Humala Aide Says Peru May Review Too Fast Regional Stock Exchange Merger
The integration of stock trading in Peru, Colombia and Chile was done “too quickly” and Peru’s President-elect Ollanta Humala may renegotiate parts of the arrangement if benefits aren’t fairly shared, economic adviser Kurt Burneo said.
The combined exchange, which began May 30, will be evaluated by Humala’s government after it takes office July 28 to weigh the “pros and cons, benefits and costs,” Burneo said in an interview yesterday in Lima.
“Before we talk about renegotiation, the first thing we have to do is a better evaluation because we feel it was done too quickly,” said Burneo, who was deputy finance minister in the government of former President Alejandro Toledo. The Humala team feels “there is asymmetry in the distribution of benefits as a consequence of the integration,” he said.
MILA, as the exchange is known, allows cross-border transactions between the three nations, creating Latin America’s second-biggest stock market after Brazil. Mexico and Panama may join as part of an agreement signed in April and Bogota and Lima have said they plan to take the arrangement a step further by completing the region’s first corporate merger of exchanges.
Peru’s benchmark stock index plunged a record 12 percent the day after Humala, a one-time ally of Venezuelan President Hugo Chavez, beat Congresswoman Keiko Fujimori in a June 5 runoff election.
Still, investors remain wary of Humala, whose original government platform called for changing the constitution to give the state a stronger role in the economy, including its ports and pension fund system, and unilaterally increasing mining royalties.
Burneo, who said he would consider the post of finance minister if offered, said Humala will respect existing contracts with mining companies. The new government would ask companies to contribute more taxes while ensuring Peru’s mining industry remains competitive with others such as Canada and Australia, Burneo said. No new taxes will be introduced, he said.
“We will respect accords with companies that have tax stability contracts,” said Burneo. “There’s an extraordinary situation with high prices, and the state has the legitimate right to charge taxes, not expect a handout from companies.”
The Lima General Index rose for a third day, advancing 2.5 percent to 21,091.86 at 11:59 a.m. New York time. Bogota’s IGBC Index was little changed and Santiago’s IPSA Index fell 0.2 percent.
Financing for Humala’s social programs would come from reducing tax evasion and boosting economic growth, said Burneo, who said Humala’s advisory group includes a minority of hard- line “leftists.”
“The bulk of the financing of the programs won’t come from mining,” Burneo said. “It’s too volatile because it’s linked to international prices.”
Mining companies wouldn’t be treated as they are in Venezuela and Ecuador, Burneo said, without elaborating.
“That would be like shooting ourselves in the foot,” he said. “How can we promote private investment if we do that? It’s impossible. We are clear that to have a redistributive policy, the economy has to grow. If we adversely affect private investment we are cutting the possibility to grow sustainably.”
Burneo welcomed an offer from Finance Minister Ismael Benavides made during a June 7 interview to help the new economic team calm investors’ fears and said Humala would likely consider it if he receives a formal proposal. It’s “too soon” to consider issuing new debt this year, Burneo said.
Free Trade Review
Humala will look into the wording of Peru’s free trade accord with the U.S. to judge how the platform creates competition for Peru, Burneo said. Only under the most “extreme cases” would the new government seek to renegotiate parts of the deal, he said.
“Free trade agreements are an excellent opportunity to enter markets that are much bigger than our own,” Burneo said.
The new government would shelve President Alan Garcia’s proposal to raise the limit on private pension funds’ investment overseas to 50 percent from 30 percent if it’s not approved in the current congressional session, he said.
Humala’s team won’t be announced until Peru’s electoral board officially declares him the winner of the president race, Burneo said. The President-elect will announce his economic plan for the first 100 days of government within two weeks, Burneo said.
To contact the editor responsible for this story: Joshua Goodman at firstname.lastname@example.org
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.