Coronavirus Lockdown in Peru Could Leave Six Million Unemployed

"In Peru, there are 4.5 million formal workers, of whom approximately 700,000 will lose their jobs."

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Almost half of Peru’s population is unemployed and has no income at the height of the quarantine enacted in response to the coronavirus pandemic. This situation puts the country’s economy on edge (EFE).

Spanish – In Peru, 70% of the workers are in the informal sector, and following the restrictions and confinement decreed since March 16, millions have been left without any means of survival.

A survey conducted by the newspaper El Comercio with Ipsos revealed that 42% of Peruvians are unemployed or are not receiving any income.

The street vendors, who live from day to day, have disappeared from the streets of Peru. The Peruvian economy is overwhelmingly based on the informal sector; only 30% of the companies have their employees on the payroll, according to official figures.

Additionally, during the quarantine, many companies were forced to stop their activities; and therefore had to dismiss their employees. Others adhere to the “perfect suspension of work” measure.

According to the Ministry of Labor, more than 7,000 companies have enacted the measure of suspending their employees’ salaries for up to three months.

According to estimates by José Ignacio Beteta, president of the Peruvian Taxpayers’ Association, “probably one million micro or small businesses could go bankrupt this year. He claims that the figures given by the government are “very low.”

“In Peru, there are 4.5 million formal workers, of whom approximately 700,000 will likely lose their jobs. Moreover, of the 12 million informal workers, 50% could lose their jobs, which would imply that more than a million micro and small businesses would go bankrupt.” He added that these are still “very conservative numbers.” According to Apoyo Consultoría, the biggest economic crisis in the last 30 years is looming, with 700,000 formal jobs at stake.

President Martín Vizcarra has already announced that places such as restaurants, cinemas, nightclubs, and events such as concerts will be suspended for the rest of the year, leaving the employers and workers in these sectors unemployed.

According to Deputy Labor Minister Juan Carlos Requejo, four sectors will be the most affected by the paralysis triggered by the coronavirus. These include restaurants and hotels, construction, wholesale and retail trade, and activities such as cinemas, theaters, etc.

“Of the 309,000 companies registered on the Ministry of Labor’s electronic payroll, 190,000 could be affected, and of these, 116,000 are linked to the four most affected sectors,” he said.

What’s next for Peru?

According to Beteta, the sectors that have been least affected so far are health, food, and some services. He explained to the PanAm Post that these sectors are maintaining employment and operations. But the group does not go beyond 28%.

“All other economic activities in the country have stopped. What will have to happen is a partial resumption in those activities where there is less risk of contagion. Businesses such as small businesses like hardware stores or activities that can be used at home will open up. Hopefully, the government will free them up very soon,” he said.

“Another sector that should be activated is that of shipments or deliveries which must take place at the national level. Fast food restaurants should start operating, and so should warehouses, minimarkets, etc,” he added.

“We are facing a slow recovery where many companies have lost resources, capital, or solvency needed to produce. We are also going to see less demand and less consumption because people are going to be afraid to spend,” he said.

Economic credit for everyone

Beteta criticized the government’s focus on big business alone to revive the economy: “Economic measures should be extended to micro-entrepreneurs and self-employed individuals. The state needs to buy from national micro-enterprises that are at risk,” he warned.

“Everyone should receive help from the state, and it wouldn’t be help because it’s our money, we all pay taxes. Everyone must have access to credit to survive these weeks and then get back on their feet,” the expert said.

“Hotels, gastronomy, tourism, and the entire entertainment sector will need attention and help from the state this year, which will create a line of credit. But they will also have to change their business model, look for ways to continue operating online with delivery, and try to hold out until the end of the year,” he said.

Beteta explained that in Peru, gastronomy is a commodity that will be reactivated immediately when this situation ends.

“Once this happens, when the machines start moving, these businesses will sooner or later move forward,” he said.

“Everything will depend on how quickly activities resume. If you get the sectors that hire a lot of people to start operating, the chances are that those employees who lost their jobs will get them back. So it is very important to resume activities quickly, with health security, but without excesses. It is one thing for a company to fire an employee to save money and not go bankrupt, but it is another thing for the lockdown to be so long that the company could not hold out and, it went bankrupt,” he said.

“Some sectors have laid-off workers but have not gone bankrupt. If the economy starts to move again, those same companies are going to hire people again in the next few months. I think that a person who lost his job today will be able to get another one in five or six months,” he concluded.

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