The week’s balance, by Hugo Santa Maria
I hope you and your
families are doing well. As we stated in the SAE webinars held on Thursday and
Friday last week, Peru is one of the countries that has most rapidly
implemented mandatory quarantine measures to reduce the spread of COVID-19.
However, as we indicated in the daily report of March 25, bringing the economy
to a sudden stop will lead to a steep fall in GDP of at least 20% in March,
followed by three quarters of consecutive drops, and by an overall GDP
contraction of 5% in 2020. These results assume that the spread of the virus will
be effectively contained, and that fiscal and monetary responses will be quick
and strong enough to compensate for the hard blow that the economy is enduring.
Over the past few
days, the Ministry of Economy and Finance, the central bank, and the banking
and insurance regulator have announced and implemented important measures that
we analyzed and shared with you during the webinar. On the economic front,
measures are focused mainly on transferring resources to vulnerable households
and to micro and small businesses, as well as on the establishment of mechanisms
to inject liquidity and provide loan
guarantees to support financial institutions, families, and companies with the
liquidity required to withstand the strong recession ahead. In this situation,
it is important to reduce the risk of a rupture in the chain of payments, in
order to prevent this recession from being worse than expected and to avoid a
slow and painful recovery.
In APOYO Consultoria’s
opinion, generally speaking – and with some exceptions, of course – the policy
components that make up the “measures package” known as of now are well
designed, point in the right direction, and their magnitude is significant.
However, the shock we are facing is tremendous and requires an even larger
response. We trust that after the first assessments and adjustments, the
measures will be strengthened and complemented by others.
The evaluation of what
has been done up to now should not disregard that the risk corresponding to the
chain of payments is very serious, and that reducing this risk requires that every
part of the chain is addressed. It is thus crucial to include measures to
support medium-sized and large companies, which, besides being an important
part of the chain of payments, are the main source of formal employment. If
this is neglected, we risk damaging formal employment, a very important driver
Please recall that you
will continue to receive our reports, Monday through Friday at 6:30 a.m. by
email. If you prefer any other communication channel, please let us know. I
would also like to remind you to please feel free to share our reports with
your clients and/or suppliers during these extraordinary times, if you consider
that this analysis may be useful to them.
stay safe and I hope to see you again soon.
Hugo Santa María
Partner and Chief
SAE – Business