Of all the countries of Latin America, Peru will be one of the hardest hit this year, according to figures published last week by the World Bank. The Bank predicts that GDP in Peru will contract by 12%. After Peru in this ranking comes Brazil (-8%), Mexico (-7.5%), Ecuador (-7.4%) and Argentina (-7.3%). It thinks that GDP for the Latin American/Caribbean region as a whole will contract by 7.2%.
Peru, the Bank believes, is particularly vulnerable to changing trade conditions, especially the decline in production and demand in China and the United States. It also stresses the scale of informality in Peru which impedes efforts to reduce contagion. If the Bank is right in its forecast for Peru, it will be the worst downturn since 1983 when the country suffered the combination of effects of the debt crisis and one of the worst Niño years on record. In that year, output fell by 12%.
Peru’s exports of minerals, chiefly copper, to China were already suffering from weak prices well before the Covid-19 crisis began in March. China consumes around two-thirds of Peru’s copper output.
Responding to the World Bank’s projected figures, which suggest that Peru may experience one the biggest downturns anywhere in the world, Economy Minister María Antonieta Alva said that its estimates did not take into account the government’s reactivation strategy for the second half of the year. This, she says, will be announced in due course and will focus on temporary job creation and increased public investment.
GDP figures for April were still not available as we went to press. Production in March suffered a 16.3% decline. April promises to be worse.