School campaign and tourism, the most affected by the political crisis

After a month of the outbreak of the conflict between the forces of order and the thousands of Peruvians who march nationwide, the backpack carried by small businesses continues to get heavier.

Mypes trapped

One of the most important economic conglomerates in the country, Mesa Redonda, reports an 80% drop in sales, since businesses are not opening due to the constant demonstrations and brawls that are reported in its surrounding streets.

“Sales had already fallen by 40% in December, but now the fear of customers to go to the center has been unleashed. We have no way to send our products wholesale as roads such as Ica’s Chinatown, which connects us to the south, are closed,” Pedro Gálvez, president of the Round Table Chamber of Entrepreneurs, told La República.

It is worth noting that said conglomerate has 18,000 licensed businesses, although in recent days close to a third of the premises have not been serving, a fact that has an impact on those “workers who live from day to day because only medium and large companies can cover with their expenses”, adds Gálvez.

In Gamarra, the picture is similar, to the point that they consider that the school campaign will continue without exceeding pre-pandemic levels for the fourth year in a row.

“Almost 60% of what Gamarra produces goes nationally, and 30% to the southern regions. The road blockade affects wholesalers in the provinces because they cannot stock up on finished garments ready to be sold this summer and for the school season,” said Susana Saldaña, president of the Gamarra Peru Association.

The leader recalled that last year, with the gradual return to face-to-face, barely 40% of uniform sales could be reactivated.

Free fall tourism

Another sector in intensive care is tourism. The Peruvian Association of Receptive and Internal Tourism Operators (Apotur) reported that during 2022 the flow of foreign tourists that entered Peru was barely 1 million 900,000 people, and as long as the crisis does not continue, the year could close with 3 millions.

However, Miguel Velasco, vice president of said group, warns that during the first quarter reservations will continue to be canceled due to “the impact on the image of Peru.”

To mitigate this fall, remember that Promperú has the tools to “improve our image as a destination”, but this will not be carried out until the protests finally end.

Apotur estimates that the losses in the sector will amount to US$300 million at the end of January, by not receiving an average of US$1,500 for each foreign tourist and US$500 for each national.

Likewise, the Association of International Air Transport Companies in Peru (Aetai) and the Peruvian Association of Air Companies (Apea) detail that so far in 2023, 525 flights have been canceled and more than 58,000 passengers have been affected.

The stoppage of commercial flights not only jeopardizes the connectivity of the southern regions, but also those users who need to travel to other cities, some even for health reasons.

The desolation of the sector is seen with greater intensity in Cusco, acknowledges Liz Huamán, a tourist guide from that Andean city.

“Everything has gotten out of control since before they took Lima. You can’t even travel to Machu Picchu anymore. The season has gone down since the December coup. Travelers are no longer seen on the streets. Just a few South American visitors. Some hotels are closing, and personally, I no longer go down the street out of fear”, the entrepreneur from Viajes Cusco tells this newspaper.

How do you deal with cancellations? Huamán acknowledges that the protests will last a long time, which is why he has chosen to refund 100% of the money to his foreign clients, while locals have been given the option of rescheduling their dates if they wish.

The Decentralized Directorate of Culture (DDC) of Cusco reported that, since yesterday, the entry of tourists to the llaqta of Machu Picchu and the Inca Trail Network will be suspended indefinitely, due to the protests that are plaguing the country. It was specified that there are 417 people stranded in the Machu Picchu district, of which more than 300 are foreigners.

North loses up to US$15 million

La Libertad accumulates daily losses of between US$10 million and US$15 million in exports, according to the head of the Ministry of Foreign Trade and Tourism (Mincetur), Luis Helguero.

For the official, the constant blockades of the Panamericana Norte roads are taking their toll on the economic activity of the northern region, and he also considers that “the biggest problem is the damage to the country’s image,” since this season customers from abroad -such as Europe, the United States and Asia- expect to receive fruits and vegetables produced here.

The closure of sections such as Chao, Virú and the Sierra Liberteña make it difficult to supply the markets of Trujillo and the country, says Fernando Reyes, regional market coordinator. “Our region these days already has more than S / 90 million in losses,” he claimed.

Out of supply in the south

The Republic was able to verify a few days ago that the products coming from Cusco and Puno —such as corn or Cusco corn and lamb meat— were not entering Arequipa with their usual flow, a phenomenon that raises their prices due to a lower supply.

While in the markets of Puno, the outlook is more discouraging due to road closures and drought, laments Roger Flórez Quispe, president of Conveagro Puno.

“They are not entering groceries or vegetables and even gas cylinders. That raises concern. The markets are opening, but only for a few hours. Almost 90% of the families in the 13 provinces are farmers and ranchers and we see that the food crisis is a more latent risk, ”he explained to this medium.

For his part, Gianni Simoni Rosas, president of the Arequipa Regional Milk Council, indicates that for a couple of days the collection of milk has stopped at the height of Santa Rita de Siguas, for which they are forced to throw it away because “People are already fed up” despite giving it to them.

Simoni calculates that the region loses S/2 million by stopping the distribution of milk and other derivatives; also added to a decline in daily production: from 1 million 200,000 to 800,000 liters.

pressure on inflation

The president of the Central Reserve Bank (BCRP), Julio Velarde, identified that the sociopolitical catastrophe can not only affect economic growth, but also inflation.

Let us remember that official growth of up to 2.9% is expected in 2022 and 4% for this year, although the issuing entity estimates that it will close in both periods with 2.9%.

In his opinion, the political instability that began in December with the failed coup d’état by Pedro Castillo is not the main factor that will increase the pressure on prices, and rather, we must learn to overcome the constant political tension.

“We have to get used to political instability (…) Definitely this particular period (of conflict) could affect the price of food, but we believe that it will not be the main factor behind inflation,” he explained at the World Economic Forum in Davos.

Although the protests do not seem to have an expiration date, Velarde maintained that inflation —which closed 2022 at 8.46%, its highest level since 1996— would begin to fall gradually from March, to the point that it stands at 3% towards end of this year.

Macroeconomic impact

According to the Ministry of Economy and Finance (MEF), the social protests generated losses of S/1 million 560,000 in total, particularly affecting transportation (S/50 million due to the drop in ticket sales and S/20 million in parcels ).

Likewise, Cusco stops receiving S/3 million a day in tourist activities, while Puno loses a total of almost 9,000 tourists a day and S/714,000 due to the lack of demand in lodgings, restaurants and the like, they recalled from the SAE survey of Apoyo Consultoría .

The Scotiabank Economic Studies Department estimates that by December 2022, the GDP would have registered a growth of around 1%, its lowest level since February 2021, as a consequence of social protests basically unleashed in the south of the country after the vacancy of the President Pedro Castillo.

Meanwhile, from the Economic Studies Area of ​​the BCP they envision that if the protests continue, the GDP would no longer grow at the 2.3% expected this year.

Impact on employment and income

Forecasts from the Ministry of Production (Produce) show that, as of the 18th of this month, 243,777 companies were affected (242,924 MYPE and 853 medium and large companies).

In 15 days, the Ministry of Labor and Employment Promotion (MTPE) projects that 28,000 jobs would have been lost in the southern regions.

The Ministry of Development and Social Inclusion (Midis) warns that the programs with the greatest impact on the provision of their services are Pensión 65, Juntos, Contigo and the Food Supplement Program.

In the case of programs that provide economic assistance, 58 ETV payment points (paying carts for value transport companies) have had to be suspended in the regions of Ancash, Apurímac, Ayacucho, Cajamarca, Cusco, Huánuco, La Libertad and Puno .

reactions

Liz Huamán, tourist businesswoman from Cusco

“Everything has gotten out of control. You can’t even travel to Machu Picchu anymore. The season is down. Travelers are no longer seen on the streets. Some hotels are closing and I don’t go out into the street out of fear”.

Gianni Simoni, dairy farmer from Arequipa

“Not only is the milk not collected, but we have expenses for electricity, milkers and keeping our cows. Approximately, we are 80,000 affected livestock families”.

Macro strength would be lost

Focus: by José Távara, PUCP professor

The damage of these busy weeks is measured by two variables. First, there is the political assessment. The President of the Republic, Dina Boluarte, has assured that “everything is under control”, but unfortunately other people, including myself, are not sure when the social tension will decrease, while the political actors continue to add more firewood

On the economic side, the answer is short: uncertainty, although we must recognize that there are investors of all kinds; also considering that the international scene is also complex. There are gaps to be closed, but we still cannot reconcile the transition from the inherited rules with the new ones from the current government. We must process this reflection in order to have a calmer climate and a dialogue where mutual respect flourishes.

Naturally, Peru’s macroeconomic strength, one of our virtues, would be lost if the social and political tension continued.

I would not dare to give a real impact on the Gross Domestic Product (GDP) for this year as a result of the blockades seen throughout the country and the demonstrations after the declarations of the ministers, but I consider that it is difficult to think that the Peruvian economy can still grow at high rates.

Let us remember that the calculation of the activity of the last months is not yet available and, therefore, it could not accurately determine the result of 2022, although the intensity of December would generate some corrections.