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Note from Chief Economist


The week’s balance by Hugo Santa María.

We need to start some engines

Dear friends:

This week, the Ministry of Economy and Finance, the Central Bank, and Cofide, have completed the regulatory framework applicable to Reactivate Peru, the guaranteed loans program. Financial institutions are already coordinating with their clients and will be ready to start injecting liquidity into the economy once the first bid for funds is carried out. In APOYO Consultoria’s opinión, the guaranteed loans program still has room for improvement and there are important segments in the financial market that are not being covered by it, but we trust that authorities will address this.

The government has also announced a subsidy program in favor of rural households, as well as willingness to consider adjustments to labor regulation seeking joint public and private sector efforts to alleviate the impact of COVID-19 on employment. At the end of this week, 5 to 10-year sovereign bonds amounting to US$3 billion were placed at historically low rates and with a level of demand 8 times higher than the placement amount. These are good news indicating that things are in motion amid the pandemic.

Along these lines, we know that many SAE members – company leaders in several economic sectors – have been working tirelessly in the design of protocols for reopening their sectors that require government approval and supervision. As for the Executive branch, some public statements made by authorities indicate that they have already begun to analyze this. For instance, on April 17 in a public event organized by Capeco, the Minister of Health Victor Zamora indicated that protocols are a necessary condition to resume activities and they must be approved by the Ministry of Health. He added that some of the factors that will be taken into account for this approval are the impact on the recovery of macroeconomic indicators and employment generation. In addition, he publically committed himself to review the protocols that the construction association has already submitted to government authorities. These signs are undoubtedly positive, but need to be reflected on concrete results. This requires speedy decision-making and intense public-private cooperation.

On this front, there is no time to request approvals or licenses in different government entities as if these were regular times. The situation requires a multi-sector government team empowered to interact with the private sector and to approve protocols and supervision mechanisms.

Throughout the past six weeks, urban households have lost 50% of their income, on average. If we do not begin to resume economic activities responsibly, no subsidy program or fiscal capacity will be enough to compensate for this impact. Considering that we are increasingly close to the beginning of a slow return to “normal conditions” in which we will have to live with COVID-19 for some time, the guidelines for getting Peru back to work again are urgent.

Best regards,

Hugo Santa María

Partner and Chief Economist
SAE – Business Advisory Service


Sondeo SAE

De acuerdo con el sondeo empresarial realizado durante la semana del 12 al 16 de octubre a los clientes del SAE, siete de cada diez ejecutivos califica al riesgo regulatorio desde el Congreso con el máximo grado de preocupación para la toma de decisiones de inversión en sus organizaciones empresariales en los próximos 12 meses.

Panorama fiscal

La crisis ocasionada por el COVID-19 generará un severo deterioro de las cuentas fiscales en el Perú. Si no se implementan medidas, el incremento de la deuda pública sería insostenible. Si se implementan algunas medidas tributarias, se podría estabilizar la deuda pública alrededor de 40% del PBI. Aún hay espacio para generar mejoras adicionales y estabilizar la deuda pública en el límite legal de 30% del PBI.

Economic outlook

Economic recovery continued to lose impulse in September. However, in September there were some positive signs on the economic and public health fronts. The above is positive news, but it is still too soon to expect an acceleration of economic recovery towards the end of the year.

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