(Bloomberg) — Peru’s new finance minister is pushing an array of tax incentives early in his tenure in a bid to boost economic growth to its fastest pace in seven years, excluding the pandemic rebound.
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Jose Salardi, who took over the finance ministry five weeks ago, is eyeing four key sectors for tax incentives: agriculture, forestry, fishing and the creation of a special economic zone near the recently inaugurated $1.3 billion Chancay port that is set to significantly boost commerce with China.
New investments triggered by those tax breaks could “generate important collaterals that exceed what I could potentially obtain from income tax, so I end up winning,” Salardi told reporters in a conference with foreign media in Lima.
Salardi is the third finance chief to take over under President Dina Boluarte, one of the region’s most disliked leaders who regardless has managed to court the business sector and deliver robust growth in 2024 after a recession in 2023 that was partially caused by social unrest directed at her leadership.
Now, Salardi is doubling down on bets to accelerate growth to a “significantly challenging” 4% in 2025, he said. That would be the fastest rate of growth since 2018, when the economy also expanded 4%, excluding the pandemic rebound of 2021.
At the same time, his top challenge is to narrow Peru’s fiscal deficit, which is low compared to regional peers but has for two years in a row blown past the legal ceiling set by congress. In 2024, the deficit grew to 3.6%, above the limit of 2.8%. For this year, Salardi is aiming to meet the threshold of 2.2% and described past transgressions as a “temporary hiccup.”
Tax Incentives
In particular, the finance ministry is supporting a bill that would cut the income tax paid by agribusiness. Peru has become a top producer of grapes, blueberries and avocados in recent years, exporting a record $13 billion of agricultural products in 2024, the second largest source of hard currency for the country after mining.
The government wanted that bill to be passed last year, but it has yet to be voted on. Critics say it will cause the state to forfeit taxes at a time the industry is booming, while government officials defend it because agriculture can generate vast amounts of employment.
“If you see the cost-benefit analysis, these have big returns,” he said of the bill.
He also wants to broaden tax incentives to forestry to take on Chile and fishing to take on Ecuador. In both cases he said proposals had yet to be fully drafted and the government is waiting on proposals from the industry groups representing those sectors.
“We need incentives so these industries can take off,” he said.
Finally, Salardi said he is supportive of creating a special economic zone near the new Chinese-owned Chancay port that would carry a 0% income tax at its onset. The city of Chancay was once a sleepy fishing village, but Salardi is convinced it can be transformed as industries flock to use the new port infrastructure.
“Some are fighting me because they say I will give away income revenue, but today I don’t generate any taxes there,” he said. “There is nothing there. So then, what are we fighting about? I may not generate income tax, but I will generate jobs and industry.”
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