Lima — Peru celebrates its independence anniversary on July 28th and 29th; and with it, 200 years of freedom that comes in the midst of a presidential change of command. In the midst of social polarization, a pandemic that continues to affect the lives of thousands of Peruvians and an economy in recovery after a severe recession, Pedro Castillo Terrones took office as President of the Republic making a series of promises to the population, and assuring that he will not betray his most loyal electorate.
“We will not let you down. I will not let you down,” said Castillo Terrones at the beginning of his extensive speech, in which he addressed a series of key issues for the country at present. Bloomberg Línea Perú sought to analyze with experts the announcements made by the president, as well as the viability (and firmness) of his proposals. This is what they told us.
Symbolic, albeit contradictory, message
Arturo Maldonado, a political scientist at the Catholic University of Peru (PUCP), considers that President Pedro Castillo Terrones’ message was one that met expectations. “He focused on the two most important aspects that citizens are most concerned about, reactivation and public health,” he highlights.
But although Maldonado remarks that there was symbolism and harmony with the main social concerns of the Peruvian population in the speech of the new president, he does point out that there were some contradictions.
“The revision of stability contracts, for example, is one of the issues he mentioned as one of the elements with which he is against Fujimori’s Constitution (1993 Constitution) and thinks they should be revised, although he was not entirely clear with that. But if we are talking about maintaining the rules of the game or keeping investors calm, that is not in said direction”, explains the political scientist.
Along the same lines, President Castillo indicated during his message that his presidential administration will not “nationalize”, and added that they will maintain economic stability. Nevertheless, the president announced other messages that could set off alarm bells in certain industries, according to the expert.
“The energy or mining industries are the main ones, since they are where the stability contracts are. We are going to see how this (the possible revision of such contracts) will be operationalized to see the relationship that will arise with these sectors”, Maldonado argues.
Constituent Assembly: the most responsible way to approach it
Although several people asked Castillo Terrones not to address the issues of a new Constitution and a Constituent Assembly, main proposals of the President during the campaign since before the second round of the elections, Maldonado considers that it was inevitable that these areas were mentioned, due to the announcements prior to the message in which Castillo had promised his electorate that this would be one of his main priorities since July 28th when he assumed power.
Several analysts, including Maldonado, agreed that the President made the announcement in the most responsible way possible, leaving behind versions that speculated that he would seek a constitutional change at any cost and without considering the current rules of the game.
“We will present a bill (to Congress) to reform the Constitution; which, after being analyzed and debated by Parliament, we hope it can be approved and then submitted for ratification in a popular referendum,” Castillo Terrones announced during his message to the nation, after explaining that his government understood that this was the appropriate way to materialize a possible change to the Peruvian Constitution.
“It is true that the most responsible thing to do is to depend on the Congress to see how this process advances. The issue is that I think he is clear that he does not have the votes for that. That has been demonstrated in the voting of the board of directors and especially in the vote to block the Peru Libre list with its allies from running for Congress,” Maldonado argues.
However, Maldonado criticizes the message left between the lines by President Castillo, regarding the fact that the constituent power “emanates from the people”. “Again, it is a kind of a contradiction with the responsibility that he assures that they seek to have in this process,” he comments.
Health: a key issue in pandemic
During his message on July 28, Castillo Terrones highlighted as one of his main policy lines the fight against the COVID-19 pandemic, with an important emphasis on preserving life and health.
“Health is a fundamental right that the State must guarantee. Physical and mental health will be the first priority of the government,” said the president.
On the other hand, Castillo Terrones said that, with the purpose of promoting greater social protection, his government will promote “the consolidation of a single health prevention system unifying Essalud, the National Health System of the Ministry of Health, the Regional Health Directorates and the health systems of the Armed Forces and the National Police.”
“Everyone in one big system that provides service to all the inhabitants of the country,” he added.
Janice Seinfeld, health expert and director of Videnza Consultores, points out that unification is an extremely important goal where it is necessary to detail how to achieve it without harming the citizens who use the system along the way. The expert thinks, along these lines, that what is fundamental in the short term is to promote the strengthening of the first level of care, “and that the population has a nearby establishment to which it can go and knows that it wants to go”.
“This implies the formation of networks, but it is not necessarily such an ambitious administrative process that it can even be cumbersome, like unifying everything,” says Seinfeld.
Seinfeld points out that it would be ideal, for example, for a citizen who lives in a rural town and is insured by the SIS to be able to receive care without problems in a health facility in the area that is managed, for example, by Essalud. In such a scenario, the expert indicates that the State’s own systems would have to take charge of the corresponding payments for that person to access care and not waste quality time moving to another place.
“That to me would be the most valuable form of unification. It is less than the big unification, but it allows them to have aligned processes rather than the fact that they are all one entity,” he notes.
Universal Higher Education?
One of the aspects addressed by Castillo Terrones during his message to the nation, when mentioning the focus of education, was that his government will seek to gradually promote “a policy of free admission to universities and higher education”. “This system works well in other countries and we consider that the same will happen here”, argued the president.
Would it be like that? For Hugo Ñopo, senior researcher at Grade, the answer is not so simple.
“There are pros and cons. In favor we could say that we are a society that is living longer, so we would have to study longer and not only in a first formation. Professionals, after working for a while, have to retrain and retrain at the university,” says the researcher.
The argument against, Ñopo adds, has to do with meritocracy. “We don’t need everyone to go to university, we need the best to go. You also need technical education and there are many other countries that do that kind of selection. We need some kind of selection to better guide people,” he mentions.
On the other hand, Ñopo points out that implementing a system such as the one proposed by Castillo Terrones would be “very expensive”. The researcher remarks, in this line, that what should be discussed is the complexity that a transition from the current system to one of free and universal access would imply. “It’s going to be a labor, a very difficult labor”.
Important omissions in the economic area
In the economic area, Castillo Terrones made a series of proposals ranging from large-scale works to bonuses for the population, and the extension of credit programs for SMEs affected by the pandemic crisis. In the area of public investment and employment, for example, he said that 3,000 million soles would be granted to municipalities and regional governments to accelerate investments; 1,000 million soles to fix dirt roads to populated centers; and 700 million soles for the program Trabaja Perú, for small municipal works intensive in employment.
However, for Carlos Casas, dean of the Faculty of Economics at the Universidad del Pacífico and former vice-minister of Economy, the message to the nation lacked a medium-term agenda that would focus on increasing productivity and reducing informality, instead of continuing to grant economic aid that would imply greater fiscal expenditure and would not be as effective in the long term.
“It was mentioned in the speech that there was a bias in the focus of credit programs last year, but it must be remembered that large companies are the ones that generate more labor, high productivity employment and can pay higher wages. All these efforts to help small business units, fishermen, cooperatives, small farmers and entrepreneurs, I think they sound good at first, but we need large companies that can generate synergies and high productivity. Otherwise, we condemn Peru to have an ocean of unproductive micro-enterprises”, comments the economist.
Another economic highlight of Castillo Terrones’ message was the new social license modality, now called “social profitability”.
This new criterion, explained the president, means “a new pact with private investors, where the State intervenes to reduce costs, facilitate processes, maintain legal security, and in exchange the local population and the country receive contributions that generate development and greater opportunities with a real care for the environment”.
For Casas, this model can be problematic depending on how it is implemented.
“Mining companies can tell you that they spend on social investment, in support of the communities; this is already being done in some way. There may be companies that are doing it wrong, but they are spending, they are spending. If you look closely at the mining data, 70% stays in the country because the mining companies reinvest it, they make a greater contribution. I don’t think it’s true that social conflict is decreasing”, he considers.