Lima, Peru, December 19, 2022. The last days have exposed Peru’s main weakness as a business platform: internal and external distrust in local politics is already having an impact on companies, scaring off investments and increasingly reducing economic growth projections.
Dina Boluarte assumed the presidency of Peru on December 7, and the protests are becoming more and more violent. The government has already decreed social immobilization, better known as curfew, and although it is not throughout the country, it does leave the feeling that the escalation of violence, damage to the social fabric, and the rule of law continue unabated. that everyone cries out in Peru.
However, the greatest concern lies in the fact that the underlying problems in the country are not being addressed from politics, which have been generating an unusual replacement in the executive branch, presidents and senior officials for at least six years, which does not allow for the a national project that offers peace to citizens and guarantees for business, employment, wealth generation and social development.
A problem that can only be solved by opening the way to trust based on facts in favor of development, communication and public relations.
This was the path and the crisis generated
The government of the first female president in Peru issued a curfew on Thursday afternoon in 15 provinces of eight regions of the 23 that make up the country, which are: Arequipa, Arequipa; Viru, Freedom; Ica and Pisco, in Ica; Andahuaylas and Chincheros, in Apurímac; Cusco, La Convención, Chumbivilcas and Espinar, in Cusco; Carabaya and San Román/Juliaca district, in Puno; Tayacaja and Angaraes, in Huancavelica; and Cangallo in Ayacucho.
The hours in which the curfew applies from 6 p.m. to 4 a.m., from 7 p.m. to 4 a.m. and from 8 p.m. to 4 a.m. in the mentioned provinces, for the following five days.
La Defensoría del Pueblo had reported 25 deaths and more than 420 injuries due to clashes between the protesting population, the armed forces and the police.
Boluarte had also declared a State of Emergency for 30 days in the country, in order to offer more confidence to society when deploying elements of the armed forces.
In the country there are currently blockades of roads, airports, energy installations, police stations and damage to private property, all this, while the Judiciary ordered 18 months of preventive detention against Pedro Castillo for the attempted coup, which promoted this wave of mistrust and uncertainty.
The investigated ex-governor has been detained at the headquarters of the Diroes, in Ate, since December 7 and the prosecutor’s office estimates that Castillo would be sentenced to at least ten years in prison for said insurrection attempt.
On the other hand, Boluarte completed his government cabinet on Tuesday with the appointment of the Ministers of Transport and Labor in the Government Palace, a total of 19 assignments.
A bad reputation that was getting worse
The problem facing the country is that there is great polarization that has dragged on even since Castillo’s electoral victory in 2021, when he won with just over 50 percent of the vote, a minuscule margin for a second round.
He won back then with a very tight margin and with allegations of wrongdoing.
However, until before his arrest, his popularity had grown inexplicably, despite the fact that in recent months accusations of corruption had appeared against him, there was even talk of 51 investigation folders in the hands of the fiscal.
There was talk until December 7 that there was compelling evidence in audio or video where Castillo received money and that they were going to be presented to authorities.
Some conclusions dictate that this was the reason for his political suicide last Wednesday.
What is a fact is that his declaration of a State of Emergency did not have the support of the armed forces or the national police, these corporations maintained their institutionality, but now with the confrontations their reputation is also impacted.
Castillo, for his part, must face these allegations of corruption, while he is in preventive detention and not with the asylum that the Mexican government of Andrés Manuel López Obrador had granted him, also of the same political ideology.
The panorama told from the bowels of chaos
José Luis Silva Martinot, former Minister of Foreign Trade and Tourism of Peru, reported that this political situation has transcended so much that there are already direct effects on businesses.
“Businesses have a demand reduction of up to 80 percent, depending on the region and business; restaurants, also depending on size, between 40 and 60 percent fewer customers; sales at the end of the year have a contraction of up to 80 percent and it is the same case for hotels”, and he hopes that this situation will be resolved in the following days and weeks due to the presence of the armed forces in the streets and therefore the impact on business.
But the damage is done, because political uncertainty has already reduced investment significantly from the levels it was at before Castillo took office.
“Definitely the uncertainty in many years generates doubts in businessmen in all areas, but the private sector continues to work, the position is that the elections be brought forward in a real sensible term. Promising elections very soon would be a lie because the structural changes required in the electoral institutions would not be made. Another chamber is required, the non-re-election to prevent unprepared people, without values from continuing in the public sector and for this two legislatures are required, which means that they are in April 2024”.
José Luis Silva Martinot, former Minister of Foreign Trade and Tourism of Peru.
According to César Flores Córdova, director of Infomercado, a specialized economic and business digital media, Peru has already experienced six years of political instability that have weakened the country.
He points out that the autonomy of the central bank has not been touched, but the weakness in the policy is already materializing with lower growth of the Gross Domestic Product (GDP) of Peru, which was already adjusting downwards.
Data from the International Monetary Fund (IMF) indicated last October that Peru’s GDP would grow 2.7 percent annually this year, less than what was calculated in the previous April, when the perspective was for growth of 3 percent.
“Now growth this year is expected to be between 2 and 2.3 percent, when many years before the rates were between 6 and 9 percent, although this is not only due to internal factors, but because of the war, the economic recession of China, changes in interest rates in the United States and other factors”, and by 2023, the executive expects progress to be at zero rate, due to the hard start that Boluarte will have and due to the replacement of local rulers in the following weeks, since the budget in its first year tends to be under-exercised.
In addition, for the following year mining, which has a significant weight in the country’s economy, is expected to drive other activities, but even so the damage to the attraction of FDI has been done.
“Ecuador and Colombia have been able to take advantage of this situation and have managed to attract investments from Peru in agro-industry and agro-exports. The large rating agencies such as S&P or Fitch have also lowered the country’s risk ratings, which makes it less reliable. There has been a lot of uncertainty. In the year and a half of Castillo, close to 70 ministers passed”.
César Flores Córdova, director of the specialized business and economics digital media Infomercado.
The problem is that Dina Boluarte does not have the support either because she did not fulfill two promises, the first is that if Castillo left office, she would also leave and the second, that she did not call immediate elections, actions that add to the mistrust.
Diana Seminario, an independent political analyst, explained that Boluarte decided to stick to the constitutional presidential succession that dictates that if the president leaves office, the next to occupy it is the vice president and it was her.
Boluarte has already made several mistakes due to the changes in positions that she has had regarding the elections. It should be remembered that at the beginning of her inauguration as president of Peru, she stated that she would like to finish the term until 2026, then and after pressure she said that the elections would be brought forward to April 2024 and later to December 2023, revealing a very flexible position. and with a greater tendency to accept what the protesters are looking for, immediate elections, actions that once again add to the lack of confidence among businessmen.
“She must advance elections with the support of the congress and the reforms, but in no way should she give in to blackmail, as happened in Chile to hold a constituent assembly, she must not give in to violence and extremism, she has to be firm, she must think that he already governs for everyone and that he is not just another member of the Perú Libre party that had that line.
“The reasonable term is April 2024 to allow for better representation, avoid the re-election of congressmen, because we would have inexperienced people, not allow those convicted of corruption to run and that requires two legislatures, that is a year, before that not makes sense”.
Diana Seminario, independent political analyst.
While all this is happening, 26 million dollars of the economy are lost daily due to demonstrations.
It is important that the Peruvian government shows a firm and institutional change towards reconciliation with specific events, such as creating a roadmap to advance elections to April 2024, and that the country begins to export the image and reputation of a business platform that suits businessmen, entrepreneurs, citizens and the government itself.
It is not convenient for anyone to have a position of belligerence and antagonism because the best opportunities are created from communication, the linking of interests, and they are taken advantage of with forceful actions designed for the well-being of the population and with a view to the future.
