Peruvians shop in downtown Lima, Peru, on December 23, 2022 (AFP/Ernesto BENAVIDES)
Over the past five years, Peru has seen six presidents, the dissolution of parliament and even recently a coup attempt. But, despite repeated political crises, the economy of the Andean country is showing resilience.
Edgar Saenz has had a small street stall in the center of Lima for thirty years. The 51-year-old man offers, like 60,000 other small traders throughout the country, a traditional plant-based drink.
“We have been wronged by the protests and I hope they will not be repeated because it is ordinary people who are paying the price (…) if you don’t work one day, you hardly eat that day there,” he said.
The demonstrations which followed the dismissal then the arrest on December 7 of the former socialist president Pedro Castillo, at the origin of an attempt to dissolve Parliament described as a “coup d’etat”, affected many traders.
However, despite the repeated political crises and their consequences, the Minister of Economy Alex Contreras, freshly appointed by the country’s new president (and former vice-president) Dina Boluarte, believes that the country is “like a kind of building paraseismic”.
“It has central pillars which, despite the earthquakes, allow it to hold on”, he explains to AFP, referring to an “Independent Central Bank”, a Ministry of the Economy which , despite the changes (four ministers in one year), “has been able to enforce tax rules”, and a banking supervision system “which has maintained financial stability”.
A woman sells produce on a street in Lima, Peru, on December 23, 2022 (AFP/Ernesto BENAVIDES)
The world’s second largest copper and silver producer, Peru maintains monetary, fiscal and financial stability, regardless of its government.
In a note dated at the end of September, the World Bank (WB) indicates that “Peru’s macroeconomic fundamentals remain solid, notably a relatively low public debt/GDP ratio, considerable international reserves and a credible central bank”.
It estimates that Peru’s economy is expected to grow slightly below its pre-pandemic pace of 3% in the medium term, supported by rising exports.
“It is the reflection of our public debt which is the lowest in the region. This year, it will be around 33.8%” of GDP”, advances the brand new Minister of the Economy.
“There is no doubt that the Peruvian economy has resisted and has a capacity for resilience”, analyzes for AFP the economist Augusto Alvarez Rodrich, however mentioning the economic consequences of repeated political crises.
“Businesses and families are losing opportunities. Private investment is down 1.3% in 2022 and is estimated to be down 2.3% in 2023. This means the economy is not going to grow at the same pace where she could do it,” he notes.
The Peruvian economy also suffers from an informal sector which employs 80% of the active population, underlines the former Minister of Economy Luis Miguel Castilla (2011-2014, centre-left government).
Police officers stand guard with street vendors in central Lima on December 23, 2022 (AFP/Ernesto BENAVIDES)
“In the short term, (the informal economy) constitutes an escape valve. But in the medium term, it is a burden for the effectiveness of government policies”, he underlines.
“The negative side (of the informal economy) is that there is a great lack of social protection (…). This was particularly evident during the pandemic”, notes Mr. Contreras.
“Among the important structural challenges for the Peruvian economy are the reduction in the relative size of the informal sector”, estimates the World Bank, which also cites “improving the quality of public services, including education, health and water”.
A woman sells piñatas bearing the image of former President Pedro Castillo, his successor, President Dina Boluarte, and former Prime Minister Anibal Torres on a street in Lima on December 23, 2022 (AFP/Ernesto BENAVIDES )
Considered one of the biggest producers of cocaine in the world, with some 400 tonnes per year, Peru is also the scene of illegal mining and logging activities.
“The illegal production of gold in the country now exceeds the legal production (96.6 tons in 2021)”, estimates Mr. Castilla, also pointing the finger at the corruption which, according to him, makes 20% of the annual budget disappear. from the country.
However, Minister Contreras wants to be optimistic: “I have set myself the objective of economic growth of 4%”, he declares, evoking to achieve this “fiscal relaxation”, “rapid spending measures” or still “support for vulnerable sectors”.
© 2022 AFP
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