Peru’s Path Forward: Navigating Political, Economic, and Global Dynamics

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LATIN AMERICA ADVISOR

LATIN AMERICA ADVISOR

A daily publication Of the dialogue

November 1, 2023

Will a New Stimulus Plan Spur Peru’s Economic Growth?

Peru’s Congress (pictured) last month approved a $408 million fiscal stimulus package. // File Photo: Peruvian Government.

Q

  • Peru’s Congress on Oct. 20 approved a fiscal stimulus package of approximately 1.5 billion soles ($408 million) in an effort to boost the country’s economy and mitigate the impact of the El Niño weather phenomenon. Just days earlier, Finance Minister Alex Contreras publicly acknowledged, for the first time, that the country is in a recession. What are the most important parts of the stimulus package, and what effects will they have on the economy? What is weighing down Peru’s economy, and what is needed for it to rebound? Which sectors of Peru’s economy are struggling the most, and which are doing better?  

A

Pedro Francke, former Peruvian finance minister: “Peruvian non-primary manufacturing and construction show 9 percent lower production (from January through August) and agriculture is 4 percent lower, while mining has grown due to the new Quellaveco mine. The immediate cause of the recession is the sharp drop in domestic demand, especially private consumption, as nominal salaries have not risen at all in the last year while inflation has been 5 percent. Private investment has also fallen due to the rise of domestic interest rates and the political instability generated by a regime that undermines democracy, has violated human rights causing 60 civilian deaths and has a disapproval rating of 90 percent. Public investment and spending have been falling, worsening the recession, while at the same time the public deficit has risen to 2.8 percent of GDP due to…”

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