Under pressure, Cabinet ministers to repeal pay hike decree

Three days after Peru President Alan Garcia caused an uproar and prompted a public outcry from opposition politicians by signing off a 46 percent pay hike for his Cabinet, his ministers unanimously decided Wednesday to turn down the pay increase and repeal the controversial decree.

“I am sure that (the ministers), as they will tell you, will continue working for our country actively and with enthusiasm,” said Garcia in comments to Radio Programas radio. “So, I thank all of you, and cheers to their 48-hour pay increase.”

Emergency Decree N° 001-2009 was signed off by Garcia late Sunday night, authorizing the Finance Ministry to increase ministers’ salaries by 46 percent, to earn as much as members of Congress. The decree boosted a minister’s monthly paycheck from 15,600 to 22,800 soles, or approximately $28,800 more per year, upping their annual salaries to $91,200.

With Peru starting to feel the effects of the global credit crunch and falling commodity prices, criticism gushed from opposition politicians and economists as soon as the decree was published.

Then, on Tuesday, Premier Yehude Simon announced that the Cabinet ministers had unanimously decided to repeal the emergency decree, and turn down the pay hike.

“This issue is dividing our country,” said Simon during a press conference. “It has generated a scandal.”

But the Premier, who was thanked by Garcia for his “unselfishness,” insisted that the pay increase was “legal and fair,” and that the ministers were “making a sacrifice.”

On Wednesday, Emergency Decree N° 001-2009 was repealed.

“I’m not saying that increasing salaries is unfair,” said Felipe Osterling, former president of Peru’s Senate. “But doing it now was impertinent considering all the restrictions we now face as citizens.”

Despite its considerable economic success this year and the fact that Peru is weathering the global crisis better than most other Latin American countries, in September, Peru announced a trade deficit for the first time in more than five years. And, the government has already lowered its forecast for next year’s economic growth from 9 to 6.5 percent.

But, according to political analyst Fernando Tuesta, the repeal is yet another mistake in an already long line of errors made by Garcia since his election in 2006.

At the time, Garcia slashed wages by approximately 40 percent in Congress, and reduced wages of all public service employees, on the grounds that they were earning first world wages in a developing world nation. It sparked an exodus of professionals from the government payroll, in favor of the private sector.

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