LatinFinance - September/October 2015 - 26

most polls. Pedro Pablo Kuczynski follows
her with 15%. Fujimori and Kuczynski
placed second and third, respectively, to
Humala in the 2011 race. The other two
candidates are former Presidents Alan
García (1985-1990 and 2006-2011) and
Alejandro Toledo (2001-2006).
Fujimori served one term in congress,
but her role in Peruvian politics has been
defined largely by her father, Alberto
Fujimori, who was president from 1990 to
2000. He is in prison on corruption and
human rights convictions, but remains
popular with a large number of Peruvians.
Focusing on the economic achievements
of her father's two terms, while distancing
a future administration from the corruption scandals that eventually forced him
from office will be the ultimate challenge
for Fujimori. Her campaign opted against
discussing specific plans until internal
party elections are finished in October.
Kuczynski, popularly known as PPK,
was finance minister and cabinet chief in
the first half of the previous decade. He is
well known in financial circles abroad and
an easy candidate for the private sector to
embrace.
Unlike other candidates, Kuczynski
does not blame the Humala government
for the economic decline. "We are in bad
shape for a number of reasons, but the
first reason has to do with the interna-

CYNTHIA SANBORN
UNIVERSIDAD DEL PACIFICO

"NONE OF THE
CANDIDATES WOULD
UPSET THINGS.
THEY ARE ALL SAYING
THE SAME THING,
PRO-BUSINESS, LAW
AND ORDER, SO
WHOEVER SAYS IT
BEST IS LIKELY GOING
TO WIN"
tional context that the government has no
control over. The fall in mineral prices and
the slowdown in China have had an important impact," Kuczynski tells LatinFinance.
Kuczynski does, however, fault the
government for not moving fast enough
with reforms and stimulus measures. More
effort should have been put into cultivating public investment, he says, pointing
to the management of social protests that
have stalled key projects, including Newmont Mining and Minas Buenaventura's
$5 billion copper-gold Minas Conga and
more recently Southern Copper Corpora-

Now, an issue has been raised about banks becoming dependent on
repurchase agreements as loans in soles increase. Banks did not have
enough soles to loan, so the Central Bank has been increasing access to
soles through repurchase agreements. I do not see this as creating any
kind of dependence. The financial system can be confident that the role
of the Central Bank, like any central bank, is to guarantee liquidity in the
market.
The situation is going to change as the public sector ramps up its investment, which will inject soles into the market. Second, we know that
the exchange rate is going to stabilize once the Federal Reserve makes
the decision on interest rates.
LF: What is the level of dollarization today?
JV: It is slightly below 34% in the financial system. It is still a high level
compared to other countries, so we need to see further declines.
One thing I think we need to maintain and which sets us apart from
other countries is the policy for allowing accounts in dollars. Countries
like Brazil, Colombia and Mexico do not allow for accounts in dollars,
but here it is important and Peruvians value the fact that they can save in
soles or dollars.

26 L ATINFINA NCE.COM - September/October 2015

tion's $1.4 billion Tía María copper mine.
Southern Copper declared a "pause" in
the project in May, but there are signs that
delay may last throughout the remainder
of the Humala presidency. Minas Conga
has been on hold since 2011.
If elected, Kuczynski says that he would
lower the value-added tax to 15% from 18%
and continue with the income tax reform
started by the Humala government. Corporate taxes dropped two points to 28% at
the start of this year, and will fall to 26% by
2019. The reform instituted two new tax
brackets for low wage earners.
García and Toledo are third and fourth,
respectively, in the polls. For García, it is
his fourth time running for the presidency. His first term ending in 1990 coincided
with what is widely considered the worst
five years in Peru's modern history, with
the economy contracting by double digits
and inflation topping 1.2 million percent.
García redeemed himself in his second
stint in office, from 2006 to 2011, with the
international mining boom spurring GDP
to grow an average of 7% annually during
his five-year term.
Toledo is running for a fifth time. He
attempted a comeback in 2011, but placed
fourth. Toledo and García are campaigning on their records, pledging to restore
economic growth and boost social programs.

LF: Are you concerned about the depreciation of the sol? Why
has the sol depreciated less than neighboring countries?
JV: The sol has depreciated 7% in the first six months of this year, 14%
in the past 12 months and 25% since the end of 2012.
The issue in Peru, Chile, Colombia and most of the emerging economies has to do with the decline of the dollar in the past and economic
agents buying local currencies as they increased against the dollar. The
situation has now reversed and it is not only in Peru.
The perspective for depreciation is now stabilizing.
The difference here and the reason we have reacted more aggressively than Chile or Colombia is that they do not have the same level of dollarization as we do here. In a weak economy, we have been concerned
about a much more pronounced depreciation, but the Central Bank has
never and will never maintain an artificially low exchange rate because
we know that it would not last and would only create problems.
However, we do not agree with the recommendation of some analysts that we let the sol depreciate faster. We would be less concerned if
the economy were growing faster. If the economy was growing closer to
6% we would be able to absorb a higher level of depreciation.

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