Castilla: Fiscal Reforms Needed to Ensure Predictability for Public Investments

Economy and Finance Minister Luis Miguel Castilla said Wednesday that the government should enact fiscal reforms to ensure predictability in public sector investments.

He said the government is open to looking at how to better redistribute resources from mining taxes to ensure a steady supply of investments, daily Gestion reported.

Taxes to regional and municipal governments have declined recently as mining sector profits have weakened as a result of lower metal prices.  Proposals to cut back the revenue distribution by some 20% has been met with protests in mining areas.   However, at the same time, many of the regions to receive the revenue have either invested it poorly or failed to invest it at all.  In the Arequipa region, the regional and municipal governments have failed to spend a total S/.11 billion ( $3.9 bn).

“We appreciate the concern in a large part of the country due the reduction in the resources from the canon,” Castilla said in a presentation to Congress. “We can start thinking going forward on how to improve the distribution of resources.”

“The objective of the fiscal rules until now has been to reduce the debt in order to ensure a sustainable public debt,” he said. “There are large gaps to close in the country, and that requires predictability.”

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