Peru’s economy shrank by 11.1% in 2020, after 22 years of continuous growth, mainly due to a 10.1% drop in domestic demand. Accommodation and hospitality services were the most affected, with a decrease of 50.45%. In contrast, telecommunication services recorded growth of 4.58%. The public deficit increased to 8.9% compared to 1.6% in the previous year.
External debt exceeded the central bank’s planned limit of 30% of GDP by 5%, and is expected to reach 38.5% this year (the third lowest in Latin America after Brazil and Mexico). Foreign trade also recorded a decline – exports fell by 19.0% and imports by 14.9%.
In May 2020, Peru received a two-year loan of USD 11 billion from the IMF to strengthen the economy. Foreign direct investment fell by 76% in 2020.
In June 2020, former President Vizcarra announced the creation of the Arranca Perú (Start Peru) investment program. The government planned to jump-start the economy and create new jobs lost due to the covid-19 pandemic. Public investment of PEN 6.625 billion (USD billion) should create approximately 1 million new jobs. They focus on 4 areas: transport, housing, agriculture and employment. In September of that year, additional resources of over PEN 2 billion ($0.542 billion) were approved until the end of 2021.
In February 2021, the government launched a PEN 2 billion ($0.542 billion) program to support micro and small businesses. Until June, they will be able to apply for loans with a state guarantee with a maturity of 36 months, with deferred repayments of 12 months. In addition, the government will temporarily buy the shares of savings banks owned by municipalities, which provide loans to micro and small companies from 50 percent or more. It will thus provide them with the capital needed to provide loans.
The government is also providing various types of support to individuals and businesses unable to work or carry out their activities due to the pandemic (US$1 = 3.69 PEN): support of PEN 380 (US$103) to households classified as poor or extremely poor; PEN 760 ($206) to the self-employed; PEN 760 ($206) to poor and extremely poor agricultural households; 35% of income/employee with a salary of up to PEN 1,500 ($407) to private sector firms; PEN 760 ($206) to the breadwinner; PEN 600 ($163) to households in areas most affected by covid-19. The subsidies cannot be combined, they are paid irregularly.
Post-covid-19 opportunities for foreign exporters
Transport industry and infrastructure
Infrastructure development is key to the development of the Peruvian economy. The National Plan for Infrastructure 2016-2025 assessed the needs of the sector at almost USD 160 billion, of which almost USD 57.5 billion is transport infrastructure, approx. USD 31 billion energy, USD 27 billion telecommunications. This would mean an average annual expenditure of 8.27% of GDP.
At the beginning of 2020, 52 projects were under implementation, mainly in the areas of transport infrastructure, telecommunications, rehabilitation and healthcare, worth approximately USD 30 billion. Almost half of them are currently long overdue, the other part has not yet been allocated or is only in the public tender phase. Interestingly, 60% of these projects are PPP projects. At the same time, G2G projects are also developing. Currently, the airport in Lima is being modernized and expanded, and a brand new airport is being built in Cuzco.
At the beginning of 2021, 23 projects worth USD 7.736 billion have been identified, from the areas of transport infrastructure, energy, irrigation, sanitation and telecommunications, for which there is a lack of funding.
Czech companies could participate as subcontractors of technologies and solutions.
Mining, mining and oil industry
According to allcountrylist, Peru is among the 6 countries with the greatest diversity of raw materials in the world. E.g. in the mining of silver, zinc and copper it ranks second in world production, lead third and tin, mercury and molybdenum fourth. The mining industry is a key sector of the national economy. It contributes almost 10% to the creation of GDP, more than 60% to exports. Also due to covid-19, mining fell by 14.1% in 2020, but the sector is expected to recover this year with an increase of 14.4%. The sector is also one of the most important sources of tax revenue and directly employs almost 200,000 people. workers (data as of November 2020).
Currently, only 1.3% of Peru’s territory is used for mining, although concessions are granted for 14.2%. Modern mining technologies and equipment could make exploration accessible even in previously inaccessible areas and conditions. In the same way, digitization, automation of production processes and control of energy supply and perforation can enable continuity of work in mines and remotely.
According to the Ministry of Energy and Mines, investments worth over USD 56 billion are expected in the sector in 2020-2022. 67% will go into copper mining. As of November 2020, 46 projects were registered – of which 5 were mine construction, 4 mine project preparation, 17 project evaluation and 20 selection of the most suitable place for mining.
Peru has currently privatized most of its mines, largely in the hands of foreign companies (50% from China). The role of the state in the mining industry is regulatory, supportive and controlling. The mining industry is a key sector to jump-start the Peruvian economy. In the period 2009–2018, approximately 20% of publicly funded projects were supported by taxes derived from the extractive industry. It is necessary to start the implementation of important projects. Therefore, their acceptance by the population is also necessary.
The Ministry of Energy and Mines, together with the Inter-American Development Bank (IDB), launched the virtual platform MapaInversiones Perú País Minero, which reports on public projects financed by taxes coming from the mining industry, in order to improve the public profile of the sector.
Peru’s growing economy requires more electricity. The covid-19 pandemic has also brought with it new needs and challenges.
As of the end of October 2020, USD 3.061 billion was earmarked for investments in the energy sector. There is also a need to complete the transmission network projects that were planned for implementation as early as 2014. Another important step is the implementation of the rural electrification plan, where some areas still do not have access to electricity. The Rural Electrification Act adopted in June 2020 should help with this. The Amazon region is not connected to the SEIN national transmission network.
The modernization of the sector is under the responsibility of the Multi-Sectoral Commission for the Reform of the Electricity Sector CRSE. The Commission concentrates its work in 4 main areas:
- Strengthening the institutional framework.
- Transformation of electricity trading, which will also include energy produced from renewable sources. Equal access to energy and competitive prices should be achieved.
- Innovation in the distribution and trading of electricity for households, again with the possibility to include energy from renewable sources.
- Regulation and control of electric power transmission.
Support for the production of electricity from renewable sources, especially in rural areas and the Amazon, could be an opportunity for Czech companies to enter the Peruvian market.
The National Energy Plan 2014–2025 states that in 2013, the share of electricity production from non-traditional renewable sources (which includes production from small hydroelectric power plants under 20 MW capacity, from solar and biogas power plants and power plants burning residues after the extraction of sugar cane juice and agave) was 2.52% of the total volume. By 2025, with the participation of wind power plants in production from non-traditional sources, the share could increase to 20%.
In recent years, Peru has intensified efforts to digitize the country. In 2019, it jumped 46 places in the e-participation index (the UN index on the digital participation of citizens). 60% of the population had internet access in 2019, which is 10% more than the previous year.
In January 2020, the government approved the so-called Digital Agenda for the 200th Anniversary of the Foundation of Peru: a list of steps necessary to digitize public administration with the aim of facilitating the administrative actions of citizens, which the government committed to fulfill by 2021. According to the BID, Peruvians currently need an average of 8 hours to complete of the common administrative requirement, which is the 2nd longest time in Latin America. The BID has also become Peru’s main partner in the implementation of the digitization of public administration.
It financially supports the activities of the newly created General Secretariat for Digitization, including the provision of a USD 10 million grant to create a unified platform for citizens’ questions and requests. The BID will also finance the introduction of digitization for the 24 most requested civil processes.
It can be expected that in connection with covid-19, when public institutions are forced to retreat from the physical participation of citizens, the use of digital processes will increase even more. In April 2020, the government launched a digital connection between individual regions, the so-called GORE Digital. The goal is to share information and news, especially in the field of telemedicine and education.
The Ministry of Transport has also stepped up efforts to roll out a backbone Internet network to all regions, investing PEN 850 million (USD 230 million) in the project, newly due to covid-19. In order to enable working and studying from home during the pandemic, even in hard-to-reach areas, the government has already donated a total of 850,000 tablets to families.
In July 2020, the Digital Trust Framework was adopted, setting standards for digital security, data protection and transparency.
In addition to public digitization, Peru has begun to invest more in supporting innovation and online solutions. The National Competitiveness Plan 2019-2030 envisages a gradual increase in public investment in ICT, including the creation of a centralized digital data platform that will allow applicants to directly and transparently apply for government funds for the development of innovations and provide information on the programs and data of the National System of Science and Technology (SINACYT ).
A new platform “Innovate Peru” (Innovate Peru) is already operating within the Ministry of Production with the aim of involving the private sector in the development and implementation of digital solutions. ICT companies, engineering associations or programmers can find here information about tenders, hackathons and other challenges in the field of using AI, the Internet of Things, blockchains, robotics, smart cities, etc.
In March 2021, the Ministry of Transport and Communications authorized 2 local operators to implement the 5G network project at the GHz frequency.
Healthcare and pharmaceutical industry
The covid-19 pandemic has shown that this sector is significantly underfunded. Hospital facilities, doctors and technology are lacking (or outdated – estimated to be as much as 10 years older than equipment in neighboring countries). Compared to some Latin American countries, Peru has so far invested very little in the health sector.
For the year 2020, for example, they initially approved 18.495 billion PEN (5.012 billion USD), which represents only 2.2% of GDP (e.g. in Chile or Argentina this share is 5%). For 2021, the budget has increased (compared to 2020) by 13% to 20.94 billion PEN (5.67 billion USD), of which 4.103 billion PEN (1.112 billion USD) should be allocated to the fight against covid-19.USD).
Due to the acquisition of the necessary modern equipment from abroad, Peru has temporarily abolished customs duties on the import of medical equipment and medicines. Hospital beds, including ICUs, are among the main items that are in great demand here. At the beginning of the corona crisis, there were only about 200 ICUs in the entire Peru of 30 million people. Official data on the number of new beds de facto do not exist. As part of the prevention of similar health diseases or frequent natural disasters, an increase in investments in the equipment of mobile hospitals, including military ones, can also be estimated.
The low number of qualified medical personnel is also a big problem. The government is trying to increase this by more attractive salaries and by investing in science and research, including the support of cooperation between public hospitals and university laboratories. In the future, we can expect an increase in interest in high-end laboratory equipment, biochemical aids, etc.
Regardless of covid-19, there is virtually always a high demand for neonatology in Peru. Public health facilities plan to purchase new equipment for maternity wards and children’s wards, including incubators, phototherapy lamps, monitors for measuring basic vital functions, equipment for intensive care of newborns in serious condition, etc.
The current situation is also conducive to the intensive development of so-called electronic or mobile healthcare, including enabling online access of patients to their medical records, online consultation with a specialist, etc., all while respecting the highest standards of online privacy protection. The government’s goal is to introduce digitalization of clinical records in 70% of health centers by 2021.