Peru needs better administration, not reforms to counter slowdown - Kuczynski

LIMA (Reuters) - President Pedro Pablo Kuczynski told Reuters Friday that he was more focused on improving government administration by cutting red tape than on proposing new economic reforms as growth slows to a likely 2.5 percent or “maybe a little bit more” this year.

Peru's President Pedro Pablo Kuczynski speaks during an interview at the Reuters Latin American Investment Summit in Lima, Peru August 11, 2017. REUTERS/Mariana Bazo

In an interview for Reuters Latin American Investment Summit, Kuczynski said economic growth in Peru was gathering steam and would likely show an “important change” in coming months, thanks to recovering internal credit and increasing prices for the Andean nation’s key copper and gold exports.

Severe flooding and a massive graft scandal involving Brazilian builder Odebrecht early this year knocked 2 percentage points off the government’s initial 4.5 percent growth forecast for this year.

“It’s disappointing but that’s how life is,” Kuczynski, a former Wall Street banker and World Bank economist, said in the presidential palace in Lima’s historic center.

But Peru’s growth prospects going forward are solid, Kuczynski added, shrugging off questions about whether he might propose new economic reforms.

“Everyone talks about reforms and more reforms,” said Kuczynski. “In Peru, we don’t need a lot of legislation. We already have more than 32,000 laws. What we need is good administration. And administration has become...impeded by too many regulations, bureaucracy, paperwork.”

The central government’s payroll rose sharply during the term of ex-President Ollanta Humala, swelling Peru’s already-bloated bureaucracy even more, Kuczynski said. But he ruled out any lay-offs, saying he would instead work to make public administration more efficient as the economy expands.

Companies in Peru have long complained about slow government approvals that stalls investments. At the same time, government offices in Peru, from ministries to small municipalities, often fail to spend all of their budgets - delaying public work projects that could drive growth.

Kuczynski said his government was now in the final stages of fine-tuning the rules for new laws that will slash red tape.

“Almost all of it is ready,” Kuczynski said.

Last year, Kuczynski’s government posted a fiscal deficit equal to 2.6 percent of gross domestic product, missing its 3 percent target as it strove to balance pleasing credit ratings agencies with providing a stimulus to bolster domestic demand.

“Things might have been done better,” said Kuczynski, a centrist who took office a year ago. “Peru has a very modest fiscal deficit.”

Kuczynski’s government now aims to post a 3 percent deficit this year before widening it to 3.5 percent in 2018 as it rebuilds infrastructure in parts of Peru hit by flooding.

“Peru has a strong internal economy. We’re seeing it now. Cement sales, for example, are recovering after falling for three years,” Kuczynski said.

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Reporting By Mitra Taj and Marco Aquino; editing by Diane Craft