Business confidence in Peru is being undermined by a legislature bent on populist measures ahead of the general election
covid-19 first appeared in Peru, the government’s response seemed exemplary. President Martín Vizcarra imposed a swift lockdown. Taking advantage of Peru’s strong fiscal position, his economic team launched the most ambitious aid package in Latin America, worth 12% of. Four months on, the outcome is disappointing. With more than 350,000 cases and at least 13,000 deaths, Peru has suffered grievously from the pandemic. In April its economy contracted by 40% compared with a year earlier.
For all these reasons, the government opted for one of the world’s strictest lockdowns. It extended to shutting down most big mines, although many are naturally isolated. All this amounted to an induced coma for the economy. The government did its best to compensate. It has guaranteed Central Bank emergency credits worth 8% ofto businesses. The bank auctioned them, which drove down interest rates.
The lockdown did slow the spread of the disease, and the government has expanded health facilities. But the virus has not been defeated and as Peru opens up again cases are rising. In Arequipa, the second city, patients are dying in tents in the street. Having been too strict, Peru’s health restrictions now look too lax.
At least economic recovery may be swifter than elsewhere, thanks partly to the injection of credit. Mines are now operating again, and electricity consumption is on the way back to normal. Ms Alva has allocated an extra 1% offor public works. If all goes well the economy may end the year having contracted by less than 10% and could make up much of that in 2021.
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