This last week saw the government extend the emergency regulations, introduced on 16 March, for a further two weeks. It also saw those regulations tightened. The night-time curfew, which had been between 8pm and 5am, was also brought forward two hours to 6pm. In the north of the country, where many appear to have ignored the curfew, it was brought forward even further to 4pm.
The government also announced measures designed to alleviate the economic impact of the shutdown on firms and individuals. As well as the 380 soles subsidy to low-income families announced previously, it unveiled a scheme by which savers in private pension funds (AFPs) could withdraw up to 2,000 soles from their pension pots. The value of savings in AFPs has fallen along with the drop in equities on the Lima stock market. Congress has gone even further by approving a bill allowing savers to withdraw 25% of their savings, a move likely to be scotched by the executive.
At the same time, the Ministry of Economy and Finance (MEF) and the Central Bank (BCRP) have launched programmes to facilitate credit to private companies. Having reduced the BCRP’s referential interest rate to 1.25% a week ago (from 2.5%) a further reduction to 1% is in prospect to encourage borrowing. The MEF also announced a sharp increase in government spending to mitigate the effects of the crisis, while easing the timetable for the payment of taxes.
Ultimately, such programmes will have a high fiscal cost and will lead to the run-down of Peru’s international reserves. It remains unclear quite how the government will fund this year’s looming fiscal deficit, but this is not its primary consideration at the moment. Spending programmes will also test the administrative capacities of the state to ensure that money reaches those most in need of support (see PSG article). Peru has a relatively low public sector debt and fairly ample reserves. This gives it some room for manoeuvre. However, this protection may not last long if there is a sharp outward movement of capital.
Meanwhile, the increase in the number of cases has continued unabated over the last week, as has the number of reported deaths. As of 3 April, the former stood at 1,414, while the latter stood at 61. This compares with the figures seven days previously of 635 and eleven. Lima remains the worst affected part of the country (1,179 cases), but the virus has now spread to almost all regions. La República has some useful graphics for measuring the progress of COVIDA-19 in Peru and elsewhere.
Compared with other Latin American countries, Peru is in fourth place in terms of the numbers of cases identified, following Brazil, Chile and Ecuador. However, as we noted last week, the number of cases is probably a serious underestimate given the limitations on testing.