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Weekly Report - 18 June 2020 (WR-20-24)

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Peru’s Vizcarra tables ambitious plan to drive growth

Peru’s President Martín Vizcarra announced a plan on 15 June to revive the economy and create in excess of 1m jobs between now and the end of 2020 as the country seeks to bounce back from the ravages of the coronavirus (Covid-19) pandemic. A three-month lockdown brought an abrupt halt in March to a growth streak which stretched back 127 months. Peru’s worst monthly GDP figure since records began followed in April, the national statistics institute (Inei) revealed this week. But Covid-19 has not been suppressed in Peru. There are on average 3,000 new confirmed cases per day. Balancing economic recovery with public health in the months ahead will be a major challenge.

President Vizcarra’s PEN$6.4bn (US$1.8bn) plan, dubbed ‘Arranca Perú’, aims to drive growth through public works and investment in transport infrastructure improvements, housing, agriculture, and jobs programmes. In a long press conference attended by the majority of his cabinet, Vizcarra said ‘Arranca Perú’ would haul the country out of what he described as “the most serious crisis” in its history from the perspective of health and economic damage.

Vizcarra said that PEN$3.9bn (US$1.1bn) would be invested in repair and maintenance of some 50,000km of roads nationwide, creating 500,000 jobs, and the housing ministry’s budget would be boosted by PEN$535m to increase the number of homes constructed this year from 60,000 to 80,000, providing an additional 80,000 jobs. He added that PEN$373m would be set aside for construction, repair, and maintenance of drainage, irrigation, and water collection systems in the agriculture sector, providing 76,000 jobs, with a further 57,000 jobs created through PEN$937m of investment to improve municipal road surfaces and pavements, and public spaces. He also said the government would assign PEN$694m of investment to expand the ‘Trabaja Perú’ jobs programme to provide a further 226,000 jobs in all sectors of the economy.

In all, the objective is to create just over 1m jobs and lift the economy out of the doldrums. There is a long way to go. More than 2.3m people lost their jobs in metropolitan Lima between March and May, Inei reported this week, while GDP contracted by a record 40.5% year-on-year in May. In a videoconference with foreign correspondents on 16 June, the health minister, Víctor Zamora, said the government faced a quandary: “we need the economy to recover to raise taxes in order to sustain the health service”. Zamora also singled out the major problem the lockdown has been unable to address: “the informal economy [which comprises 70% of the working population], which has no protocols or health standards, has already exited [lockdown] independently of our will, and we have to be vigilant”.