By Miguel De la Vega PolancoIn a global scenario where the energy transition is on the agenda of governments and private sectors, Peru plays a key role that can be used for its development, and has the potential to grow up to 6% annually, pointed out economists of international institutions.
“The potential is enormous for this country” recently highlighted the country director for Bolivia, Chile, Ecuador and Peru of the World Bank, Issam Abousleiman, during his participation in the XXXV CIES Research Seminar “Challenges and perspectives of Peru and Latin America: investment, sustainability and social cohesion”, in a report published today in the Official Gazette El Peruano.
The World Bank official pointed out that Peru's economic growth potential is not 2.5%.
“For us it is almost 6 percent annually, with more growth engines that are not being used. To achieve this, they need necessary reforms in the short, medium and long term,” he stressed in his presentation “Accelerating growth and boosting investments,” at the event of the Economic and Social Research Consortium (CIES).
“There are very important sectors to diversify, such as the digital economy, tourism and mining; there is still a lot of potential in the agricultural sector. These are very important drivers,” he stressed.
He also said that growth at a decentralized level plays a very important role in the country, a process that needs to be fully implemented, which has been left halfway and now it needs to be modernized.
Mining projects
He also highlighted that in the mining sector there is a pipeline of mining projects that represents investments of about 50,000 million dollars and Peru can benefit from the global energy transition that requires copper to boost these projects.
Abousleiman pointed out that there is also an energy transition in the interior of Peru that needs to be implemented and will help economic growth.
“So, there is a lot of potential that needs reforms. We hope that since we have the pandemic behind us, the Government can emphasize the necessary reforms,” he stressed.
In the case of decentralization, he indicated that it is necessary to train the region public officers and work on reforms for their implementation and also about how to generate fiscal self-sufficiency in the regions, so that the rest of the country can develop.
Key agenda
In the panel “Challenges of the Peruvian economy 2025 in the global context,” Issam Abousleiman indicated that “Peru now has a very big opportunity” for its development, but it has a crucial agenda to achieve it, in key issues such as infrastructure, education, competition regulation, productivity and tax policy.
“We are going to release a new report at the beginning of next year (2025) which says Peru needs 64 years to reach a high-income country status without making major reforms, and in our estimate if reforms are carried on, this time can be reduced to 20 years,” emphasized the World Bank economist.
In this regard, he said that they have identified “three structural issues” that need to be worked on, these are to increase productivity, reduce persistent territorial disparities and improve the country's institutionality, which has deteriorated over the last 15 years.
Public investment
On the other hand, he said that the work of the World Bank, together with the Inter-American Development Bank (IDB) and the Development Bank of Latin America and the Caribbean (CAF), has shown that 40 % of public projects are not completed in the country.
“So, this represents a tremendous cost. These projects must accelerate growth, but they must also boost productivity,” he emphasized.
For this reason, he indicated that the World Bank, in joint work with the IDB and CAF, is supporting the Ministry of Economy and Finance (MEF), with some recommendations that include public-private partnerships (PPP), in order to make the Public Investment System in Peru more efficient.
However, he said, while they are working to improve public investment, private investment is the most important for the country because it represents 90 % of jobs, 70 % of production and 75 % of investment.
“So, if the private sector does not work well, where will most of the jobs and growth come from? That is something very important for the country,” he stressed.
Almost 60 billion dollars each year are needed to close the infrastructure gap alone, but this is not going to come from the public sector, which does not have those funds, he added, emphasizing the role of private investment in the economy.
Strong macro fundamentals
For his part, Guillermo Díaz, CAF country economist for Peru and Chile, highlighted the resilience of the Peruvian economy to face external shocks, with the good macroeconomic fundamentals that it has, “they are not written in stone” and therefore need to be taken care of, because they can crack.
“This was achieved on the basis of healthy and adequate monetary and fiscal policies in the past two and a half decades, which allowed us to exhibit an average annual growth of 4.5% in the last 25 years and very few countries can tell that story,” he said.
“We must be aware that private investment is the main determinant of growth and the generation of formal employment in the country; it is key in this country that we recover the investment climate that made investment proliferate,” said Díaz.
“We need reforms to increase growth and to help untie other knots that are permanently stuck in the economy, such as informality,” he added.
He also highlighted the opportunities that Peru has with the energy transition. “There is no green transition without copper and we have copper,” he said.
Foreign investment
Tomás Lopes-Teixeira, IDB representative in Peru, said that our country, in addition to the macroeconomic fundamentals, has an opportunity in the so-called “external investment shocks” in transport infrastructure, with ports, integration routes and the new Jorge Chávez International Airport, which will allow Peru to better integrate into the world.
He also indicated that Peru must focus on improving the low productivity of micro and small businesses (MSEs), promoting financial inclusion, the conservation of the Amazon and strengthening citizen security.
He also highlighted the critical minerals that the country has, such as copper and others, for electric cars and lithium batteries. “Peru has an opportunity to integrate into the world as a great leader and a hub for the energy transition.”
Regional focus
The prominent economist and director of the Center for Sustainable Development at Columbia University in the United States, Jeffrey Sachs, also participated in the XXXV CIES Seminar with his presentation “Facing the challenges of sustainable development in Peru and Latin America.”
Sachs stressed that Peru's approach to its development must be with a regional or continental focus. “A basic challenge for Peru, or any other country, is that to advance in its sustainable development, a regional, even continental, focus is necessary,” he said.
He also pointed out that the Common Market of the South (Mercosur) “cannot continue to be a group of five countries east of the Andes, but rather needs to establish stronger Latin American regional cooperation with a view to the future.”
He also emphasized that cooperation in the Latin American region must focus on the issue of renewable energies such as wind and hydroelectric power, with the respective care of the Amazon.
For her part, the principal investigator and director of the Latam Initiative of the Center for Global Development, Liliana Rojas-Suárez, in her inaugural conference, highlighted that Peru is perceived by international investors as a country that has managed to control high levels of inflation, which provides security and confidence in the country's monetary policy.
"Although Peru is a country that has been in hyperinflation in the early 90s, it is now a country that no one doubts will control inflation. There is credibility about that," said Rojas-Suárez.
More data
- Peruvian exports would reach 70,327 million dollars by the end of 2024, an amount that would mean a growth of 8.80 %, compared to 2023, driven by mining, the agricultural sector and fishing, foresee the Lima Chamber of Commerce (CCL).
- Peruvian exports totaled 60.168 billion dollars from January to October of this year, an amount 14.5 % higher than the same period in 2023, indicated the Ministry of Foreign Trade and Tourism (Mincetur).
- This result is explained by the greater volume exported (6.4 %) and better prices (7.9 %), highlighting the growth of the fishing (26.6%), agricultural (23.3 %) and metal mining (15 %) sectors.
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Publicado: 23/12/2024