Bruno Giuffra, Minister of Production, discusses Peru’s economic growth, deregulation and the cutting of bureaucratic red tape, as well as his administration’s support for the development of the private sector and the ability of technology to transform businesses in the country.
Looking back, how would you assess Peru’s economy in 2016, and what are the growth expectations envisaged by the Ministry for the upcoming years?
Peru is coming out of a period with a very strong growth rate that has been delightful to us for several years, and in a certain way we have grown accustomed to it. Now that this stage is over, due to the international situation and – in my judgment – improper policy implementation, we have entered into a process of deceleration. Although the economy has not gone into a recession, our main indicators have fallen. When you get used to beating records but then you start to see them slip away within your economy, you start to feel uncomfortable. That is pretty much what has happened. The objective now is to restore a high rate of growth to deal with the major challenges faced by the country: getting more people into the formal labor market and out of poverty. If we grow at under 4%, we will find it very difficult to achieve the goals of increasing employment and reducing poverty at the levels we need.
In recent years, we have undertaken the implementation of a development model based on private investment and openness in trade with the world. We have integrated with that world, as well, having now signed 19 free trade treaties, of which private investment has always been the cornerstone. There has mainly been investment in mining, but also in many other sectors that provide excellent opportunities.
Our agribusiness is running very strong and has done nothing but experience growth in the last 10 years, for instance. Agricultural exports are worth more than $4 billion per year. However, the reality today is that there has been a slowdown, and now the time has come for us to resume our way on the path to growth, which is why the Executive has requested legislative powers from Parliament to start up a process of economic reactivation. We hope it can be implemented in the short term. At the same time, we are working hard to create a climate of confidence and show off these new signals.
For private investors, expectations and confidence are of major importance. They are fundamental signals. Fortunately, positive changes are starting to take place in indicators of confidence and business expectations, a necessary prerequisite for reactivating private investment.
What is your role in this economic reactivation plan by the so-called “unblocking” of major projects announced by the new government?
There are many large projects on the agenda. However, the first major measure we have implemented in all sectors, with the emphasis mainly on those associated with the topic of productivity and the country’s large infrastructure projects, is this well-known “unblocking.” All of us, acting out of our different battle trenches, are destined to have to unblock and facilitate the flow of investments: through very large infrastructure projects, on the one hand, and through business dynamics, which is the part I am responsible for. Certainly, among small and medium-sized companies, the unblocking will take place more in terms of making it easier to do business. In this sense, it is more a matter of simplifying procedures and deregulating than unblocking per se.
In the industrial sector, we have already identified more than 200 unnecessary bureaucratic complications. At our Ministry, there is a Policy and Regulation Department, whose name I would like to change, to make it the “Deregulation Department, understanding the importance held by lightening the regulatory burden on the country’s small businesses.
At the same time, after talking with businesspeople and listening to the needs in different industries, we are very aware of how they have become drowned in hurdles and restrictions. It has fallen into a sort of limbo when it comes to what should be a very natural understanding between the state and private sector, especially when you consider the latter is our main motor for development. However, the prior government turned its back on the private sector to a certain extent.
We have now shifted from that situation to a policy of total openness that closely identifies with and is committed to understanding and acting upon the private sector’s significant demands, so as to promote a virtuous investment-employment-growth feedback loop. The sectors for which I am responsible will be strengthened by bureaucratic streamlining to remove barriers, excess regulation and other obstacles.
At the Ministry of Production, what innovative guidelines will be put in place for development of the sectors with which you are concerned?
Our work includes the entire world of fishing, small and medium-sized companies (SMEs) and industry, where a large part of the informal economy problem lies. In my private work before the Ministry, I come from the world of technology. The management skills I will be putting to work here will come with a great deal of technological support on every level. The thing is that we can use technology in every realm, in a crosscutting manner. How do I view this model? I see that the proper use of technology can give us a second chance. While, prior to the digital revolution that we are experiencing, our business fabric was somewhat outdated or lagging behind – because our productivity was very low in many arenas, as well as suffering from the problem of the informal economy. The digital revolution has allowed us to catch up fast. If we are all able to embrace technology properly, I believe that there will most certainly be a second chance for all entrepreneurs. The idea is to face off as equals around the world in terms of business competitiveness.
That is my management philosophy, which, in a certain way, I am attempting to instill in a ministry where nearly 3,000 people work, all dealing with many different matters. I am obsessed with using technology in all of our current activities, as an all-encompassing policy. I am doing everything within my power to achieve this. For example, I have held three meetings with the Embassy of Israel – in less than 45 days – to seek potential joint lines of action involving technological support. I have also met with the Ambassador of the United States. We are already evaluating agreements with MIT and other institutions, as well. Wherever there is technology, we will be there. For instance, if we manage to sign an agreement to put 10,000 or 50,000 SMEs in place on Amazon.com under favorable conditions, and I am able to get them to hold a Peru Day in exchange for the batch entry of this large number of small and medium-sized companies, it will mean these SMEs get access to the world with just a click. They will gain access to powerful new markets. I am convinced of technology’s ability to effect transformation.
At the same time, the main activities related with long-term goals continue to be carried out. My energy and focus, however, are placed on the digital transformation of small and medium-sized companies so that technology can become the main catalyst in change.
What is your analysis of Peru being a recent host of APEC?
The APEC Summit showcased us on the world stage once again, with all the spotlights shining on us. The government’s first few months prior to APEC were very important. They were honeymoon months in a certain sense, in which we had the highest expectations of all executive staff members who are highly committed to the goal of modernizing the state, giving very clear signals of a particular stage in the country.
We have the best President in history, with a very strong executive staff. The Head of State possesses all the characteristics of a great statesman and an excellent leader. In addition to this, we have the promise that lies in all of Peru, with all of its potential. And we are very much looking forward to growing. What we need are the proper keys to setting up the ideal panorama. This will gradually come into view as we see the results of our big 100-day plan. Little by little, the objectives we have set will come more into focus.
The APEC Summit couldn’t have come at a better time. As I mentioned, signals are very important. That’s the way the world works. The President’s first foreign trip was in September to China, no less, and this created great expectations. Now a lot of people are interested in Peru. The projects available are not limitless, though: the first to arrive will choose the best places at the table. That’s the way the game works. I would tell investors not to waste time. Otherwise, they may be left without a seat.