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When presenting himself in Congress, Carlos Oliva, president of the Fiscal Council, referred to the doubts that they maintain regarding the financing of the projects that the Ministry of Transport and Communications (MTC) has been promoting under the Government to Government (G2G) modality such as the new Central Highway, the Santa Rosa Expressway, and lines 3 and 4 of the Lima Metro. The official, who was the Minister of the Economy, questioned whether these works should be considered without being part of the National Plan for Infrastructure for Competitiveness (PNIC).
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In this regard, Javier Correa, a former official of ProInversión, remarked that this is a matter more than substance, mainly coordination between ministers because the PNIC can be updated and projects can be subscribed under the MTC budget.
For the infrastructure specialist, what has been happening is that some ministries that have political force have been imposing their projects and want to have complete budgetary autonomy, which exceeds their powers. The ministries have found a window to expand their budget space and sign contracts outside the budget, so the issue does not become technical but political within the government.
“The MTC is beginning to write checks against a budget that it has not confirmed, which is a serious offense. It could be said that they have entered into rebellion, and are simply doing the projects because they have found a legal window to do what they want to do, or the MEF has entered into rebellion and does not want to update the PNIC ”, Correa said.
So, since the Central Highway is an urgent project with a great impact on the Peruvian economy, the opportunity to make it viable is being lost due to poor coordination between ministries, which for Correa could denote a power struggle between the MTC and the MEF.
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It is striking that these problems are aired in the press and not among ministers, he said. And it is also surprising that the Fiscal Council as an independent entity is setting off the alarms and questioning the behavior of the Minister of Transport and Communications.
For the specialist, these issues do a lot of damage to the country, “because at the end of the day a sovereign government has been summoned to help the country, it has won a contract and has to report to its country. And he reports that there is an internal struggle because there is no budget. It’s embarrassing to say the least, ”he argued.
From an investment management point of view, it is important that there is predictability and that the projects are budgeted, and according to Correa this is a pillar of Peru’s credit rating and of the government’s credibility. “At best it worries, and at worst, it does not speak highly of the ministers on duty. It is controversial, because it is a technical issue that is politicized ”, mentioned.
For his part, Flavio Ausejo, a public policy specialist at the PUCP School of Government, pointed out that what Carlos Oliva is proposing is clear and the numbers he proposes sound reasonable. “It is clear to me that these decisions bypass the institutionality of the Executive and the investment system itself,” he stressed.
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HOW TO EXECUTE THEM
In turn, Juan José Cárdenas, Project Leader at EY Law, pointed out as valid the concern about how these projects are going to be financed. The first thing to recognize, he said, is that they are necessary projects and they have a lot of time in the portfolio going around without the ministries and governments having made a decision on how to execute them.
“Something that is not discussed and that is important to mention is the cost and time savings that it will mean for users to have these projects ready. They have suffered additional costs for years from slower modes of transportation that can take two to three hours a day to get to and from work. That social cost is very important. It has an economic and social value for people. And I think that this is another variable that should be put on the table when evaluating whether or not to do it, and how to do these projects “, he referred.
On the other hand, he stressed that it is necessary to evaluate how to execute the projects. He believes that if it is going to be done like G2G, there are several options to finance it. One of them is that sovereign bonds are issued to finance long-term projects, thereby kicking the debt payment, but increasing the state debt.
Another option is to build it via G2G, and then a Public Private Association (PPP) is made so that the government recovers the amounts invested, and the private one operates it for 20 years. “Because what matters about these projects once they are done is that they serve their users, and my opinion is that the operation must always be in the hands of the private sector”, manifested.