Peru seeks to calm social protests with US$1.55bn economic plan

Peru’s economy and finance ministry (MEF) presented a 5.9bn-sol (US$1.55bn) economic reactivation plan partly to reverse losses of around 1bn soles emanating from social protests related to the ousting of former president Pedro Castillo.

The plan is expected to have a 1.2 percentage point impact on GDP in 1H23.

Economy and finance minister Alex Contreras told a press conference that a large part of the reactivation will come from unlocking and monitoring 474 projects that generate benefits in the short term, which will help finance optimization investments, marginal expansion, and rehabilitation of mining projects and infrastructure in social conflict areas. About 731mn soles will be invested in this pillar.

The ministry will also pay 300mn soles for studies on paralyzed public works. Contreras said local governments represent the main obstacles to reactivate such works. Of the 2,600 public works that are paralyzed, over 2,000 are the responsibility of local governments, he added.

PPPs AND MONITORING

Public-private partnerships will be a key mechanism. “Regarding the regulatory changes we made [to PPPs], we are adding one that has to do with simplifying the budget capacity. Budget analyses in very early stages can delay the processes by seven to 21 months. We are simplifying the procedures so that these can be done in more advanced stages of the structuring,” said Contreras.

In mining, “what we want to do in this unlocking process is a shock to general investments through acceleration in project execution,” he added. The ministry identified projects totaling US$10.6bn that are stuck.

Specifically, the ministry will help in speeding up the construction authorization modification for Chinalco's Toromocho copper project expansion and the beneficiation concession of Newmont's Yanacocha Sulfuros copper-gold project.

Contreras also said, “we have reached an agreement with the agriculture and irrigation ministry to unlock [the Chavimochic phase III and Majes Siguas II water projects] in 1H23.”

IMPACT

The recent protests are expected to negatively impact December GDP by 1pp. Protesters blocked highways and 35 other key infrastructures. “Strikes do not benefit anyone. We will re-establish dialog. The country cannot bear any more losses; losses that just go to regions,” Contreras said.

The plan could be expanded if protests intensify.