Peru is partially paralyzed by protests against President Dina Boluarte.
So much so that even the Inca citadel of Machu Picchu, its most emblematic monument and main tourist attraction, has closed until further notice.
The political conflict continues in Peru and its effects are already being felt in the economy.
Almost two months after Pedro Castillo was arrested and dismissed for his attempt to unconstitutionally dissolve Congress and began the wave of protests that keeps the country on edge, official organizations, experts and representatives of the productive sectors warn of the damage that the pulse between Dina Boluarte and the protesters who demand her resignation and immediate elections are causing.
There have been weeks of roadblocks, strikes, damage to public and private property, and even the closure of airports due to clashes between the police and protesters.
Those who protest demand the immediate resignation of Boluarte, the dissolution of Congress and the calling of immediate elections.
Boluarte refuses to resign and, although he proposes an electoral advance that has not yet materialized, blame a minority of violent of seeking to seize state power by force.
According to the Ombudsman’s Office, the crisis has already cost at least 54 lives and the Ministry of Health has called on the pickets that block the roads to allow the transit of ambulances and vehicles that transport medical supplies. In Puno, the authorities confirmed on January 9 the death of a premature baby after protesters denied passage to the ambulance that was taking him to a hospital.
Economic losses are more difficult to quantify, but reports abound of canceled tourist reservations, closed mines, rotting food because the trucks that transport them get stuck on the roads. Shortages and price increases in some areas of the country are some of the consequences that are already being felt.
The Minister of Economy and Finance, Alex Contreras, assured on January 11 that the losses caused by the protests already reached 300 million soles, about $78 million.
And the director of the Central Bank, Julio Velarde, warned from the World Economic Forum in Davos, Switzerland, that the crisis “can not only affect economic growth, but also inflation” and could contribute to higher food prices.
What is really the bill that Peru will have to pay?
the importance of the south
Although it has manifested in other parts of the country, the most intense protests, blockades and confrontations have occurred in southern Peru.
As economist Óscar Chávez, from the Institute of Economics and Business Development of the Lima Chamber of Commerce, told BBC Mundo, “it is difficult to make an exact quantification, because the regions where there are active protests vary every day.”
But the expert pointed out that at the present time “there are 15 regions involved that represent more than 35% of the National Gross Domestic Product and they are also the regions in which there is a greater predominance of the informal economy”.
The Peruvian Institute of Economy estimated last December that each day of protests costs the country a minimum of 212 million soles, about US$55 million.
Apart from the macroeconomic figures, The consequences of weeks of conflict are already being felt in many businesses and homes in the country.
Local traders in Ica said markets there are already suffering from shortages as a result of roadblocks.
In Arequipa, where some of the most violent episodes take place, Luis Caballero, president of the Arequipa Chamber of Commerce and Industry, told the Latina television network: “We have no way to get merchandise out. We are in a very difficult situation; we are kidnapped.”
Residents in the city said the price of chicken has doubled since the lockdown began.
tourists disappear
The number of tourists coming to the country has also dropped drastically.
The Minister of Foreign Trade and Tourism, Luis Fernando Helguero, said that Between 50 and 60% of the reservations scheduled for the first half of the year had been cancelled.
Tour operators have also reported mass cancellations and in some of the most famous restaurants in Lima, which normally require reservations weeks in advance, these days can see some empty.
Peru’s most prominent tourist attraction, the ruins of Machu Picchu, announced an indefinite closure after weeks of service disruptions due to intermittent blockages on the railway that leads to the site.
The Ministry of Culture ended up deciding the indefinite closure “to safeguard the safety of tourists and the population in general.”
Days before, dozens of foreign tourists were trapped in the citadel due to the blockade of means of transport and had to complete the return journey on foot or be evacuated by the authorities.
The closure of a monumental area that attracts more than one and a half million visitors from all over the world each year negatively affects the country’s image as a safe tourist destination forged over the years.
According to estimates by the Lima Chamber of Commerce, losses in the hospitality and tourism sector they reach 16 million soles per day, about US$4,150,000.
Mining and agriculture lose ground
Some of the southern regions are the most focused on the primary sector of the economy and the greater virulence of the blockades and protests there has had a special impact on agriculture and mining, especially important for the Peruvian economy.
Gabriel Amaro, from the Association of Agricultural Producers Guilds of Peru (AGAP) estimated that 90% of what is produced by small farmers has gone bad due to roadblocks. In statements to RPP, he recalled that agricultural exports are key to the national economy and that the impossibility of taking products to ports is causing products such as Peruvian avocados to be displaced by their Chilean and Mexican competitors in international markets.
According to his calculations, agricultural exports have lost more than US$150 million so far in the crisis.
Although there are no official figures yet, mining does not fare any better in the available analyses.
Some of the main mining operations in the country are concentrated in the south and there many of the leftist sectors that promote the protests have blamed the mining multinationals for years for exploiting Peruvian wealth without paying fair compensation.
In recent days, the Antapaccay mine facilities in Cuzco have been attacked, and the mine reported in a statement that it has been forced to reduce its production.
Another mine, Las Bambas, one of the largest in the country, has suffered a blockade for weeks on the road through which it receives the goods it needs to operate, for which reason, as has happened repeatedly in recent months, it could be forced to to stop production.
Mining is another key chapter for Peru and represents about 14% of the Gross Domestic Productbut in the last year it has been very negatively affected by the forced pauses in production caused by social conflicts and the latest wave of protests could aggravate the problem.
To the point that the Scotiabank bank contemplates that investment in the sector will fall by up to 20% in the sector if the projects are not resumed.
A general impact
2023 was supposed to be the year of the definitive recovery of the Peruvian economy after the blow of the 2020 pandemic, but events on the international scene, with the shock caused by the war in Ukraine and the global inflationary wave, have put a stop to it.
The ongoing conflict in the country has made things even more difficult.
Economist Óscar Chávez indicates that “this has an impact on the image that international investors have of the country and many investment decisions will be postponed until the outlook is clearer“.
The distrust of investors appears in surveys among the business community since 2021 and the events since the fall of Castillo will not have helped to mitigate it, which is why the image of Peru as a country in which the economy works despite its chaotic politics could be in danger.
The expert estimates that “there will be lower GDP growth than had been projected.”
The Central Bank provided before the crisis a growth of 2.9% of GDP in 2023, a figure considered insufficient for an economy like Peru’s. The problems will be even greater without finally the growth is even lower.
The other great consequence, according to Chávez, “is that there will be a loss of employment and this will have a special impact on the population that has informal employment, which is the majority in the south.”
Consequences for neighboring countries
The economic effects of the protests are also felt in the economies of their neighbors.
In Chile, the blockade of the Tacna-Arica border highway is preventing the entry of products into the country. The authorities are particularly concerned aboutr the shortage of chemical inputs that are harming several national industries.
The president of the Chemical Industry Committee of the National Society of Industries (SNI), Bruno Alecchi Ciamarra, stated that the lack of chemicals is endangering production and even affects other sectors such as mining.
As of Monday, more than 80 highways were still blocked in eight of Peru’s 25 regions and the airports in the southern cities of Arequipa and Juliaca remain closed.
In the case of Bolivia, trade has been affected by the closure of the bridge in Desaguadero, place where trade is widely active: 800 truckers with international cargo remain stranded at the border crossing.
Some have been in this situation for more than 15 days, local media report.
The Bolivian Institute of Foreign Trade (IBCE) estimated the economic losses of Bolivian transporters and exporters between four and six million dollars per day.
more than 40% of Bolivian foreign trade moves through the ports of southern Peru, according to official reports from the Bolivian government. The country exports more than 150 types of products across the Desaguadero border, including soybeans and sunflower oil.
“We are talking about at least 90 million dollars of losses,” said the person in charge of the agency, María Esther Peña.
As far as Ecuador is concerned, the main long-term damage is the cancellation of the Lima summit which was scheduled for last December and which, sponsored by former President Pedro Castillo, was going to discuss the inclusion of the country in the Pacific Alliance, the commercial bloc made up of Mexico, Colombia, Peru and Chile.
Ecuador was waiting for the bloc’s meeting and the position adopted by Mexico, with whom it needs to sign a treaty to enter as a full member of this regional economic initiative.
Negotiations for an agreement between Ecuador and Mexico have lasted for almost four years.
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