(Bloomberg) — Peru’s Finance Minister Pedro Francke was given assurances that he’ll be able to implement his economic policies, and expects the nation’s central bank president to stay on, he said in the first interview since securing his new role.
Francke, a former World Bank economist, was sworn in late Friday, a day when markets crashed amid investor concern that he wouldn’t take the post due to differences with other members of the cabinet appointed by President Pedro Castillo. These included Guido Bellido, a lawmaker who considers the communist government of Cuba to be a democracy, as prime minister.
“It seemed essential to me to have full support for the economic policy that we had proposed,” Francke said Sunday evening in the interview, adding that he hadn’t had much contact with Bellido previously. “Fortunately, that has already been resolved and it seems to me that it gives us space to develop our economic line in a completely safe way.”
Bellido tweeted his support for Francke’s policies Friday night before he was sworn-in.
For investors, Francke offers a counterbalance, and a reappointment of Julio Velarde, the central bank president since 2006, would help preserve a sense of continuity for markets. The two have already spoken and another call is set for Monday, he said. Bonds snapped a nine-day losing streak in early trading.
“We are convinced that it’s necessary to act with fiscal responsibility” and keep debt “at a prudent level,” Francke said. “The most important thing is to ensure that there is coordination between economic policy and monetary policy,” he said, adding that that’s the objective of his meeting with Velarde.
Francke said that he expects Velarde to accept Castillo’s offer to stay on in the role.
Worst Performer
Investors are in need of some reassurance due to concerns over Castillo’s policy objectives and the influence of his Marxist Peru Libre party on governance. Peru’s stock market is the world’s worst performer this year, and the sol’s slump was deeper than that of any other currency last month, according to data compiled by Bloomberg.
The yield on dollar bonds due 2031 fell 4 basis points on Monday from a six-week high to 2.68%, while the cost to insure the country’s debt against default declined for the first time in a week.
Read: Peru’s Finance Minister May Calm Markets but Challenges Ahead
Castillo, a former schoolteacher and union leader, emerged out of relative obscurity this year to win the presidency after consolidating support from Peru’s left-wing. He’s vowed to spend much more on education and health while seeking greater tax revenue from mining operations. He also wants to rewrite the constitution.
Francke, who’s tasked with reviving an economy battered by recession and the world’s worst Covid-19 death rate, said the country will invest heavily in health care.
“Tax collection has come at a good speed, growing at a good pace,” he said. “There is room to have a little more spending.”
Mining Tax
He also said there are plans to announce more tax measures shortly, including a levy on mining.
During the campaign, Francke advised Castillo on the economy and vowed to largely maintain the country’s macro-economic policies while putting more focus on social issues.
Francke is popular with investors, having called for inflation-targeting, fiscal prudence and respect for private property. His appointment helps ease concerns such as Castillo’s inaugural address last week, in which he called for Peru to retake control of its natural resources, renegotiate its-free trade deals and dramatically boost social spending.
(Updates bond pricing in eighth paragraph.)
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