguel Castilla told LatinFinance in an interview.

While he refused to comment on whether his resignation was imminent, he insisted the government remained committed to sound macroeconomic management. “I reject any possibility of us going towards populist policies,” he said.

Media reports that Castilla was set to resign had raised concerns over the direction of economic policy, especially following a collapse in Peruvian president Ollanta Humala’s popularity, which plummeted to 25% in March, according to pollster Ipsos Peru.

Castilla said that while the government had enjoyed two years of high ratings “there are costs to doing reforms that are unpopular,” although he added that “the most important reforms have already been approved.”

Analysts have raised concerns over Peru’s current account deficit, at 5%. But Castilla said this sum would decline on the back of a boost in mineral exports and economic recovery in the US. “We see a gradual reduction of the current account deficit from 5% to a level below 4% over the next three years,” he said.

The country’s GDP expanded 4.23% in January, the slowest growth rate since last May, while exports revenues were down 16% year-on-year However, Castilla said he is confident that Peru’s economy will grow by at least 6% in 2014, thanks to an increase in copper output, aggressive investment in infrastructure projects, robust internal demand and a recovery in global growth.

“The only thing that we might be concerned about is in the scenario of a ‘sudden stop’ of capital flows [to Latin America] or an increase in US interest rates in the future,” he said.