September 18, 2017 / 10:11 PM / 3 months ago

Peru's PM says new Cabinet to revive slumping public investments

LIMA, Sept 18 (Reuters) - Peru’s prime minister said on Monday that the country’s new Cabinet will focus on reviving public investments as it seeks to mend fences with the opposition party that forced President Pedro Pablo Kuczynski to form a new government.

Congress ousted the former Cabinet last week following a dispute over education reforms, fueling fears that political fighting might hurt economic growth that has already slowed sharply this year due to floods and a graft scandal.

Mercedes Araoz, Peru’s new prime minister, said on local broadcaster RPP that she was optimistic about rebuilding a working relationship with the opposition. A key test will be efforts to rapidly rebuild parts of Peru hit by flooding, Araoz said.

Congress will likely vote on whether to give Araoz’ Cabinet a vote of confidence in the first week of October, she added.

Araoz is a ruling party lawmaker and former finance minister in the 2006-2011 term of former President Alan Garcia.

Forecasts for an economic recovery in Peru hinge on the government increasing public investments that fell 10.4 percent year-on-year in the first half of 2017.

“Now’s the time. We can’t fall behind in this process” of increasing public investments, Araoz said.

President Kuczynski, a center-right politician and former Wall Street banker, vowed to work to modernize Peru and strengthen the economy of the world’s second-biggest copper producer.

But his first year in office has been marked by slowing economic growth and clashes with Congress, where the right-wing populist party of his former rival Keiko Fujimori has a majority.

Fujimori welcomed the new Cabinet on Twitter after it was sworn in on Sunday and said Kuczynski’s government still has four years to “mend its ways and make progress.”

Similar remarks from opposition lawmakers signaled Congress would likely give the new Cabinet a vote of confidence. But after previous efforts to reset relations failed, it was unclear how long the new truce might last.

Verisk Maplecroft, a global risk analysis company, said Peru has a score of 4.44 out of 10 - a “high risk” ranking - on its government effectiveness index.

Despite Fujimori’s support for the new Cabinet, “the re-tooled team will remain hostage to the Fujimorista-controlled Congress, with Kuczynski’s political credibility continuing to ebb,” said Maplecroft analyst Eileen Gavin.

If Congress fails to approve of the new Cabinet, Kuczynski can summon new legislative elections.

Reporting By Ursula Scollo, writing By Mitra Taj; editing by Marcy Nicholson

Our Standards:The Thomson Reuters Trust Principles.
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