How to lie twice to a President and succeed (13-VI-09)

Near three months ago, it was analyzed how the Ministry of Economy and the Central Bank collude in order to show awesome GDP growth rates for Peruvian economy, in order to fulfill presidential fantasies of success, and now it is possible to witness how such collusion persists in order to show Peru as the country with the highest economic growth in Latin America, and one of the highest around the world.

Less than 2 weeks ago, in May 30th, the Ministry of Economy published the MMF (Multi-annual Macroeconomic Framework) for 2010-2012, which includes an economic forecast for 2009. Yesterday, the Central Bank published its quarterly report which includes also an economic forecast for 2009. As before, there is little difference on the GDP growth rate, 3.5% for one and 3.3% for the other, but this lucky coincidence is only good for providing presidential comfort, but behind those numbers two different worlds emerge.

The table below shows how the Ministry of Economy (ME) and the Central Bank (CB) evolve in its economic forecast, and also shows the gross differences on key indicators as elasticity between imports and GDP or export growth, which has impact on the ratio trade gap – GDP, as well on foreign currency reserve, and domestic currency convertibility.



Date of Issue GDP growth rate Import growth rate Export growth rate
ME May 28th ‘08 6.5% 12.6% 8.0%
CB Oct 24th ‘08 6.5% 9.0% 6.2%
CB Dec 17th ‘08 6.0% 7.3% 4.6%
ME Feb 2nd ‘09 5.0% 11.0% 5.4%
CB Feb 5th ‘09 5.0% 5.5% 3.4%
ME Feb 23rd ‘09 5.0% 13.5% 5.0%
CB Mar 21st ‘09 5.0% 2.1% 1.9%
ME May 30th 09 3.5% 1.3% -2.6%
CB Jun 12th 09 3.3% -4.7% -1.3%


Institution Date of Issue Elasticity Import – GDP Ratio Trade Gap – GDP
ME May 28th ‘08 1.9 4.8%
CB Oct 24th ‘08 1.4 4.4%
CB Dec 17th ‘08 1.2 4.3%
ME Feb 2nd ‘09 2.2 5.0%
CB Feb 5th ‘09 1.1 4.2%
ME Feb 23rd ‘09 2.7 5.7%
CB Mar 21st ‘09 0.4 3.7%
ME May 30th 09 0.4 2.4%
CB Jun 12th 09 -1.4 0.9%


As before, the elasticity between imports and GDP is a clear signal of two macroeconomic forecast structures forced to converge in a GDP growth of 3.3%-3.5%. While the Ministry of Economy finds a positive elasticity, the Central Bank finds a negative elasticity which is extremely uncommon in Peruvian economic history of the last 20 years; in particular to have a negative growth rate of imports.

Last circumstance Peru had a real reduction of imports was in 1999 due to a negative GDP growth in 1998. Previous similar experience was in 1988 and 1989, when Peru has the most disastrous economic experience becoming a member of the select group of countries with hyperinflation a la Cagan (more than 10,000% annual) with a GDP contraction of more than 20%.

While Ministry of Economy forecast could be seen as straightforward optimistic and unreal, at least it is possible to foresee a conventional macroeconomic model behind with coefficients making sense with experience. On the other side, the Central Bank model looks more as a two stage model, on the first stage realistic assumptions are made (as negative imports growth due to a recession) and in the second stage comfort outcome are imposed (positive GDP growth).

 In any case, Peruvian economic authorities had shown a clear behavior of common deception to the Presidency. Both of them show a positive GDP growth which goes against common sense but on synchrony with President Garcia flamboyancy. This deceptive behavior has been analyzed previously in “How to lie to a President and succeed”.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: