Figures published last week for economic output in April show that, overall, activity fell by over 40%. The lock-down, announced in mid-March to counteract the spread of Covid-19, had the effect of suspending production in almost all sectors, with the exception of agriculture which registered a modest growth (0.6%) in April (as compared to the same month last year). The Statistics Institute (INAE) also pointed to some 2.3 million Peruvian losing their jobs.

Broken down by different sectors, the monthly data registered an 89.7% downturn in construction activity, 94.6% in activity in the restaurant and hotel sector, a 65.4% drop in commercial activity, 65.1% in manufacturing, and 42.3% in mining and hydrocarbons. Retail sales were down 66%.

The downturn was around 13.1% for the first four months of 2020, year-on-year, according to figures published on 19 June by the central bank (BCRP). Mining and fuel were down 14.5%, manufacturing 20.9%, construction 34.7% and commerce 21.7%. Agricultural output expanded by 2.2%.

The expectation is that output will pick up somewhat in May because of the relaxation of public health rules for sectors like mining and fishing, but that compared to the same month of 2019 the fall will continue to be dramatic.

The extent to which a fairly speedy recovery takes place in the next two quarters (a V-shape recovery as opposed to a U-shaped one, or even an L-shaped one) will depend on the extent to which there is still a productive structure to reactivate. Many businesses appear to have gone broke and will not be reopening their doors, at least in the short term.

Larger businesses, in the formal sector, will probably be the first to recover, further increasing the degrees of inequality in Peru’s productive structure.

Perhaps unsurprisingly, business organisations are already arguing that a ‘flexibilisation’ of rules regarding hiring and firing are required if they are to take on more labour. Such pressure are likely to grow in the next few months.