The week’s balance by Hugo Santa María.
Good morning my friends,
This week, the Congress of the Republic was added to the long list of risks that the government, BCR, SBS and other authorities are dealing with. Our parliament, in its legitimate desire to tend to the needs of the population, has presented over 60 draft bills concerning economic matters, several of which could damage families’ economic situations rather than help them. In this vein, on Friday night it approved (with 104 votes in favor) a bill that enables those affiliated to the private pension system to withdraw up to 25% of their pension fund, subject to certain restrictions. With this measure, surely a popular one, those that withdraw their money will do so at the worst time due to the historic declines that the markets are currently suffering. Those who decide not to withdraw any funds will also be affected because the asset sales that the AFP will have to carry out to be able to fulfill the withdrawal requests could deteriorate the value of the funds even further and postpone recovery. Taking into account what the MEF, BCR and SBS have said about the inappropriateness of this measure, the Executive should question this law and return it to Congress for its revision.
On the other hand, Congress doesn’t seem to be dedicating enough time to debating and reflecting about the political reforms that could lead us to the 2021 elections with better electoral rules, so that we can look to the future with more optimism. It’s a matter of trust. Parliament members have to permit and support the Executive while it manages the multiple crisis fronts, and instead focus on prioritizing what the Parliament’s original mandate was: to map the route to get to the Republic’s Bicentennial with a political system that will serve its citizens better.
Microsoft Word – 5 apr – Week’s balance.docx
The other element of risk that we’ve started to worry about more at APOYO Consultoría is the uncertainty regarding the restrictions on production during and after the lockdown. The government has already decided that limiting economic activities and people’s movements is the main tool to curb COVID-19. In this context and following that logic, there should be a fluent dialogue between the public and private sector to agree on sector-specific operational protocols that will allow the economy to be put back to work. It’s also a matter of mutual trust and transparency between the public and private sector. Peru has word-class businesses and entire sectors that can surely pour their capacity into the management of protocols that will keep the risk of COVID-19 infections under control.
See you at the Webinar-Special Sector-Specific Meeting on Wednesday the 8th of April at 8am, where we’ll analyze the situation of the tourism and restaurant sectors, two of the sectors worst hit by the crisis.
Take care and have a great Sunday.
Hugo Santa María
Partner and Chief Economist
SAE – Servicio de Asesoría Empresarial
During the 2Q2024, economic growth was driven by the rebound of primary sectors, such as traditional agriculture and fishing, and by higher public spending, supported by an estimated increase of 11% in public wages and 16% in public investment, adjusting for inflation.
During the month of August, attention was focused on the dynamics within Congress. In view of the election of the Board of Directors and the recomposition of the ordinary commissions, numerous movements were recorded in the benches.
Although the implicit alliance between the Executive and the Legislative remains in force, in recent months we have seen a progressive weakening of the Executive.
