Political crisis in Peru: protests begin to cause millions in losses to its economy

The six weeks of protests in Peru are starting to take their toll on the economy. There are already more than $500 million in losses in most of the country’s economic activities due to cuts and arrests imposed by protesters, with no way out yet in sight to the serious political and social crisis of the Andean nation.

When economic actors thought that the exit from the presidency of the leftist President Pedro Castillo, due to a failed coup attempt, would bring improvements to the country’s macroeconomic expectations, the protests intensified and They also called for the resignation of his successor Dina Boluarte.

Boluarte’s demonstrations of refusal began in the south of the country as soon as he took office, on December 7, and extended to almost the entire territory, after the first deaths from the police repression, which Now they exceed 60 dead.

After six weeks of protests, with a week off for Christmas, economic losses have risen to 2,150 million soles (about $554 million), as confirmed this week by Economy Minister Alex Contreras.

the paralyzed south

The most affected regions are the south of Cuzco, Madre de Dios and Puno, which there have been cuts in routes since December and already suffer from fuel shortages and high food prices.

Contreras estimated that if a rapid dialogue between the parties is not achieved and the conflict continues, The Peruvian economy will grow by just 2% in the first quarter of 2023but if there was a reactivation following a political consensus, the increase in GDP would be at least 3%.

However, the inflation analyzed in January will most likely be around 9% precisely because of the protests, the minister announced, although he hopes it will be a temporary increase.

One million people out of work

A study by the Lima Chamber of Commerce warned this week that one million jobs, accounting for 27.8% of formal employment in Peru, are at risk of being lost to the protests.

Interruptions and roadblocks affect mainly to mining (52.6%), the agricultural sector (51%), manufacturing (32.3%) and construction (31%), among others.

The chamber specified that the losses are also recorded in public investments which are equivalent to 71 million soles (18 million dollars) every day.

blow to tourism

But if there is one activity that is currently in recession, it is tourism, since the focus of the protests is in the regions that have the greatest attractions for incoming tourism, such as the southern Andes Cuzco and Punoas well as the Amazonian Madre de Dios.

No tourists in Machu Picchu

Cuzco is home to the Inca citadel of Machu Picchu which, due to the protests, has had to interrupt the operations of its airport and of the trains that lead to that archaeological center several times.

Puno is the plateau region that has the highest navigable lake in the world, Titicaca, but that keeps blocked the route that connects it with Bolivia and the rest of the country.

Similarly, Madre de Dios has some of the most attractive national parks in the tropical jungle, bordering Brazil and Bolivia, but was the first region to run out of gas and fuel supplies due to the lockdowns.

The president of the Peruvian Association of Travel and Tourism Agencies (Apavit), Ricardo Acosta, explained to the EFE agency that the current situation is that “there are many (the micro-enterprises in the sector) that have already closedthere are many people who have sadly lost their jobs and the shock is very hard.”

Peru received 4.6 million tourists before the pandemicbut this year the expectation dropped to less than half a million of visitors, Acosta said, because “the reservations for hospitality tourism that we had, I reckon, until May have already been cancelled”.

The representative added that this crisis “unfortunately does not only affect the tourism supply chain, but the country’s supply chain in general. The situation is complicated, I hope that the situation will reverse itself”.

Measures for the resumption of public works

Faced with the stop, which generates uncertainty in the economy, the government has announced the program with fist (force) to resume public works delayed by the social upheaval and the financing of micro-enterprises which make up most of the entrepreneurial map in Peru.

However, the possibility that the Executive can implement this program in the transitional period, as Boluarte has defined it, collides with the difficulty you are having in regaining stability and be able to govern until a snap election in a year or less.

EFE agency