Peru's finance minister quits over fuel tax hikes

Peruvian Finance Minister David Tuesta resigned on Monday as truck and bus drivers called off plans for a major protest against his fuel tax hikes and the president promised to shift the focus on collecting taxes owed by big companies.

The finance minister's resignation marks the biggest setback yet for President Martin Vizcarra since he became president in late March, replacing Pedro Pablo Kuczynski, a former Wall Street investor who stepped down in a graft scandal.

Tuesta's decision to hike excise taxes on diesel and other fuels as oil prices climbed on global markets prompted protests in southern Peru last month and organisers had threatened to stage larger and indefinite protests starting on Tuesday.

In a late-night televised address, Vizcarra said he had accepted Tuesta's resignation as part of a shift in tax policy.

"The country's growth will be obtained on the back of investments and better [tax] collection, not on raising tax rates," he said.

However, Vizcarra did not say whether his government would reverse the higher fuel taxes. Instead, he shifted the focus of his tax drive to large companies.

"Large companies have been identified that owe the state the equivalent of more than one percent of GDP, revenues needed for the development of public works and policies that benefit all Peruvians," Vizcarra said.

Vizcarra did not name any of the companies but promised to establish an ad-hoc commission to tackle the issue.

Truckers call off strike

Earlier on Monday, representatives of truck and bus drivers announced they had agreed to call off plans for an indefinite strike against the higher fuel taxes after reaching a deal with officials in Vizcarra's government.

It was not clear if Tuesta's resignation was part of this deal. The finance ministry was not immediately available for comment.

In neighbouring Brazil, a recent truckers' strike over higher diesel prices virtually paralysed the country for nearly two weeks.

Vizcarra did not say who he would appoint to replace Tuesta, but he is widely expected to keep Peru's decades-old free-market economic model in place through 2021, when his term ends.

Critics warned that the resignation of Tuesta, who had been in the job for only a little more than two months, risked sending the message that Vizcarra, formerly the country's vice president, could be easily swayed.

"Let's hope the departure isn't a response to new policy reversals due to pressure," 

Alonso Segura, a former finance minister during the government of former president Ollanta Humala said on Twitter, "There are decisions that aren't popular but are necessary."

Last month, responding to an uproar from fishermen, coastal residents and environmentalists, Vizcarra repealed decrees Kuczynski had signed authorising offshore oil exploration by London-based Tullow Oil.

Vizcarra said he had been forced to form a cabinet in "record time" to stabilise Peru after its worst political crisis since the turn of the century, and urged Peruvians to be patient.

"We've been in the government for a little over two months, and the results of this arduous work are starting to show," Vizcarra said, listing upcoming private investments.

But Vizcarra's approval rating has slipped amid growing criticism in recent weeks as teachers pushed for a bigger budget for education and feminists protested his lacklustre initial response to a wave of gruesome killings of women.