In April, Peru made international headlines when it announced an ambitious economic stimulus package equivalent to around 12% of its Gross Domestic Product (GDP), something that specialists applauded as a counter-cyclical measure to the economic paralysis brought on by the coronavirus pandemic. Eight months later, the results have been disappointing. The economy fell by 30% in the second quarter of the year, its worst record in history, and fell again in the third quarter. The International Monetary Fund (IMF) expects the economy to contract by almost 14% this year. During these months of pandemic, and while mortality rates were among the highest in the world, Congress voted twice to impeach then President Martin Vizcarra until it succeeded in removing him from office. In two weeks of November, Peru had three presidents and the streets of the capital erupted in protests that were harshly repressed by police.

The plan to support the economy failed because the measures planned by Vizcarra's administration came up against an atrophied State which, due to the high level of informality, did not identify the poor citizens who should receive the subsidies, according to experts. In the last three decades, the government worked to take care of macroeconomic indicators, but neglected the implementation of public policies, according to economist and professor at the Catholic University, Edmundo Beteta.

In the midst of these crises, Peru capitalized on its solid position in the international financial markets and on November 23 placed debt bonds for 4 billion dollars, 1 billion of which mature in 100 years, a clear sign of confidence on the part of foreign investors in the country's future. "The political part and the economic part in Peru have gone 'down two different paths,'" says Benito Berber, chief economist for Latin America at investment bank Natixis. Presidents in recent decades have been pragmatic, regardless of their ideological alignment, Berber explains. "Even before Pedro Pablo Kuczynski, who was right-wing, the previous one, Ollanta Humala, was center-left and ultimately turned out to be very pragmatic. He ratified the president of the central bank, appointed a Minister of Finance and Economy, let's say, pro-market. When they just won the election there was doubt whether a leftist government could derail the economic part and it didn't happen." Between 2014 and 2019, the country's economy grew an average of 3.1%.

This year, some parliamentary benches have passed populist laws that promote the immediate availability of cash, either with the withdrawal of funds from private insurers or state pensions, even though people have not yet reached the years to release the money. In October, Economy and Finance Minister Waldo Mendoza told Congress that the fiscal stimulus being implemented to cushion the blow of the pandemic will represent almost 20% of GDP and would likely increase public debt from 28% of GDP to 35% by the end of the year.

The State has a fundamental role to play in reactivating the economy through public investment, argues Beteta, "and in the fateful second quarter of this year, while the economy decreased 30% with respect to the previous year, public investment fell by 52% and, in June, it was at an execution percentage of only 13%, which is extremely low, even more so when the private sector was prevented from producing by strict confinement".

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