Fighting crime becoming top priority for Peruvians

Crime is the greatest concern for Peruvian citizens and the resulting economic losses are reaching record levels and restricting business development in the country.

This year, crime is projected to cost 3.5 percentage points of GDP, equivalent to 35bn soles (US$9.39bn). Of the figure, it is estimated that some 6bn will be due to extortion and another 1bn to the halting of works in the first half of the year.

That is according to a report by Erika Solís, a researcher at the Pontificia Universidad Católica del Perú (PUCP), using information from various associations such as the Lima chamber of commerce (CCL), business group Confiep and Capeco. According to the specialist, there are almost 300 construction projects that have been paralyzed due to crime, a factor that explains why the construction sector has not been growing at the expected rate.

PERCEPTION

The increase in crime in the country has been the focus of attention for years but the government's response has not been effective in tackling the problem. A recent survey by pollster Ipsos indicates that at least 33% of Lima’s 10mn residents have been the victim of a robbery in the last 12 months, including both individuals and small and medium-sized businesses.

According to Solís, extortion payments demanded of companies range between 15,000 and 30,000 soles per month, which is making the business climate unsustainable. This was already happening in the formal mining sector but in recent months it has spread to areas such as retail, construction and even banking.

According to a financial sector specialist who preferred to remain anonymous, the default rate on loans in the microfinance sector – rural, municipal and financial banks – has been increasing because part of the loans end up going to gangs, putting the solvency of companies at risk.

Protests are currently being staged in Peru led by the transport union, demanding greater security from the State, and unions such as in the textile industry and small businesses have joined in. If the strategy to deal with crime is not improved, it is likely that social discontent will increase and the way will be clear for politicians with radical proposals, say analysts.