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Monthly Snapshots - May 2020: Peru Edition

Updated: May 29, 2020

Studies indicate that Peru will undergo the quickest economic recovery in South America

Alejandro Werner, Director of IMF for the Western Hemisphere, estimates that Peru will recover the quickest from the economic crisis caused by Covid-19. Chile also features high on the list.

ASBANC (Association of Peruvian Banks) issued a similar statement recently, explaining that Peru’s financial system is best positioned to deal with this economic crisis. Martin Naranjo, President of ASBANC, has explained that its financial system has enjoyed great performance in recent years and now has institutions that are capable of regulating and supervising it. This paints a radically different economic picture from the crises Peru experienced in 1998-2001 and 2008-2009 and has given greater reason for optimism.

According to ASBANC, due to the wide coverage of provisions, lower exchange rate risk, limited dependence on foreign funding, availability of liquidity and sufficient capital to support credit operations, Peru is very well-positioned to support the country and its people through these difficult times.

Credicorp recently estimated that Peru will encounter growth of 6% during 2021 despite a fall of 38.8% in GDP this year. Daniel Velandia, economist from Credicorp capital, has said ‘we continue to be optimistic here at Credicorp because it has the tools and resources to get out of the crisis…few have the luxury of having a public debt which is less than 30% of their GDP and with international reserves’.

There is a growing consensus among different companies and institutions that Peru is the best-equipped country in South America to deal with the dangerous economic unknown that lies ahead due to the pandemic the world is currently facing.

Falabella announces it will begin online deliveries in response to Covid-19 retail demands.

Alex Zimmerman, CEO of retail giants Falabella, has announced that on Friday 9th May, the company received authorisation from the Ministry of Production to start its online delivery services.

Permission to start its online service comes after the announcement of the first phase of the reactivation of Peru’s economy after months of total lockdown. As part of the reactivation process, Falabella has sent a Covid-19 surveillance and control plan to the Ministry of Health so that it could be published in SICOVID-19, an integrated system for Covid-19 in which companies have to register in order to restart their activities.

Zimmerman reaffirmed his belief in the protocols set out by the Peruvian government stating that, ‘the protocols are necessary to face this global order to ensure the safety of our clients and workers, and to avoid additional infections.’

Falabella is currently preparing itself for huge mass orders to satisfy the needs of its clients as quickly and efficiently as possible. Analysing the popularity of ecommerce in Chile and Colombia, where it has continued to operate throughout the crisis, Falabella is expecting to encounter an unprecedented amount of orders and are working as hard as they can to prepare themselves.

Falabella has also decided to change the minimum payment for installation payments with 0% interest in order to easen the lives of its burdened customers.

In regards to the restart of Falabella’s physical operations, the CEO stated they will be adhering to what the authorities believe best for the safety of the community and the prevention of further infection.

Peru doubles aid for businesses affected by Covid-19

The Peruvian government has recently increased aid for companies adversely affected by Covid-19 by 60,000 million soles which is equivalent to US$ 17,650 million. The aim is to curb the economic effect of the pandemic which has almost paralysed the local economy.

The money is part of a package which is called ‘’Reactiva Peru’’ which was launched in March which had, until now, granted 26,848 million soles to companies as working capital. In a decree published by the official newspaper, the Peruvian government stated that its objective was ultimately to continue to implement timely and effective measures which will positively impact the financing of the replacement of working capital funds for companies that make payments and short-term obligations.

The recent announcement which affirms that the government will be more than doubling its original aid means that the economic stimulus plan will inject equivalent to 16% of the national GDP to counter the severe economic effects of the virus, to help the poorest and most vulnerable and to keep their public health system alive.

Peru has shown the world yet again their resilience in the face of national and global crisis.

New regulation formalises Peruvian Travel and Tourism Agencies

On Thursday 14th May, Mincetur (the Ministry of Foreign Trade and Tourism) published the Regulations for Travel and Tourism Agencies with the aim of formalising the companies within the sector.

From Thursday, these companies must register in the National Directory of Qualified Tourist Service Providers. In order to do this, they must provide a legal representative, contacts within the company and compliance with the agreed conditions. The directory will also start providing badges to registered companies to more visibly distinguish between formal and informal companies.

Regional governments have also been empowered to initiate criminal and legal proceedings against an agency when, during its provision of services, it threatens the life, body or health of the client. Additionally, tourist and travel agencies are not authorised to hold raffles in an attempt to avoid marketing techniques linked to scams.

Further requirements include: staff are required to have a education in tourism and one year of experience in tourist activity, staff must wear easily visible identification, the agency must have an office with a computer, internet access, email, telephone and printers and the office must have free access to the public.

The new regulation will hope to formalise an otherwise informal industry which will bring both benefits to the local economy and better services to foreign clients.

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