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Peru’s economy, slowdown.

“Structurally speaking Peru’s is a small economy, which has, for the most part, shown vulnerability to external shocks.
The impulses to growth and the reasons of its slowdown were seldom due to internal causes but almost always to external factors”, as the economist Felix Jimenez says. (2)
Peruvian economy is currently undergoing slowdown, after more than one decade of relevant economic growth.
Between 2002-2013, Peru grew at an annual average of 6% of the GDP (gross domestic product), while the average of Latin America and the Caribbean region was 4%. This year the expected growth is 3.9%, while the regional projections are -0.2%. In this context, Peru has to face the following economic challenges: in the first place, the  achievement of the decrease of monetary poverty (of incomes) throughout the country. In fact, although poverty decreased from 58.7% in 2004 to 21.7% in 2015, it did not decrease equally in all the areas of the country. Poverty decreased in just 855 (45%), out of the 1,848 districts of Peru, but remained stable in 761, and increased in another 232.

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The second economic target is to improve the conditions of employment of the Peruvian population. The majority of working Peruvians (72.8%) are ‘informally employed’ often meaning by that ’employed outside the framework of regulations, in precarious and irregular jobs with longer working hours, no labour rights or social security’. The average informal employment is 50% in Latin America and the  Caribbean region. According to the Organization for Economic Cooperation and Development (OECD), which groups the most developed countries, the informal employment rate of the Peruvian labour force is ‘one of the highest rates in the world’.

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This situation is due to the fact that the mining sector, which has been the main sector that has boosted the Peruvian economy in recent years, contributes very little to the increase of employment (0.9% of the total). Changes in the economic policies are therefore essential in order to make Peru less dependent on the export of raw materials and to develop the internal market, particularly in the sectors of agriculture for domestic consumption, micro and small business, tourism, gastronomy and services; sectors which generally need more labour force than others.

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Peruvian economist Humberto Campodónico said that “all the actual proposals of multilateral organisms point to the need of reforms that allow diversification of the productive activity (…) we Peruvians are lagging because we are expecting that another cycle of high prices for raw materials is coming soon, which is not so”, (3).
The third target is to reduce the so-called criminal economy. In fact, the scarcity of regular jobs inside the frame of regulations has favoured, over the last decade, the recruitment of people into the illegal business of drug trafficking, smuggling, illegal logging, illegal mining and human trafficking. All these criminal economic activities  generate wealth, but at high human and social costs and put the governance of the country at serious risk.
Peru’s fourth challenge consists of ensuring a sustainable growth. The growth the country has reached so far, has been achieved by means that have often sidestepped environmental issues. Environmental liabilities currently amount to 8,616 in the Peruvian territory, 50% of which are at high risk, and for only 12% of these has an environmental remediation been planned.
(P.A.)

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(2). Otra ruta de desarrollo para el Perú. Critica del neoliberalismo y propuesta de transformación republicana” (Lima, Otra Mirada, 2016),  p.281.

(3) ‘Y después del superciclo ¿qué viene?’ en Eduardo Toche M. (compilador) Perú Hoy. La divina tragedia (Lima, Desco, 2015), p.212.

 

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