The year 2014 was marked by several challenges and opportunities. How is the Ministry responding to the new conditions in Peru and what opportunities do you identify?
The government is actively responding to the economic slowdown, not only in terms of industrial activity, but also to economic activity in general. We are implementing a series of measures that will drive economic growth in 2015. Our goal is to return to a growth rate close to 5% in 2015 and 7% thereafter. In July we launched the National Productive Diversification Plan (PNDP). So far, Peru's growth has been driven mainly by the mining sector. However, we have other potential sectors such as agricultural exports, which are highly competitive and are growing at an annual rate of 18% to 20%. We need to ensure we have more of these engines to drive growth. Fundamentally, our diversification strategy needs to stimulate other sectors. In that sense, we have begun work on technical committees with representatives of private associations to collect proposals on public assets; for example, considering the legal barriers that are hampering certain sectors, and what kind of infrastructure industry requires to maximize its competitiveness. The priority is not to improve profitability. We are not here to grant subsidies or tax exemptions, but to ensure that we are maximizing the productive potential of the country.
What are some of the tools and initiatives implemented to improve productivity?
On one hand, we have a group of formal, modern, and highly productive enterprises, and on the other, a larger group of SMEs that are characterized by informality and low productivity. We look forward to working with both because we need to increase the average productivity of the entire economy. In order to achieve this we have created the Centers for Technological Innovation (CITE), which aim to support technology transfer to SMEs. Currently, Peru has five centers; however, our goal is to have at least 30 in 2015 and 47 in 2016. This model has already yielded results, but we are extending it to make it viable on a macroeconomic scale. For high-productivity sectors, we have included a number of funds to promote innovation. Companies in Peru spend very little on R&D and we are trying to reverse that. We are also working to streamline bureaucracy, adn consequently the cost of doing business in Peru.
Could you tell us about the importance of the availability and expansion of credit to SMEs from the perspective of the Ministry?
Clearly, the economy as a whole has high liquidity, adn yet the cost of funding for some SMEs is very high. We are addressing this situation on at least two fronts: in July, Congress approved the law enabling us to improve the financial market for SMEs through factoring. We need to ensure that when an SME sells to a large company, you can use your bill at a bank or similar institution for liquidity at a lower rate. What we are doing is to ensure that, in accordance with the law, it is clear and established that the invoice can be used as a guarantee statement. This bill is now an asset that can be sold on the market and obviously is negotiable. This will significantly reduce the cost of working capital for SMEs that provide goods or services to larger companies. We are also working to improve the environment for both small and large companies keen to be linked to microenterprises. We have implemented a number of changes to reduce these costs through market mechanisms.
How has growth in infrastructure investment helped to increase economic growth?
Peru has a huge gap in infrastructure. We have been spending about 6% of GDP on public infrastructure, and this will continue. Additionally, in 2015, due to lower growth, the government is increasing public spending even further, to the tune of 2.5% of GDP. This will generate increased demand for the industrial sector, service sector and SMEs. If a government institution requires something that local industry can provide, it should do so. What is more important is that better infrastructure and business conditions further reduce business costs and make the country more competitive. The goal here is to level the playing field and make it easier for the private sector to operate. This is not about granting subsidies or raising tariffs, which the government does not support.
The fisheries sector has experienced a costly slowdown this year due to weather conditions. What is your outlook for the industry?
Peru has been highly sensitive on the subject of fish stock and we have preventive standards such as fishing limits in place. In Peru, there is a high dependence on one particular type of fish; anchovies, and a single product; fishmeal. First of all, we need to encourage aquaculture, since currently only 1% of Peruvian production belongs to this segment compared to almost 50% in the rest of the world. In other words, there is high potential in this sector. We know that fish stocks in the oceans are not growing and there is a limited amount that can be drawn if we maintain sustainable levels. Therefore, further growth needs to come from aquaculture.
What is the Ministry doing to stimualte this sector?
We have established a technical committee to find innovative ways of working with the private sector. Our efforts include establishing an innovation center for aquaculture. Besides the anchovy, Peru has other options that can increase fishing and tuna fishing significantly. It is vital that we look beyond the anchovy, as this year has shown how dangerous it is to rely on a single product. However, such a process will take some time.
© The Business Year - May 2015