Peru's Vizcarra is confident anti-graft initiatives are working

Peru's Vizcarra is confident anti-graft initiatives are working

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Martín Vizcarra was catapulted to Peru’s presidency in 2018 following Pedro Pablo Kuczynski’s resignation amid the sprawling Odebrecht graft scandal. A largely unknown former governor of Peru’s second smallest state, Vizcarra was serving as vice president and ambassador to Canada when Kuczynski abruptly announced he was stepping down.

In his first year in office, Vizcarra led a drive to reform the country’s political and judicial systems and made fighting corruption his government’s banner issue. The political change has had a positive ripple effect through Peru’s economy. Foreign direct investment increased in 2018 and business confidence also rose.

LatinFinance sat down with President Vizcarra in the presidential palace in Lima to discuss his anti-graft drive and the outlook for Peru’s economy.

Across Latin America we’ve seen a powerful public clamor for governments to do more to tackle corruption. You were thrust into office after your predecessor was forced to resign. Months after taking office you pushed for a referendum after a major corruption scandal erupted in the judiciary. What does this tell us about the political system’s ability to address corruption issues? Will it only respond to extraordinary circumstances?

When I found out about the resignation of President Pedro Pablo Kuczynski, it was March 21st and I was in Canada. I flew to Lima on the 22nd and a day later I was sworn in as president. It was clear that the political crisis had reached a point where Peruvians did not trust the authorities or the institutions. I realized we had to immediately get to work on several issues. Among them was getting government closer to Peruvians to show them that we were going to work together to recover that confidence. We also saw that the lack of trust was largely because of a sense that there was not only corruption but impunity. So we knew fighting corruption would be a central theme of this presidency.

Does it take an outsider to shake up the political system? In your view, are Latin America’s traditional parties unable to address this issue?

The entire political class has reached the point where they have accepted the status quo. Everyone is aware of the problems but can’t seem to find solutions. Here in Peru, ordinary Peruvians were demanding we do something, and we’ve tried to take steps to address some of these issues. One might say, ‘well, why didn’t the political class do anything?’’ We found there was a large number of proposed laws in Congress addressing this issue, but they were never taken up. We haven’t proposed anything extraordinary, we’ve simply moved ahead with plans that some lawmakers had previously proposed. But we’ve done it from the executive branch, and we’ve done it with public backing for these proposals.

So public pressure was the critical factor?

I would say everything came together at the same time. I would say that public pressure was absolutely necessary, but it wasn’t enough. We needed an executive branch that could help provide an impulse to these constitutional reforms and other bills. They haven’t been approved by Congress yet, but we hope that they will be very soon.

Why did you decide to propose these changes? Did you want to send a message after assuming office?

It was something we could not continue to put off. In other words, I thought it was a crucial step to move forward. The judicial system was facing a serious credibility crisis because it was not behaving in a way one would expect the judicial system to respond. By giving a push for reforms, we have also helped generate a sense inside some of Peru’s institutions that they need to make changes.

The impact of the Odebrecht scandal in part led to you being catapulted into office. In your opinion, what has been the political and economic impact of the scandal?

The negative impact has been huge. Government officials and some in the business community were involved in the acts of corruption, but Peruvians felt the impact because it paralyzed the economy. Economic growth slowed, new investments were halted. It’s important to determine who was responsible and punish them severely. We hope judicial authorities will get to the bottom of it. The morale of all Peruvians was affected. That’s why we have declared 2019 ‘the year of the fight against corruption and impunity.’ We want to tackle this problem and we want to reignite economic growth.

Is there a reform or a series of reforms you think are needed to ensure a similar scandal doesn’t repeat itself?

We need to bring more transparency to government. We need to ensure Peruvians can freely access information detailing every government action — every contract, every government tender, every purchase, every service the government pays for. Any Peruvian should be able to access that information. The government is responsible for ensuring there is transparency. I was recently in a conference with the top business leaders in Peru and corruption was one of the top issues. They are also aware that they need to do more too.

Odebrecht has reached a plea deal with Peruvian officials. Are you in agreement with the plea deal and the fines outlined in it? You recently said Odebrecht should no longer be able to continue working in Peru. Do you see a need for stronger enforcement against companies accused of corruption?

The agreement has not been formally made public, so it is hard to really discuss the specifics of the agreement. Judicial officials are working on it. I think the most responsible thing to do at this point is to let them continue with whatever agreement they have reached and to support them.

You mentioned the impact of the Odebrecht scandal on the infrastructure sector. What is your message now to possible infrastructure investors? Our message is Peru is open for investment from companies with experience, and we have a range of investment opportunities — in transportation, ports, airports. Our only requirement is that the companies abide by the rules. We aren’t going to accept a company with a bad track record just for the sake of attracting investment.

Do you have hope in Peru’s anti-corruption fight?

Things are improving. We want to send a message that impunity is coming to an end. Every time we uncover corruption we plan to apply the law. We hope that with the reforms we have proposed, which we expect will be approved by Congress soon, will give us the institutional foundation to tackle this issue head-on.

What are the economic priorities for the remainder of your presidency?

We are really focused on maintaining economic growth. We ended 2018 with growth of around 4%, which is superior to many countries in the region. It’s more than double the average growth in countries in Latin America. And we plan on continuing to work to attract more investment. In 2019, we believe growth will reach 4.2% to 4.5%.

Shifting to the global economy. How worried are you about the trade war between the United States and China and its possible effect on Peru’s economy?

Obviously, these are decisions that both countries are going to take. We obviously can’t influence those decisions. So what are we going to do as a country? I think it’s important to help strengthen economic growth in the interior of Peru and the overall economic base of the country so that if there is a negative effect, we’re in a position to withstand it. We are really focused on attracting more investment. And while economic growth in China may be slowing compared to previous years, China is continuing to show a lot of interest in investing in important projects in Peru. The Chinese are investing in mining projects, in projects to improve our ports. So perhaps China’s economy is slowing a little. But what we’re seeing is that they are continuing to invest in Peru, in fact more when compared to previous years.