Esta semana se dieron tres eventos que permiten vislumbrar la dinámica política de los meses iniciales del nuevo Gobierno: la Mesa Directiva del Congreso, el mensaje a la nación del 28 de julio y la conformación del gabinete de ministros.
Si bien aún hay mensajes contradictorios dentro del entorno cercano a Pedro Castillo, hoy vemos señales claras de moderación al menos en el ámbito económico. En este aspecto, Pedro Francke –vocero oficial de Pedro Castillo en materia económica– ha cumplido un rol importante.
This year, the business environment will continue to be complex. For the second year running, business output levels will be determined largely by COVID-19. There is still uncertainty about the speed of the vaccination process in our country. Given the limitations in the supply of vaccinations on a global level, most likely inoculation in Peru will only reach wide coverage in 1H2022. The new regional restrictions will have a differentiated impact in different economic sectors. Worst affected will be those that are under the most restrictions to operations and are still facing a highly weakened demand. For example, businesses linked to tourism, hotels and restaurants, as well as trade categories of non-essential goods. In contrast, the primary sectors—mining, fishing and agriculture—which aren’t confronted with new operational restrictions and whose demand faces less difficulties, will continue to recover and grow, respectively. The good news is that this year, large public infrastructure works will be carried out which will boost the construction sector. The materialization of investments under the Government to Government scheme will boost the flows of the Rebuilding with Changes program (hospitals, schools and comprehensive solutions for the key river basins of the coastal rivers). Nevertheless, there is a risk that the budget reallocations arising from the need for higher current spending to attend to the second wave will slow down the public investment flows under the regular public works scheme and that the change of administration is to generate delays in the awarding process of the projects.
In the first results presented by the ONPE at 98.1%, Pedro Castillo obtained 50.2% and Keiko Fujimori 49.8%, about 85,000 votes apart. With a distance of 0.4%, the uncertainty could last a few more days while waiting for rural and foreign votes. In additiion, there is the pending review of the 1,371 minutes observed. Despite the ONPE's high percentage of advancement, the winner cannot yet be declared, due to the narrow margin between the two candidates. For the moment, both candidates have called for serenity and calm. There have been mobilizations both in Lima, against the JNE and ONPE, as well as in other regions of the country such as Tacna, Puno, Cusco and Cajamarca, although these were minor. The population remains expectant because of the short distance that separates both candidates.
This year, the international environment will be favorable to the Peruvian economy. On the one hand, China, Peru’s main trade partner, is set to grow close to 8% (higher than the global average), and the United States, our second most important trade partner, will reach its pre-crisis output level by the end of this year (it’s expected that an important percentage of its population will be vaccinated by the end of 4Q2021). On the other hand, it’s expected that the prices of our main export products, such as copper, will stay at favorable levels throughout the year. This is due to the higher demand from China (investment programs of 5G telecommunications networks and electric vehicle manufacturing) and the United States (fiscal stimulus plan of approximately 10% focused on infrastructure for the following four years). Nevertheless, the significant increase expected in our export prices will not necessarily translate into an appreciation of the sol versus the dollar during 1H2021, like in previous episodes. The heightened uncertainty around the election race will cause the exchange rate to stay close to current levels (3.65 soles per U.S. dollar). This way, a trend toward appreciation will only be seen in 2H2021. This will occur in proportion to the new administration being centrist and maintain macroeconomic order. There are two main risks to the elevation of the path of the exchange rate. Firstly, on an international level, there is the faster increase in the U.S. treasury bond yield. This could happen if inflation rises faster than expected due to the important fiscal package in the U.S. Secondly, on a local level, if the new administration adopts highly populist policies and fails to respect macroeconomic order. This would increase the country’s political risk and generate doubts among international investors about our capacity to undertake a process of fiscal consolidation in the next few years. Both factors would generate capital outflows, and in turn, the price of the sol against the dollar would increase.
2021 started off with a few setbacks. In order to mitigate the impact of the second wave of COVID-19 infections, the government introduced more severe and extensive restrictive measures last month. This was reflected in the economic output which receded to levels close to those observed in June, when we were in Phase 2 of economic reactivation. And, as a consequence, in January and February economic activity has contracted again, after having recovered to its pre-pandemic level at the close of 2020. The main economic challenge will be to avoid a K-shaped recovery. This kind of recovery process is worrisome, since it leads to an increase in inequality, given that it means certain segments of the economy, population and markets recover, while others regress. There are some signs that we are witnessing these types of divergencies. As a matter of fact, we’ve already identified three relevant divergencies in economic recovery: 1) between economic sectors, 2) between economic activities and labor market and, 3) between socioeconomic levels and segments of the population. To prevent Peru from continuing to move towards a K-shaped recovery which will increase the country’s inequalities, focused economic measures need to be implemented urgently. In this context, we’ve corrected our forecasts for this year from 10% down to 9.3%. Even though the aggregate impact on economic activity will be limited, the differences between sectors will be notable.
Durante estos momentos críticos, el SAE de APOYO Consultoría ha puesto algunos de sus Reportes especiales SAE a dispocisión de todas las empresas y ejecutivos para contribuir a enfrentar los desafíos y oportunidades que se presentan en este contexto. Encuéntralos en "Nuestra mirada".
In March's Monthly Meeting, APOYO Consultoría analyzed the different scenarios that could unfold as a result of the recent coronavirus outbreak, as well as possible impacts on the Peruvian economy.
In February's SAE Monthly Meeting, APOYO Consultoría presented the current economic situation and the impact of some international events on the Peruvian economy at the start of 2020, and analyzed some of the most attractive market segments for this year.
