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 30^th, 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.

 

Institution	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”.

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How to lie to a President and succeed (16-III-09)

Peruvian economic authorities are two as in many countries, one in charge of fiscal policy and other in charge of monetary policy. As in many countries too, fiscal policy is in charge of a Minister, who is an appointee of the President; and monetary policy is in charge of the head of the Central Bank, who in Peru is choose by the Congress.

Until May 2008, both authorities had a point of agreement in economic policy and macroeconomic forecast, in a document called Multi-annual Macroeconomic Framework (Marco Macroeconómico Multianual), which is prepared by the Ministry of Economy and subscribed by the Central Bank, through an attached letter of acceptance.

Actual Peruvian president, hold the dubious record of producing the most lasting hyperinflation (Cagan definition) in Latin America, in his first tenure between 1985 and 1990, and this legacy hunts him.  At the beginning of the present economic crisis in 2008 he declared “Peru is insulated”, now he declares that Peru will be in top 5 world wide highest GDP growth for 2009, in an optimism that exudes maniac behavior.

But the world economic crisis has produced a hidden divorce in Peru economic authorities, in the process of trying to satisfy a President who believes that economic panic could be cured by hypnosis, the Ministry of Economy and the Central Bank have build macroeconomic forecast based on presidential needs and not on technical criteria.

In the table below, is possible to see how the public documents from both institutions, available through Internet, document two different ways to fulfill a GDP growth rate out of reality. ME stands for Ministry of Economy and CB stands for Central Bank.

Institution	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%

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%

Even today is March 16^th, Central Bank web site link to its March document is dated March 21^st, who know why. Going to substance, the column for GDP growth rate shows a reduction from 6.5% to 5.0% from May ’08 to Mar ’09; which looks as a shy reduction to many analysts but maybe Peru has a secret formula for growth.

The column for Import growth rate shows substantial differences between the Ministry of Economy and the Central Bank, which is more evident in the column Elasticity Import – GDP. The Ministry of Economy has elasticity value that varies between 1.9 and 2.7, which fits with my own econometric estimations for this coefficient. But the Central Bank has an elasticity value that varies between 1.4 and 0.4 which is unrealistic from an econometric point of view, as well with historical data. Unless the Central Bank is planning a drastic change in its actual monetary policy, therefore the Peruvian currency will have a free fall enough large to reduce imports.

Finally, the last column shows the ratio for foreign trade and GDP, if May 2008 is taken as base line with financial markets willing to lend to emerging economies, actual circumstances imply a smaller gap since financial availability is lower than before for emerging markets. Also if terms of trade are constant, the baseline gap remains constant; but if there is deterioration of term of trade for Peru, then we have large gap; and today all analysis assumes deterioration for Peruvian terms of trade.

Assuming the Ministry of Economy export – GDP elasticity and the Central Bank export growth forecast, it is possible to simulate several scenarios. In order to reach the ratio for foreign trade and GDP of the base line, which is 4.8%, the maximum GDP growth rate feasible is 2.5%.

If foreign influx of capital is less than baseline scenario May 2008, and terms of trade deteriorated relative of baseline scenario May 2008, then GDP growth rate will be below 2.5%. From other analysis (in Spanish) made with short-term and medium-term real-sector economic cycle, the outcome is more grim with a GDP growth rate negative in 2010-Q1 of -1% (see “Fundiendo Motor” and “Compulsion a la Repeticion“).

Timoratos versus Timberos – Parte Dos (La República 18-IV-07)

 

Timorato: Tímido, indeciso, encogido.   Timbero: Apostador en juegos de azar.

En el gráfico adjunto tenemos once años de PBI mensual en el Perú, pero nuestros ojos son engañados por el mal hábito de creer que en el Perú se mide el PBI mes a mes. Este mal hábito empezó en 1987 cuando la Presidencia de la República quería “buenas noticias” mensuales, y el INEI tuvo la cortesía  de empezar a medir mensualmente, lo que el resto del planeta mide trimestralmente.

 

Como referencia, la medición del PBI mensual es tan compleja y difícil, que de las potencias que conforman el G-7 (Alemania, Canadá, Estados Unidos, Francia, Inglaterra, Italia, y Japón) sólo uno de ellos –Canadá- puede hacerlo. Y a nivel de la toda la Comunidad Europea, tan sólo un país –Finlandia- puede hacerlo. Por ello linda entre lo iluso y lo idiota creer que en Perú tenemos un PBI mensual.

 

Lo que si tenemos como sólido, es la información de campo que mensualmente las oficinas de estadística de los ministerios respectivos acopian sobre la agricultura, la pesquería, la minería, la manufactura, y la producción de agua y electricidad. Esta información consolidada por el INEI, produce una medición del 30% de nuestra actividad económica y esta la graficada como “PBI de Campo”.

 

El otro 70% del PBI no se mide en el campo, sino que se calcula en el gabinete para satisfacer un capricho presidencial que data de 1987. Este cálculo se hace con un conjunto variado de artificios matemáticos, que ni las potencias del G-7 ni los países europeos arriesgan usar, y este cálculo es grave porque induce a pensar que lo graficado como “PBI de Gabinete” es sólido, cuando en realidad es extremadamente dúctil.

 

El gráfico en cuestión parte de Agosto 1995 y culmina en Febrero 2007, y tenemos que en las gestiones Fujimori, Paniagua, y Toledo, ambos PBI están entrelazados, y por ello la medición total se puede considerar relativamente exacta. Pero en Marzo 2006 esta coherencia se pierde, porque el PBI de Gabinete que tiene una metodología dúctil, crece sin cesar y con ello el PBI Total también crece sin cesar.

 

Este cambio de patrón tiene como única explicación un cambio metodológico en el cálculo del PBI de Gabinete, que provoca una sobre-estimación sistemática de la medición del PBI Total. Esta medición errónea puede ser interpretada benévolamente como una “falla” a corregir de inmediato, o puede ser interpretada malévolamente como un “arreglo favorable”.

 

Desde afuera, el timbero creerá que el PBI continuará a tasas de crecimiento mayores mes a mes y tomará sus decisiones de acuerdo a esta realidad errónea, mientras que el timorato creerá que el PBI continuará creciendo a tasas en torno al 6% y tomará sus decisiones de acuerdo a esta realidad parcial.

Timoratos versus Timberos – Parte Uno (La República 16-IV-07)

 

Timorato: Tímido, indeciso, encogido.   Timbero: Apostador en juegos de azar.

 En el gráfico adjunto tenemos 56 años de historia de la evolución de los precios de nuestras exportaciones e importaciones de acuerdo al Banco Central. Un primer elemento cierto es que desde 1980 en adelante los productos que exportábamos valían menos que los productos que importábamos, pero esta tendencia se revierte desde 2001. En otras palabras, durante esos 21 años con el paso del tiempo nos iba igual o peor.

 

Al presente, tenemos una situación favorable donde el poder de compra de lo que vendemos al exterior se incrementa respecto a lo que compramos del exterior, situación que nos conduce a la situación de bonanza que se vive al presente con el inédito temor que el precio del dólar se reduzca, y no como fue nuestra experiencia desde el auge del guano en el siglo XIX, que el precio del dólar siempre se incrementaba.

 

Al cierre del 2006, tenemos cinco años consecutivos de incremento de nuestros precios al exterior con un valor de 52%, pero nunca antes a excepción del periodo 1961-1966 tuvimos una situación similar de mejora permanente, pero en ese quinquenio fue de tan sólo 32%. Finalmente, hay que tener presente que en nuestra historia registrada, el record es de cinco años de mejora, y estos 5 años se cumplieron en 2006.

 

Pero esta mejora de los precios internacionales no es nueva sino más bien cíclica, y las dos más importantes correspondieron a los periodos 1972-1974 y 1978-1980 correspondientes a los gobiernos de Velasco Alvarado y Morales Bermúdez, respectivamente. En el primero los nuestros precios mejoraron 37%, y en el segundo mejoraron 24%., y en ambos casos para derrumbarse posteriormente.

 

Si analizamos un periodo similar con nuestro presente, este sería 2004-2006 donde nuestros precios mejoraron 33% en sólo dos años, que es una tasa inferior a la de Velasco pero mayor a la de Morales; con la legítima duda de cual será la trayectoria futura, y para ello tenemos dos visiones alternativas del futuro, la de timorato y la de timbero.

 

La alternativa timorata nos dirá que esta mejora de los precios externos tiene que terminar por el pasado se repite y porque en el 2006 ya vivimos una situación inédita tanto en la duración de la mejoría como en el nivel de la misma.

 

La alternativa timbera nos dirá que el pasado ya pasó y que el futuro será diferente; por ello lo vivido desde el 2001 al 2006 es sólo el inicio de una nueva ruta por el paraíso prometido, y que no debemos temer un regreso a las crisis habituales.

 

En la segunda parte de este artículo, se verá cuales serán las consecuencia de ser timorato o timbero.