He BCRP It projects a growth of 3% for 2026.
We have a fairly neutral projection of 3%. Economic conditions are very positive. We have commodity prices at their peak in the last 75 years. It is very difficult not to grow at that rate. The risks, in any case, are more on the upside than on the downside. The interesting thing is that this is highly stimulated by private spending. Consumption has been growing at 3.5% and investment at around 11%. It’s a pretty positive environment. I think we will grow 3% this year and 3.2% next year.
And there are several months of continuous growth.
When you look at the numbers more closely, there is a bit of a slowdown. In November, for example, the economy only grew 1.5%. But if you extract the seasonal effects and calculate the last three months against the previous three months, it has grown around 2.7%, which is more or less the growth forecast we have for this year. Obviously, there is electoral risk, but it is difficult to quantify it.
How feasible is it to reactivate projects like Aunt Mary and Congaannounced by the Government?
Mining investment is doing spectacularly well. There are many mining projects that are underway. There is Zafranal, there is the expansion of Antamina, the expansion of Green Hill…I understand that Aunt Mary It will start producing in 2027. It is progressing quite well. and I think that Green Hill represents 50% of Arequipa’s GDP. There are also other projects, such as La Granja, explored by Río Tinto, which is a huge project. That’s 800,000 tons of copper per year. Almost double that of Cerro Verde or Las Bambas. So, yes, there are a number of projects that are coming out despite the restrictive environment in terms of approvals and facilities for formal mining.
Informal mining does not have those problems…
What there has been since 2021 are governments that have clearly supported informal mining to the detriment of formal mining. We, in 2016 and 2017, followed a formalization policy, giving facilities to the informal miner to become large-scale mining as well. But that’s what there hasn’t been. There has been confrontation. The government’s policy in recent years has been wrong.
In what sense has she been wrong?
Many restrictions have been placed on formal mining for the approval of its projects. A mining project in Canada takes one year and here it takes ten years. And, meanwhile, informal miners have been messing with formal mining. The best example is Pataz. The Government would have to make a policy of formalizing all these miners to turn them into large miners.
They are related phenomena. The left frustrates formal mining projects and then enters with informal mining. The example is Tambogrande.
Correct. What is quite clear is that informal mining is not going to generate the growth gains that this economy needs. The only way to achieve 4% or 5% growth with these mineral prices is with economies of scale, and that is large-scale mining.
And to that are added the problems inherent to informal mining. Criminality, semi-slavery…
It has secondary effects of pollution, of labor without social security, all the problems that we already know. That, in the long term, generates a lot of dissatisfaction. Eventually, the population itself is going to stop that.
There are sectors that have not yet recovered from the pandemic, such as tourism. And we also have a debt in poverty.
We have lost the central objective of politics, which is the citizen. Our health and education system has its back to the citizen. Our security system goes without saying. What must be rescued is that politics is precisely about giving the citizen the benefits. Instead of being an economic policy that seeks well-being, it has not generated that. And we have grown far below our potential. When you look at how we grew in the other commodity cycles, we grew well above current levels. And the surprising thing is that our tax collection is also far below the other cycles of raw material increases.
We should grow and raise much more.
We have not had these raw material prices for 75 years. Growing at 3% and having a fiscal deficit of 2% I think is a small thing.
Investment has been growing at more than 10%. Since 2012 that has not been seen.
Yes and no. When one sees the investment with respect to GDP, it is almost 14%. It is not that we are facing an investment boom, but it is commendable that investment has picked up. The big question is whether this will continue in 2026. We have a fairly neutral estimate of 4%. But a lot depends on which government is elected. The big surprise is that we are entering an electoral period with little financial and political risk. At least that is not materializing in the exchange rate, interest rates, or country risk. Rather we have the financial variables at their best moments in many years.
Is that because we still have to get to March or April?
I think it’s a pretty bipolar situation. Something very bad would have to happen for this environment to deteriorate. We would have to see a Pedro Castillo 2, but frankly I don’t see it.
“THERE IS A BIG TAX FAR”
Don’t you see a Pedro Castillo-style threat?
When you see the Polymarket bets, there are López Aliaga and the former rector of the UNI (Alfonso López Chau)… There must be some certainty. We are all thinking that a Pedro Castillo is going to appear at the last minute, but there are eleven weeks until the election. Not much is missing.
Alfonso López Chau seems moderate, but he leads some radicals. And he seems to get carried away by them.
That’s it. We will probably go into the election with one of the three leading right-wing candidates on the list. With some other center or center-left candidate. I don’t know if it’s López Chau. Lescano is also rising quite a bit. It is true that Mario Vizcarra has slipped a bit, but there are other center or center-left candidates who could take that place.
Is it difficult for a radical like Ronald Atencio to win?
I think that, on the one hand, the population is very disappointed by Pedro Castillo’s performance. I know that Castillo has many followers, some in the south and in the center. But they have seen their expectations greatly affected during this government. It is not that they have received tangible benefits, projects or access to water and sewage. The case did not occur. It was not a government that had the citizen at the center of its priority.
The Castilian narrative is that they did not let him do anything. There is a fight of stories.
Well, we can discuss that.
Is the real risk populism? In Congress, on the right and on the left. An example is José Luna, who now leads the ex-castillistas.
That’s very interesting. (Yuval Noah) Harari in his book Nexus (2024) says that the roles have been switched. It was always the left that destabilized, wanted to make a revolution and go against the Constitution. And now it’s the right.
The disruptive right of Trump and Milei…
That has disrupted the roles of left and right. And it has opened the doors to the Trumps and Melonis of the world. And in Latin America we have had several cases, such as Paz and Noboa. There is a shift in Latin America, away from these patrimonial governments that become autocratic, like Venezuela and Cuba.
The Fiscal Council has warned about the deficit.
The current Government is passing the responsibility to the next Government.
Beyond Petroperú’s announcement, the Government does not seem to take clear measures.
The president began by connecting a little more with the people, but I think that the latest photographs we have seen, with all these lobbies of Chinese companies, have hit him a lot. I don’t know what Congress is going to do, but clearly the president is going to become a ‘lame duck’.
What is the balance of MEF?
He has touched on the issue of Petroperú and has done some good things. In the fiscal field, it has invited a great crusade for fiscal sustainability. But the numbers that come out and the commitments that she (Minister Miralles) establishes have nothing to do with that. And I think there is a big tax blunder.
Like in the Ministry of Defense.
Not only that. The BCRP has announced that the Government gave US$1,000 million to Petroperu. Are they within 2.2% of GDP? I think they are not there. They did the same in 2024 when they gave US$2.4 billion to Petroperu.
There has also been farce in Congress.
The Minister of Economy says that she is going to go to the Constitutional Court to reverse some laws. It should have been the first thing he did. It has three laws: one that increases pensions for teachers, another for CAS, and another for bonuses for public servants. This represents 1% of GDP. So, de facto, the 2026 fiscal deficit must be increased by one more percentage point, just for those salary increases.
The State has grown a lot and now has better salaries than the private sector. It is a public sector that legislates for itself.
That’s what I meant by the patrimonial model. The Minister of Economy should not have endorsed the budget left to her by the previous minister. He should have said that we cannot increase salaries by that magnitude. Now the MEF is in the uncomfortable situation of having to renegotiate investment contracts, many of them government-to-government, because they simply do not have enough money. So, we are paralyzing public works that do have an impact on economic growth and directing spending towards current spending, especially salaries, which do not have much impact on economic growth.
What is the greater evil, economically?
We are entering elections with a very positive economic environment, with very little volatility in the markets and with a very strengthened exchange rate. It is one of the first elections in which I remember that this is happening. That’s very positive. The negative is that we are not taking advantage of the extraordinary conditions we have. And we are not using this money wisely to put the citizen at the center of public management. We are using this money to benefit a series of politicians who want to take over the State with their backs to the population. I think the elections are going to be very clear in punishing those parties.
Do you predict a vote against that political caste, in the words of Milei?
I hope to see a vote of punishment against those political elements who have used power to benefit themselves. And that does not exclude the left-wing parties, which have been part of that collusion in Congress.
“Buying airplanes now with a weak government leaves many questions”
He MEF celebrates having met the fiscal goal of 2.2%, but it does not include defense spending.
They say that defense expenses will be recorded when the expense is made. That means that the next Government will have to pay the US$3.5 billion for the planes, plus the US$1.5 billion for the new naval base. It is a bit grotesque to pass on that responsibility for fiscal adjustment to the next Government.
We issue bonds to buy airplanes. We are at war, but against fiscal responsibility.
I have nothing against the military renewing its weapons, but all this must be done within a context of limits on the fiscal fund.
Argentina bought used planes. Other countries buy drones.
When I was minister I had a discussion with members of the Armed Forces. and we propose financing their expenses on weapons, but over a period of 10 or 20 years and with a fund that allows them to gradually renew weapons. But buying planes now with a weak government leaves many questions.
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