We wait anxiously in the entranceway of his Lima home for an assistant, a press officer, someone official to tell us where to set up. 

Instead, after a few minutes Pedro Pablo Kuczynski himself appears. 

“There’s a lot of you,” he says after a brief introduction, apparently surprised to see so many strangers standing in his house. 

He pulls an Andean vest on over his carefully pressed collared shirt, and announces he just needs to make a couple of calls. Please, there is no rush, we assure him. He retires to his study. 

The film crew is only halfway through preparation when he appears again. “Ready?” he asks. No-one wants to keep a president waiting, much less in his own home. But there are lights to be mounted still, so we ask for another 10 minutes, please. 

Part of this casual preamble can be attributed to the fact that Kuczynski is operating from his home while renovations are done to the official quarters in central Lima. But it also reflects a man who is hugely at ease with power. 

After half a century of important work in the public and private sectors, the gloss of high office perhaps shines less bright for Kuczynski than it does for other newly-elected figures. 

His conversation is littered with references to his experience: “The free trade agreement with the US that I helped negotiate back in 2005…. When I was minister of energy and mines 36 years ago… I used to be in mining, in Alcoa’s mining division, many years ago.”

Kuczynski is not a typical Peruvian president. The country’s oldest elected leader at 77, he is also the first investment banker, and the first concert flautist, to be its head of state. 

He started out in Peruvian officialdom in 1966 when he was named central bank governor. In the early 1980s he served as Mining and Energy Minister, and returned to government under Alejandro Toledo’s presidency as Finance Minister in 2001. 

His private sector experience includes running a venture capital fund in Miami, a stint as a managing director at First Boston in New York and advising the Rohatyn Group on private equity investments.

Born in Lima in 1938, he lived in Iquitos, in Peru’s Amazon region, and Puno, in the Andes, as a child. He went to school in Peru and the UK. Kuczynski studied philosophy, politics and economics at Oxford University, followed by postgraduate study in economics at the Woodrow Wilson School of Public and International Affairs at Princeton University. He was the youngest employee at the World Bank when he joined the institution after university. 

Kuczynski won this year’s election in June by the slimmest of margins, topping his opponent by less than 50,000 votes out of more than 18 million cast. He was seen by many as an elitist ‘gringo’, having renounced his US citizenship only a few months before the elections, and as out of touch with the vast majority of Peru’s 31 million people.

Kuczynski, or PPK as he is commonly known, has quickly erased his standoffish image.  

He endeared himself to Peruvians with a little jig during his inauguration on July 28 and by putting a handkerchief on his head to block the sun during a military parade the next day. He followed this up by leading his ministers in a session of aerobics before the first Cabinet meeting on August 4. Peruvians love the antics, with more than two-thirds approving of his style, according to mid-August polls by Datum and Ipsos Peru.

That style has won over the country’s hearts, but now Kuczynski faces the tough test of wielding his academic and business prowess to enact policies that expand the economy and create conditions for more equitable growth.

Datum indicated that 68% of those polled believe his policies will lead to growth and jobs. “There is a sense of optimism in the country. I think the government, with a Cabinet that includes ministers with business and public-sector experience, will be able to move ahead on the important issues,” says Luis Nunes, a political analyst.

LatinFinance discussed Kuczynski’s economic philosophy, his view on Peru in the world and financial issues for the country in an exclusive interview on August 19. Below are highlights from the discussion. The full interview is also available for viewing:

LatinFinance: How would you characterize your economic philosophy?

Pedro Pablo Kuczynski: I believe in the market, but I also believe that in a country of the level of development of Peru that the government needs to have a strong presence in various areas. One is education. One is public health. We sit here in a cauldron of transmittable diseases, like zika, dengue, chikungunya etc. You have to have strong public health. And you have to have basic social services which Peru has not provided at the pace at which it should have. 

LF: How do you determine the priorities of market versus social services?

PPK: You let the market do its job. Peru has done well since the 1990s in promoting private investment. We’re a high investment country. Gross domestic investment has been close to 30% of GDP and that is the main reason Peru has grown so well. 

Where has this investment gone? Obviously into mining; we sit on the Andes so we’re naturally a mining country. But a lot of it has gone into other things – services, distribution, tourism, agro-industry, for example, sophisticated foods like blueberries. Peru produces the biggest blueberries in the world — and they’re actually tasty!

So, the free market works, but we’ve got to provide the public services. Now, some of these are provided by private companies. For example, a big part of electricity here is private, the ports are mostly private, the airports are mostly private. But there are some parts of public services that are public too. 

LF: You have extensive experience in the public sector and the private sector. What has that experience taught you about how economies operate in the real world, beyond textbooks and theories?

PPK: The economy should be run by a good conductor. You let the orchestra play, but the conductor occasionally has to wave his wand in a certain direction. I once was very lucky to play the flute in an orchestra that was led by Sir Thomas Beecham, the famous British conductor. I was struck by how little movement he made with his baton, but how effective he was at conducting. 

That’s what one has to do with an economy. You’ve got to not interfere too much: just a little bit. Give it a little touch. And never overestimate what the government can or can’t do. You have to be very careful. 

We have an incredible example in the world today which is this idea that with zero interest rates we’re going to get out of the semi-recession the world is in. It’s clearly wrong because we’re not progressing at the moment. 

That’s affecting countries like Peru which export raw materials, also other things. But we’re in a repressed potential depression, that’s where the world is today. This affects everybody.

LF: So let’s talk about Peru’s place in the world. We thought we were going to see a tapering of central bank liquidity globally. It looks now like central banks are being easier with their monetary policy. You’re saying that is negative for Peru?

PPK: What the central banks are doing is not negative for Peru – but it is not effective in restoring growth. Central banks are focusing on a tiny sub-segment of the world economy. The growth of credit and money has slowed down dramatically, despite what central banks have been trying to do. 

Would it be worse if they had some different policy? I don’t know. That’s something to be discussed. 

The reality is that today we have Europe, vastly slowed down, mostly for demographic reasons. We have the US in a long but slow recovery. And we have China, where population is starting to stabilize and the immigration from the countryside is slowing dramatically and so China is slowing down. Countries like Japan already slowed down. ‘Abenomics’ has not been able to reverse that. In the end, the major actors are probably demographic much more than monetary. 

What’s the place of Peru in this? We still have pretty good productivity growth, despite what some say. We still have a pretty good investment ratio. We have a ton of things to do that could give us growth for the next 15, 20, 25 years: infrastructure; we could double exports; we could double tourism. 

LF: Going back to liquidity in the markets globally. It seems fund flows into emerging markets have picked up again. Does that pose a risk for Peru?

PPK: Not really. Our exports fell because of the fall in the price of copper, mostly, and gold, somewhat. And there is really no risk of a lot of hot money coming here as has happened in 2006 to 2010, more or less. 

There was a lot of hot money. The exchange rate appreciated. But it didn’t appreciate that much here. We were careful through fiscal and monetary policy not to let the rate appreciate too much. Whereas other countries – Colombia, Brazil, Mexico, Chile – had enormous appreciations and subsequently they have had huge devaluations. That’s a roller coaster that’s not so good if you’re in big investments like mining that need some predictability.

LF: But when we’re talking about portfolio flows, Peru has solid growth potential. You’re not worried that the hot money is going to come back?

PPK: There aren’t so many things to buy here for hot money. The government has a very low debt ratio. It’s not a big issuer. We have the best credit rating/spread of any country in Latin America other than Chile. 

LF: Staying on the theme of Peru in the world: what’s the role of China?

PPK: It’s very important and my first foreign trip is to China. I wanted to give a sign that China is our biggest customer. They’re coming here to APEC in November. So I should go as a medium-sized country and say hello to Mr Xi, and give him an invitation and a warm welcome to Peru. That’s why my first trip is to China. 

LF: How do you see the relationship between Peru and the US, and how would you like it to evolve in the years ahead?

PPK: Peru is really focused on building up relationships not just with the US but with the other Pacific Alliance countries – Chile, Colombia, Mexico. 

With the US, we have a free trade agreement that I helped negotiate back in 2005 and that has been very successful. We learned from the FTA with Mexico that there were certain mistakes you could make in agriculture which we did not make. We’ve had no problems with this agreement. 

We want good relations with the US. Now the thing is that with the campaign in the US there are a lot of protectionist noises. We’re a small enough player so we hope they leave our FTA alone. The US has also benefitted from the FTA. You see Jeeps here, American cars, that you didn’t see years ago. 

LF: It does seem we’re seeing a popular trend toward protectionism in the developed world. Is that a risk for Peru?

PPK: It is a risk not just for Peru, for all emerging countries. We’ve been at the forefront, behind Chile, in opening our economy. Our average import tariff is 2% — and that is simply to pay for the customs, it’s really not protection. You can buy an American jeep here for the same price as in the US. 

I think this protectionist tendency is based on a fallacy. It is based on the fallacy that manufacturing employment in the US and Europe has fallen because of these FTA agreements. That’s not the reason. The reason manufacturing employment fell is new technologies and robotics. That’s the real issue. That’s an old battle in the world since the 18th century. 

So we’ll see what happens. It’s a little bit worrying. 

LF: What are you doing to prepare in case Donald Trump wins the US elections?

PPK: As I told Mr Obama on the phone the other day, I said: “I hear the Thump of Trump.” [Laughs]. But he said: “Don’t worry, we’ll beat him.” 

I don’t think he can win. 

LF: Do you think even if Clinton wins, the popular support towards protectionism might alter the way she approaches trade?

PPK: Whoever wins, it will be very difficult to get this TPP through the US Congress in the interim period between the election and the new government. I think it will be extremely difficult. The chances of that happening are low.

LF: How do you rate the chances of the TPP going through altogether?

PPK: No more than 30%. If it doesn’t go through – what would we do? We’d persist with Australia, New Zealand, and Malaysia. We already have all the others in agreements. It’s not the end of the world for us. 

LF: Let’s talk about Peru more specifically. One of the financial issues here is land reform bonds. Gramercy, the fund, is suing Peru. What’s the strategy there? Are you going to default or are you going to pay?

PPK: These land reform bonds were issued in the 1970s. They’re under Peruvian law. They are not internationally recognized bonds. And we have a very good team of lawyers. 

These folks think they can buy something for a cent and make 100. It doesn’t work that way. This is not funded debt like the Argentine bonds were, that were actually issued. This is something quite different. 

We will look at it when the issue comes up. They’ve hired lobbyists, they’re making a big fuss. And we’re not stupid. We know what to do. We’ll face the music if there is music. But I think that we can look at this with a clean view.

LF: So you’re saying a solution through negotiation? 

PPK: Well, I don’t think we owe them anything. It’s that simple. But we’ll have to see. We’re reasonable people. They already, the same group of investors – Paul Singer and company – they already got Peru to pay up in the late 90s. But that was funded debt. That was internationally recognized debt. This is not. 

LF: Would you say that Peru has had a following wind? It’s benefitted from global factors, from the rise of China that’s brought in new money, new capital.

PPK: The slowdown in China has affected metals prices. It’s affected our exports. But we can, I think, double our exports in the next seven years despite this. 

We have a lot of new mines coming on stream. We have the tourism, we have agro-industry. I am not so worried. 

Peru for years and years exported a billion dollars. When I was deputy governor of the central bank we exported $800 million. During the 1990s we stayed at $6 billion, we didn’t move. And then suddenly we went to $46 billion, in 10 years. Now we’re down some. But we can get back up to $70 billion, $80 billion. Chile is $60 billion, Colombia is about the same. Colombia is of course a much bigger country. Chile is a smaller country than Peru and they export much more than we do. We have a surplus with Chile. 

I think we can get there. It’s a question of infrastructure and proper macro policies and it’ll take care of itself. 

LF: What do you want your legacy to be?

PPK: I’m not so concerned about my legacy. A lot of people in politics think about their legacy. What I’m interested in is that Peru, when it reaches its 200th anniversary of republican government in 2021, five years from now, the only thing I would like is for Peru to be a little bit on the path to being a modern country.

Less poverty — we’re winning the war against poverty but we’re still at 23%. We should be down to 10%. Infant mortality is high, it’s at 17 [deaths per 1,000 live births]. It should be 5. I don’t think we can do that in five years, but maybe in 10. 

I would like formal employment to dominate in Peru. Today it’s informal employment that dominates. And a reasonably modern education system, which we’re slowly getting to but we have a long way to go yet. 

That’s what I would like. It’s not going to be my legacy, it will hopefully continue to the next person in charge, and the next one after that. LF