García’s choice of finance minister cheered

The appointment of a fiscally orthodox technocrat as Peru’s finance minister was welcomed on Friday both in Lima and internationally.

With the choice of Luis Carranza, president-elect Alan García is hoping to plot continuity with the current administration, under which Peru has registered impressive economic growth. The country’s gross domestic product exp­anded by 6.7 per cent in 2005 compared with the previous year and is forecast to grow between 5.5 and 6 per cent this year.

“My government’s goal is to ensure growth but also social equality through state and private investment,” Mr García said. “Luis Carranza, who comes from a great international bank, will be a great support in this.”

That signals Mr Carranza’s difficult task – to balance the demands for greater social spending that Mr García’s promises of “responsible change” have fuelled, with a need to keep a tight hold on the government’s purse strings.

Mr Carranza joins the finance ministry from BBVA, the Spanish bank, where he was chief economist for Latin America and emerging markets. He is also a consultant to the Inter-American Development Bank.

He was deputy finance minister in the current administration of President Alejandro Toledo but resigned in 2005, reportedly over plans to increase public spending ahead of elections.

In Lima, the appointment reassured local analysts who remember Mr García’s mismanagement of the economy during his first stint as president from 1985-90.

Fernando Zavala, the outgoing finance minister, called Mr Carranza “a first-class technician and one of the best economists in Peru”, while Claudia Cooper, head of market analysis at BCP, the Peruvian bank, said: “There is no one in Peru more capable for this position.”

The choice also cheered Wall Street, where Peruvian sovereign bond spreads tightened after Mr García confirmed the pick. UBS said in a research note that “markets will be pleased with this appointment”.

But Mario Huamán, president of the main trade union body, expressed disappointment. “It looks as though Alan García is not going to fulfil his promise to change economic policy,” he said.