RWI Latin America Regional Coordinator Carlos Monge is featured in an extended interview on PBS Newshour, discussing economic growth in Peru. While Monge acknowledges the importance of the extractive industry to Peru's economy, he suggests that tax policy reforms, such as the institution of a windfall profit tax, could help the nation receive a larger share of income generated by the extractive sector, particularly from companies reaping huge revenues during times of high commodity prices.
"Peru is a country in Latin America where the state retains a lesser portion of the extractive rent. Because taxes are low, we do not have a scheme for what they call windfall profit tax in those times when prices go up," says Monge. Additionally, he continues, royalty rates are low "and a number of companies do not pay their royalties because they consider them a new tax."
Although Peru is considered an economic success story in Latin America, Monge says the country has an unbalanced pattern of growth that leaves behind many poor and rural areas. Peru, Monge says, has strong potential to grow in markets of the future that could provide a sustainable source of income for local communities, but the government must shift more attention to developing these sectors, and not rely entirely on the income brought from mining, oil and gas.
"The question is the way we grow, and if the nature of our economic growth is what is needed to meet the needs and expectations of the majority of Peruvians," says Monge. "I think that's where the problem lies."
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