In this second installment of the interview with Gianfranco Castagnola, executive president of Apoyo Consultoría, The economist analyzes the risks that concern businessmen.
LOOK: “Betrayal to the country is spending US$3.5 billion on something that Peru does not need”
Average income has risen at a rate of 5%, but consumer credit delinquencies remain high. Is the growth of the economy really widespread?
During the pandemic, people went into debt and lost income. Then came Pedro Castillo’s political pandemic where no jobs were generated and private investment came to a screeching halt. I have always said before that Pedro Castillo stole a lot, but what he stole the most from us was the sense of the country’s future. So, all the people who return to the market post-pandemic do not find employment in the formal sector, they go to the informal sector where the supply of labor increases, while demand is lower and salaries decrease. So, people are still getting out of this over-indebtedness and financial institutions are slowly digesting that bad portfolio.
How long must it take for this situation to change?
For this to change, Peru needs to grow at rates of between 6% and 8%. The 3% that looks good at the regional level because the neighborhood is just as complicated, is not enough. Peru needs another level of growth so that the entire population little by little begins to recover. And for us to grow again 6% or 7% we have to recover politics. I am not a specialist in this matter to give the recipes, but the only thing I know is that we cannot have 40 candidates and continue playing with fire.
An interviewee from abroad asked me if APEC was going to be suspended due to a security issue, do you think that the good news such as being part of the APEC club can be overshadowed by the situation in the country?
The fact of bringing together so many world-class political leaders, presidents, prime ministers and business leaders is good news in itself. For the issue of traffic safety, they have decreed three holidays, which show the inability to manage these. So, since there are going to be holidays, visitors are going to be able to move around with peace of mind, we are going to lose days of work and the event is going to work well. On the other hand, the insecurity experienced in modern Lima, where the event will take place, is relatively less than that experienced in Northern Lima or northern Peru, which tremendously affects families and small businesses. What worries me most is Chancay.
Why are you worried about Chancay?
Chancay is one more example of the dysfunctionality of the Peruvian State. For five or six years, we have known that the port of Chancay is going to be inaugurated in 2024, that this requires a lot of services, that Chancay can become a development pole. What have we done as a country to be able to organize and have Chancay well positioned for this challenge? Nothing, we haven’t done anything. A similar situation occurs with the Lima airport. The operator and its adjacent investors have invested a total of US$2.4 billion, of which US$2.0 billion comes from the operator and some US$400 million from third parties in all the works, such as the parking lot and warehouses. The State only had two obligations there, to make the new tower work, because it is a Corpac issue, and to build the blessed Santa Rosa bridge, which it has not done.
Business expectations are on the border that separates optimism from pessimism, what do the SAE say about the state of mind of businessmen?
At the business level there are three concerns about the business environment that come from the political sphere. The first is the governability of the country between now and 2026. The vast majority of businessmen disapprove of Dina Boluarte’s management, but at the same time consider that Dina Boluarte is better than Pedro Castillo. There is a certain peace of mind that even though this government is extremely mediocre, it does not do great atrocities. However, there is still concern about what is going to happen in 2025 and 2026 and everything that is happening, such as, for example, the transport strike, to what extent it will have an impact on the good ministers and public officials. . I think that deep down we all sympathize with this strike because it is absolutely legitimate. What the left has not been able to do, which is to mobilize the population and stop Lima, has been achieved by a union of transporters, winemakers, and market representatives, and that is positive as a country.
What are the other areas of concern?
Secondly, what comes from Congress. This Congress is very poor and there are two types of risks that worry, such as regulatory and institutional risk. Businessmen live with that. Then comes the elephant in the room, which is the 2026 elections. There is great uncertainty because we are going to face a process where there are 20, 30 or 40 parties with candidates of all types. This does generate a significant level of uncertainty. I would believe that the business community today is resigned to not having an inspirational president who is going to lead a great change in the country. I would think they would be calm with a president who runs a normal government. That is, appoint good ministers, like what happened between 2001 and 2018, where for better or worse, the country was advancing in different areas. I think that, if there were two or three candidates who made you see that we could have ‘normal’ governments, there would be great business confidence. The risk is in the extremes, that someone from the right or left comes who wants to be disruptive in a bad way.
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