Economic losses and shortages rock Peru with no sign of end to crisis

The protests and blockades against the government of Peru’s President Dina Boluarte have so far led to losses of over 2.15bn soles (US$550mn) and there are no concrete signs of dialogue.

Although the executive ratified bringing presidential and general elections forward to April 2024 – as opposed to the scheduled April 2026 – details of the process are not known, such as the deadline for presenting candidates and the specific dates of the first and second rounds.

That has buoyed popular discontent and calls for the departure of Boluarte, who took over as president on December 7 after the ousting by congress of leftist Pedro Castillo.

The violence has resulted in more than 60 deaths, and recently the government intervened – by force – in the Universidad Nacional Mayor de San Marcos (UNSM) in Lima, where demonstrators from Peru’s regions came to the capital to protest. What was perceived as an excessive use of force could set a precedent for new protests and make the situation worse.

According to the economy and finance ministry (MEF), GDP in Q1 is likely to grow 2% if social conflicts persist. The previous estimate was 2.5%.

CRISIS

The economic losses in January, up to the 23^rd, of 1.15bn soles exceed those registered during December of 1.0bn, and the impact of the suspension of mining operations in the southern regions of Peru, where the pro-Castillo demonstrators are strongest, will soon be seen.

Scotiabank recently trimmed its growth estimate for Peru's copper production in 2023 to 11% from the previous 12% and does not rule out revising it downwards again if the conflicts persist. BBVA Research is reviewing its figures as a result of the prolongation of the crisis and Moody's Analytics said Peru’s GDP could grow less than 1.9% this year.

The supply of inputs and transportation of merchandise is the big problem. There are more than 130 roads with restricted access or that are totally blocked, which is generating a shortage of basic products. In Madre de Dios region in the central jungle, a 10kg bottle of liquefied petroleum gas (LPG) costs 200 soles, when the price normally is in the 40-60 range.

Mining and energy regulator Osinergmin reported that in the region there are establishments without stocks of fuels and there are 17 tanker trucks with 149,550 gallons of diesel and gasoline unable to move.

The blockades – to a similar or lesser extent – are repeated in various regions of the southern zone. Although annual inflation remained at 8.5% in November and December, food and energy prices rose 11.8% and 12%, respectively, according to the central bank. According to the MEF, annual inflation in January will fluctuate between 8.5% and 9%. This will lead the bank to raise the benchmark rate again and it will be more difficult to return to the inflation target range – between 1% and 3% – by the end of the year.

ANALYSIS

It is necessary to release the complete information on the elections in April 2024 to appease the protests. This has not happened, and part of the population perceives that Boluarte wants to stay in office. "The fact of not having a 100% defined date means that the country lacks a roadmap. In [defined] electoral times, discontent is channeled through a political space," Jose Carlos Requena, a partner at consultancy Público and adviser on anti-corruption matters, told BNamericas.

The intervention in UNSM was perceived as an excess at the international level, and plans to revive the economy remain up in the air as the blockades persist.

When the crisis resulting from the removal of Castillo began, it was even proposed to bring forward the elections to December 2023 as a way out of the problem. Although the proposal does not solve the structural problems that have left Peru in a “political coma” – seven presidents in the last eight years – it has begun to be seen as a possible alternative to give the country a breather.

"At this point I think the reforms are secondary. The fundamental thing is to be certain of the processes.... Having elections at some point in 2023 may perhaps calm the streets a bit. But for that you have to persuade a congress that’s quite insensitive. Nobody is doing that," adds Requena.

Javier Albán, a constitutional lawyer and electoral analyst, says bringing forward the elections to December 2023 does not ensure that the political situation will calm down, but it is more likely to do so than holding them in 2024. "In the short term, it has the chance of being an escape valve, which is what you need now to vent the anger of the protesters," Albán told BNamericas.