Private investment accumulates five negative quarters

Between July and September of this year, private investment was S/27,722 million, which meant a decline of 6.2% compared to the S/29,567 million disbursed in the same period of 2022, according to the weekly note from the Central Bank of Reserve of Peru (BCRP).

In this way, the private investment accumulates five consecutive quarters of decline. The issuing entity explains that this result is due to the 5.6% contraction of non-mining investment in a scenario of stagnation of business expectations that are in pessimistic territory. The loss of momentum in residential investment also played a role.

For its part, Mining investment contracted 11.3%. In detail, Anglo American Quellaveco invested US$147 million in the third quarter, US$95 million less than the same period last year, given that its Quellaveco Mining Unit has been operating since the end of the third quarter of 2022. For its part, Yanacocha It decreased its investment by US$25 million, due to lower development and preparation disbursements in its Chaquicocha Accumulation.

Lack of credibility

Although the fall in private investment in the third quarter is less than that of the previous two quarters, positive rates have not yet been recorded for more than a year.

Luis Miguel Castilla, former Minister of Economy, points out that this result confirms that for the second consecutive year private investment will register a contraction. Likewise, he indicates that the lower commitment of businessmen is due to the fear that exists of a phenomenon The boy of strong magnitude, which makes them more careful in their future decisions.

It is worth mentioning that, according to the Vistage Business Confidence Index, almost half of business leaders (47.2%) do not plan to increase their investments in fixed assets, that is, it will maintain the capital disbursed this year.

Another factor that affects the lower investment by businessmen is the lack of credibility of the Government, warns Carlos Parodi, professor at the Universidad del Pacífico.

“The Government has a very low level of credibility, and the difficult thing is how to make it believe again,” adds the professor.

Recession is already felt

Another key indicator that reflects how the economy is doing is private consumption, which recorded a drop of 0.1% at the end of the third quarter, a decline that has not occurred since the pandemic era.

According to Luis Miguel Castilla, this result is a clear reflection that the economic recession is already being felt by ordinary citizens through low income.

“What it reflects is a precarious labor market, disposable income is not enough to cover the cost of the basic basket despite the reduction in inflation that has been seen. This is already beginning to affect the purchasing power of families. Peruvians and that is complicated,” warns the economist.

Parodi also agrees with this, who explains that this indicator reveals that “people do not have money to buy” and this is a product of the fact that the employment In Peru it is not rising because private investment remains in decline.

Fiscal deficit was 2.8% at the end of the third quarter

The BCRP reported that the deficit of the last four quarters of the non-financial public sector (SPNF) stood at 2.8% of GDP as of the third quarter of 2023, higher by 1.6 percentage points of GDP than that registered in the similar period of 2022. and above this year’s fiscal rule, established at 2.4%.

This behavior was largely due to the decrease in current income of the General Government.

It is necessary to remember that the president of the Fiscal Council, Carlos Oliva, warned that, if the Government fails to comply with the fiscal rule at the end of 2023, the credibility and image of the Ministry of Economy would be affected.

The word

Luis Miguel Castilla, former Minister of Economy

“The central problem with the Economy Minister’s announcements is that he is suffering from a credibility deficit. There have been many measures and, despite all this, he has not been able to convince investors.