The MEF 'losing weight'?

10 December 2017

The role of Peru’s Ministry of Economy and Finance (MEF) has become a subject of public discussion in recent weeks. The president of the Central Bank (BCRP) Julio Velarde has drawn attention to the fact that, in his opinion, the MEF has lost “weight” in the last few years. At the annual meeting of executives (CADE), there has been much debate about the need to integrate economic policy with other areas of decision making.

Ever since the early 1990s, when neoliberal technocrats took over at the MEF, the ‘autonomy’ of this super-ministry has been an unwritten rule. Supported by multilateral banks and Peru’s foreign creditors, it was an article of faith that decision making in the MEF would not be contaminated by other political priorities. The MEF guaranteed to the financial and business worlds that Peru would stuck to the straight and narrow, not deviating one iota from the neoliberal prescription.

Velarde’s concern appears to be that this is no longer the case. The ideological purity of the MEF seems to him to be in doubt. The rot, he appears to think, appears to have set in under the Humala administration when there were timid attempts to forge policies that embraced other concerns, such as industrial diversification (away from the all-important extractive sector) and the need to factor in longer-term issues related to the political sustainability of investment decisions.

The MEF has tended to operated on its own in policy making, acting a sort of super-ministry, often with much more power than even the office of the prime minister. It has provided the business community with privileged access to decision-making, often through informal channels that (as we see with the Odebrecht scandal) involve collusion and corruption. The frontiers between legal and illegal forms of influence have become a grey area. Recruitment to the highest positions in the MEF have involved a ‘revolving door’ though which the main beneficiaries of economic policy – the business elite, the international bankers and the neoliberal opinion formers – maintain control.

Contrary to what Velarde thinks, it is by no means clear that this has changed under the Kuczynski government. Indeed Kuczynski’s career -- international banker and businessman as well as twice minister of mines, twice master of the MEF and twice prime minister -- is the quintessential embodiment of the revolving door principle. His first chosen minister at the MEF, Alfredo Thorne, was of the same mould, having previously been a former manager and corporate director at JP Morgan. When dislodged earlier this year, he was replaced by Fernando Zavala, the prime minister who had previously worked with the Apoyo lobbying organisation and as a senior executive in the beer industry.

It is arguable that the current minister, Claudia Cooper, is a lesser figure than her predecessors, but the MEF will retain its dominant role so long as Peru seeks to pursue the economic strategy that began in the 1990s. Talk of playing the ‘economic’ and ‘political’ strings together as a harmonious chord is unlikely to change things. Pursuit of an integrated policy, in which decisions are geared to a new development paradigm rather than just the promotion of export-led investment is not on the cards as things stand.

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