Business & Economy

Battered economy awaits winner of Peru’s presidential election

By Monica Martinez

Lima, Apr 8 (efe-epa).- The health of Peru’s economy is a top-of-mind priority for voters ahead of Sunday’s presidential election, following a year in which coronavirus-triggered lockdowns caused the nation’s gross domestic product to plunge by 11 percent and the ranks of the unemployed to swell by more than 2 million.

The government, fearful that large numbers of coronavirus patients would overwhelm the country’s historically deficient and underfunded health care system, initially responded to the pandemic by bringing productive activity to a halt.

The temporary or permanent closures of businesses caused joblessness to soar in the first half of 2020, forcing the government to respond by providing billions in rescue loans to prop up companies and paying out subsidies to vulnerable families struggling to put food on the table.

“The worst moment Peru experienced in terms of employment losses occurred in the second quarter of 2020,” when the number of jobs shrank by nearly 6.7 million, Julio Perez, a technical officer in employment and labor market policy at the International Labour Organization, told Efe.

“As the months went by, economic activities reopened, companies began to open, and at the end of 2020 only 2.2 million jobs were lost” compared to the previous year, he said.

The pandemic also exacerbated the already endemic problem of labor informality in Peru, where 75 out of 100 workers lacked a contract or social benefits at the end of 2020, up from 72 percent at the close of 2019.

Industry federations are counting on the incoming government to reactivate productive activities that were already struggling prior the pandemic due to corruption scandals and a cooling economy.

“The incoming government must be clear that one of the most important sectors is mining, and that (that industry) must operate with a (commitment to) shared value,” Ricardo Marquez, president of the National Society of Industries, told Efe, referring to initiatives that ensure environmental protection and sustainable economic and social benefits for local communities.

Although that sector is a major source of revenue for the government and accounts for the majority of the country’s exports, it has faced criticism for the tax breaks it receives, its alleged lack of support for local communities and the negative environmental repercussions of its operations.

The candidates vying to succeed interim President Francisco Sagasti, who took office late last year amid political turmoil and is not running, are keenly aware of the need to recover the fiscal resources spent addressing the health emergency and the jobs lost due to the lockdowns.

The frontrunner, Yonhy Lescano, is promising to create 5 million jobs if elected, reduce labor informality to 30 percent of the population and extract more tax revenue from mining companies, while leftist candidate Veronika Mendoza is pledging the recovery of 3 million jobs in the first two years of her administration and a 20-percentage-point reduction in labor informality.

She also says she will bolster the economy by providing monthly subsidies to households and more loans to businesses.

The crowded field also includes Keiko Fujimori, a former lawmaker and ex-first lady who was runner-up in the 2011 and 2016 presidential elections.

If no candidate receives at least 50 percent of the vote on April 11, the presidential race will be decided by a two-candidate runoff in early June. EFE-EPA


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