• Julio Velarde participates in IMF and World Bank meetings in Morocco
• Minister Alex Contreras confirmed that Peru is experiencing an economic recession

Julio Velarde He conveyed an encouraging message to potential foreign investors. He assured that the government Dina Boluarte choosing stability, that capital flight has stopped and communicating that Peru will be the country with the largest growth in the region by 2024.

On an investment tour to great Britain last Thursday, president of the Central Reserve Bank (BCR), Julio Velardeclear when calming concerns regarding Peruvian instability: ““With the current government, there is a much more stable climate and it is predicted that there will be a recovery in investment in the following months or years,” he said.

LOOK: Julio Velarde will participate in the ‘Invest in Peru Roadshow’ in London

Velarde said the economy has suffered significantly in recent years due to three factors.

The first is productivity: “LActivity in 2023 was affected by movements at the start of the year and GDP fell by half a point. This has since disappeared, but affected many cities in the southern part of the country. Today we have a new government, and the remnants of the previous government have completely lost power. About 40 -50 people attended the last demonstration and it had no impact at all on GDP“, he pointed out.

The second is The El Nino phenomenonwhich could again affect inflation and growth in 2024. And the third is also political and related to the first and focuses on numbers former president Pedro Castillo“Tperhaps the most radical person we have ever elected”, whose actions led to a massive exodus of money: US$20 billion left the country in 2021 according to figures from Minister of Economy and Finance, Alex Contreras.

“We believe that the decline in private investment was influenced by the previous administration. In 2021 we experienced the largest capital flight in Peru’s modern history. People are afraid that their savings will be affected by a radical government. In a context where money is taken from companies and banks abroad, it is very difficult to expect new investments“, explained the banker.

However, he added, this situation has been resolved. “Currently there is no longer any capital flight. The problem is that when something like this happens, it takes quite a long time for the money and trust to return. The tendency of the strongest groups in Peru is to place almost all their investments in Peru. Now they consider it very risky and diversify into other countries. But it’s not just the big players who influence capital flight. I have seen that the middle class also travel with money to Miami to deposit in the banks there, and the poorest people, convert their money into dollars and put it under the mattress. It’s something common. Everyone is worried about their savings. Nobody wants to lose any large or small amount they have.”

The reverse of the situation seems clear in the quoted growth figures released by the consultancy firm Latin Latin Consensuswhere Peru appears in first place, adding that the Central Bank’s report will be published in 6 weeks.

“Consensus puts us at 0.6% growth for this year (I think it will even be a little lower), but for next year we expect growth of 3 points which will take us to 2.5%, which is still low growth compared to what we had in previous years. This figure is close to our GDP potential in the short term, but of course if reforms are carried out, this potential will increase. Peru will be the country with the highest growth in the region, along with Mexico,” Velarde said.

He also indicated that Peruvian fiscal spending This figure is still quite low compared to other regions.

We monetary policy level is the lowest (7.25% compared to an average that exceeds double digits) as well inflation expectations 12 month term and real ex ante interest. Our sovereign bonds have risen between June and September this year (although they remain low) but “remains stable despite the political situationhe added.

General inflation is decreasing. From a peak of 8.81% in June 2022 to 4.3% in October 2023.

Regarding Central Bank independence, which is a key element in credit considerations in a regional context where governments are putting pressure on monetary policy, he said: “The Central Bank of Peru is strictly independent. I’m surprised when other countries ask me, how many times do you meet a minister? And I tell them: Never. Why should I meet the finance minister? Of course, at the lower levels it is always coordinated. You should know how much debt they’re going to incur, how much tax you can expect… but they’re not going to ask me what I think about raising taxes. I won’t ask your opinion about rising interest rates. So it doesn’t make sense (meet)”.

He added that the BCR’s political independence was respected, even during the reign of Pedro Castillo.

Mining

In front of a group of guests Investment Roadshow, organized by Imperu in the investment bank auditorium J.P. Morgan, In London, Velarde explained that the government was taking steps to attract investment and this was evident in this case Rio Tintowho after many years are interested in investing again.

“I talked to them 20 years ago. At first there was interest, then the interest disappeared, now it’s starting again“, he says.

“The last major mining project, Quellaveco, completed construction in the second half of last year and there is a lot of interest in new mines. Projects that, not to mention forgotten, but not very active, are being resumed, I think because of the interest in copper that will continue to increase in the following years. In Peru, not only is copper readily available, but copper is also available at the surface, lowering costs significantly.”, he pointed out.

He explained that throughout 2021 it is possible that mining investment of US$2 billion will be stopped. “During the previous government there were many threats. The road has been taken and product cannot be removed from the mine. You don’t make an investment of 2 billion, or 4, or 6 [mil millones], if you cannot delete the product. The previous government was unwilling to confront the protesters. But this blockage has disappeared.”

“I am confident that in the coming years we will return to previous levels of investment confidence. I believe that to achieve the 6% or 7% growth rates we have enjoyed, we need to reach consensus on the decisions that led us to that growth, and investment will occur when that consensus is felt and that the desire for change has been achieved. growth. Then, everything worked out. That inertia is gone, but it can be recovered. “We are still a middle class country but a poor middle class that still has a lot of growth potential,” he added.