Peru Central Bank’s Gallardo Joins Cabinet as Economy Sags

Peruvian President Ollanta Humala appointed central bank director Jose Gallardo to his cabinet as part of an effort to shore up investment as economic growth slows.

Gallardo was sworn in as transport and communications minister in a televised ceremony at the presidential palace in Lima yesterday. He replaces Carlos Paredes, who had held the post since Humala took office almost three years ago.

The appointment comes as Humala seeks congressional backing for a package of business-friendly measures to spur private investment and accelerate public works. Peru, South America’s fastest growing economy of the past decade, expanded 2 percent in April, the slowest pace since the 2009 recession, as mining and construction output fell.

Gallardo left the central bank board to take up the cabinet post, the Transport Ministry said in an e-mailed statement. Peru’s constitution bars ministers from holding a second public post, except as a lawmaker.

Gallardo, who has a doctorate in economics from the University of California at Berkeley, joined the central bank board for a five-year term in 2011. Previous posts include head of policy at the telecommunications regulator and head of research at the energy regulator.

Diversifying Growth

Gallardo last year published the book “What Can Be Done With Peru: Ideas for Sustaining Long-term Economic Growth,” which suggests ways to diversify the commodity-dependent economy. He co-authored the book with Piero Ghezzi, a former head of global economics at Barclays Capital who was named production minister in February.

The extra yield investors demand to own Peruvian government bonds instead of U.S. Treasuries rose three basis points, or 0.03 percentage point, to 150 basis points at 8:42 a.m. in Lima, according to JPMorgan Chase & Co. The country’s sol-denominated bond due 2020 rose 0.04 centimo to 114.14 centimos per sol.

The World Bank this month cut its 2014 growth forecast for Peru to 4 percent from a January estimate of 5.5 percent, amid weaker outlooks for the U.S. and China, Peru’s top trading partners.

Finance Minister Miguel Castilla said last week that the government’s measures will add as much as three percentage points to growth within two to three years while providing an immediate boost to business sentiment.

Humala also swore in Daniel Urresti to replace Walter Alban as interior minister, while Gonzalo Gutierrez was named foreign minister to replace Eda Rivas.

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