"The economic reactivation of Peru must be implemented very cautiously"

Unlike other countries in the region, Peru is showing optimal conditions for an economic recovery that would begin to be felt over the course of 2021, the country's Bicentenary year. Therefore, the reactivation should be "implemented very carefully in order to avoid any new outbreaks." This is what Jaime Reusche, vice-president of Moody's Investors Service, one of the most important risk rating agencies in the United States, said in an interview with the official newspaper El Peruano.

In this respect, he said that despite the Peruvian economy having contracted by around 10% this year following the extension of quarantine, it would gradually recover.

"Peru is the leader in terms of speed of action and coordination of the macroeconomic response, thanks to the clear articulation demonstrated in the plan. Moreover, the Minister of Economy and Finance, María Antonieta Alva, does an excellent job of communicating the measures and explaining their impact," the expert explained.

The impact is reversible

As for the global situation, the senior executive said that, in general, there is confidence that China - where the pandemic broke out - and the more developed economies should recover favorably. Of course, they will all be impacted, but the consequences should be reversible.

The recovery of advanced economies would, says Reusche, have a positive effect on other countries, especially the economies of those that are managed responsibly. In other cases, there will be countries that will struggle to recover and will be more vulnerable.

The numbers don't lie

When asked about Peru's GDP projections for 2021, Reusche responded: "By 2021 it is in the range of 10 to 12% growth. The rebound effect would explain most of the recovery with the support of exports and both private and public consumption, as well as, but to a much lesser extent, investment, since many companies will still feel the effects in their balance sheets."

Reusche deemed the four-phase economic recovery plan proposed by the government to be "sensible" as it is designed "on the basis of technical criteria to determine the activities that have the greatest economic impact and the least risk of spreading the virus."

In other words, it means we're on the right track. The expert warned, however, that the crisis is not yet over and that maximum effort must be made to get through it.

"There will always be some remaining issues since the capacity of response is not limitless, but, in general, the country’s [Peru’s] economic institutions are demonstrating all the international prestige that they have earned over several decades of effort and macroeconomic stability."

Appropriate measures

As part of the economic reactivation plan, the Peruvian government designed a series of strategic measures such as the Reactiva Peru program, which grants a loan of up to S/.10 million soles, under certain requirements, to micro, small, medium and large entrepreneurs, in the financial institutions that have contracts with Cofide.

"The simple fact that the economy has reopened will generate a significant rebound effect in 2021, and measures such as the expansion of the Reactiva Peru Program help a lot, since the amount they are providing is enormous for a developing country and few nations can design and actually implement a program of this size," Jaime Reusche said.

If you wish to take advantage of the Reactiva Peru program, we recommend that you verify the eligibility of your company for this service, here

A detail:

Jaime Reusche has 11 years of experience in the industry. He is responsible for the analysis and ratings of Latin American countries. He is also responsible for communicating the views of risk groups at investor briefings around the world.

Sources: El Peruano/ Gobierno del Perú/ Moodys's