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Peruvian presidential candidate Keiko Fujimori (R), next to economist Elmer Cuba (C) and Congressman Joaquin Ramirez, talks to the press during a visit to San Juan de Lurigancho in Lima, Peru, May 4, 2016. REUTERS/Mariana Bazo/File Photo


By Mitra Taj and Marco Aquino

LIMA (Reuters) - The economist widely expected to be Peruvian presidential frontrunner Keiko Fujimori's pick for finance minister said higher corporate taxes and a bigger budget deficit would be part of an initial raft of reforms if she wins Sunday's election.

Elmer Cuba, whom Fujimori tapped as her chief economic adviser this month, said President Ollanta Humala's bid to shore up slumping private investments in the world's third biggest copper supplier by cutting the corporate tax rate during a sharp slowdown in 2014 had failed.

"Nothing happened with the reduction," Cuba said in an interview in his offices at consulting firm Macroconsult. "Without a doubt, we're bringing it back up to 30 percent," next year from 27 percent now.

The tax hike would help replenish public coffers as Fujimori plans to ramp up infrastructure spending to bring economic growth rates back to at least 5 percent per year, Cuba said.

Fujimori enjoys a nearly 5 point lead over her run-off rival Pedro Pablo Kuczynski, a 77-year-old former World Bank economist. Both candidates are free-market champions and pleased markets after they defeated leftist rivals in the first-round election in April.

But Cuba described as "regressive" Kuczynski's proposals to cut sales taxes, while offering tax rebates to companies that reinvest their earnings.

"It's also fiscally irresponsible," Cuba said. "Our economic plan is much more orthodox."

Fujimori recruited Cuba, a prominent economist in Peru and former central bank official, as she has sought to broaden her appeal beyond the loyalists of her father Alberto Fujimori's authoritarian government.

Her previous economic adviser Jose Chlimper, who is still her running-mate, was once farm minister for her father.

"I trust Keiko Fujimori," Cuba said in reply to a question about a scandal involving a senior aide who resigned amid media reports linking him to drug trafficking.

Cuba cited Fujimori's firm leadership and popularity with the poor in conflict-prone Peru as a likely boost for business sentiment that has sunk during Humala's term.

But he threw cold water on Fujimori's initial campaign pledge to tap a rainy day fund in the finance ministry, saying it would be used "minimally, less than during this government."

The budget deficit that Fujimori would widen to up to 5 percent of gross domestic product in 2017 would be financed with loans from multilateral institutions and a "probable" bond sale in global markets in 2017, Cuba said.

The deficit would be left at 1.5 percent of GDP in 2021 and the public debt level capped at 30 percent of GDP, he added.

(Reporting by Mitra Taj; Editing by Clarence Fernandez)


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