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15 September 2014 By Martin Hutchinson

President Ollanta Humala abruptly replaced his finance minister amid an economic slowdown. Commodities prices, overspending, the currency and foreign investment are not obvious problems. The political shake-up may buy enough time till Humala’s pragmatic policies start to work.

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Peruvian President Ollanta Humala on Sept. 14 replaced Finance Minister Luis Miguel Castilla with the ministry’s chief adviser, Alonso Segura.

Segura said the Peruvian economy would probably expand by less than 4 percent in 2014, below the government’s 4.2 percent official forecast. In August, Peru’s Congress voted to undo a law sponsored by Castilla requiring self-employed workers under the age of 40 to pay into a private pension fund. Humala supported the law’s undoing in return for Congress approving his sixth cabinet reshuffle in three years.

In July, Peru’s GDP increased 1.2 percent from a year ago. In the first seven months of 2014, it rose 3 percent from the same period in 2013.

Peru reported a current account deficit of $3.7 billion, or about 4.6 percent of GDP, in the second quarter of 2014. Peru runs a budget surplus, but Castilla had said in July that it would increase spending by 1.6 percent of GDP to boost the economy. The Peruvian sol has declined by about 10 percent against the dollar in the past two years.

The central bank cut the overnight interest rate by 0.25 percentage point to 3.5 percent on Sept. 11, while consumer prices in July were 2.7 percent above the previous year.

Mining investments in Peru are expected to reach $10 billion in 2014 compared with $9.7 billion in 2013, according to Pedro Martinez, President of the National Society of Mining, Petroleum and Energy on Sept. 12.

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