The calculated collapse of public investment

According to the latest reports (Gestión, 16.12.19, p. 27), and as noted in recent years, (see post) public investment spending, until December 13, has reached only 53%, spent only 28,000 million soles, of the 52,000 million budgeted, a very low proportion never seen before, and that shows that: little and bad is spent.

The government withdraws purchasing power from the population and businesses, and does not reintroduce it to economic circulation, contributing to a slowdown in GDP growth with no return. In fact, the GDP growth forecast was 4.2% at the beginning of the year, and today it is doubted that it reaches 2%.

Why?

Absence of decision making.

The government did not take a single step to abandon the scheme of the highly questioned Public-Private Partnerships APP, a scheme that - vox populi - encouraged corruption; On the contrary, he was on the lead with opting for the alternative, the classic public work.

Moreover, it did not even give the green light to PPPs whose beneficiaries were not the usual construction companies, as was the case with the declaration of desertion of the Lima-Ica railroad project concession, to which the China Railways mega railroad was running.

By betting on conventional public works, it would leave the whole of Brazilian construction companies (Odebrecht, the main one) and its Peruvian consortiums - baptized as the "Construction Club"; that in other countries, such as Colombia, are prohibited (unlike Peru) from contracting with the State.

An additional problem is that a good part of the budget is officially destined to pay judicial repairs, compensation and cost overruns to the construction companies, the result of badly n PPP contracts by the State. These “contingencies” have reached up to 70% of the Public budget of the Transport sector, the most related to infrastructure.

By way of example, Graña y Montero, the local partner of Odebrecht, has just sued the Peruvian State for more than US $ 500 million, for the suspension of the cuestioned contract for the Surperuano Gas Pipeline.

24/12/19