The political crisis in Peru is not recent, the result of a series of events that have marked the country over the past three decades: four presidents have been arrested for corruption, and since 2011 the country has changed representatives seven times. In contrast, Peru held the title of the fastest growing economy in Latin America during the same period.
For this current year, the International Monetary Fund’s projections foresee a slowdown, as in most of the world’s economies. In the case of Peru, there is also concern about possible developments in the latest local political crisis, which resulted in the impeachment of former president Pedro Castillo, after an unsuccessful attempt from him to dissolve the country’s Congress last December. Since then, Peru has been under the command of Castillo’s vice president, Dina Boluarte, who has faced a series of protests since assuming the presidency.
The political instability scenario tends to put the market in a state of attention. However, Peru has managed to sustain consistent economic growth over the last three decades, despite the turbulence: World Bank data show that Peru’s GDP grew six times from 1993 to the present, jumping from USD 34.8 billion to USD 223.2 billion in 2021, according to the most recent data available.
Part of this consistency can be attributed to the economic model applied in Peru in recent decades, which follows to the hilt what was agreed upon in the Peruvian Constitution of 1993. In addition, the independence and management of the Central Reserve Bank of Peru (BCRP) has been one of the pillars of Peru’s economic equilibrium. These developments, in recent years, have made Peru an example of stability in a region where most countries face unbalanced public accounts. And even in terms of monetary stability, the Peruvian Sol is an exception among the unstable currencies of its South American neighbors.
Paola Villar, Bloomberg Línea journalist in Peru, explains that this scenario might not change, even with the current crisis, and that the political situation will also stabilize, without further macroeconomic impact. “The Peruvian economy has always walked in spite of the crisis. It may be that now it is moving at a slower pace, but I believe it will be difficult to go backwards,” opines Villar.
Economic Growth Drives a Young, Fast-paced Digital Market
The advance of the Peruvian economy has boosted market sectors that have only recently gained traction in the Andean country, such as the digital market, a sector that registered 90% growth in 2021 and is expected to expand 21% per year between 2022 and 2025, according to the Beyond Borders 2022-2023 study.
Furthermore, Peru currently appears as the third country in Latin America with the highest number of digital shoppers on social networks, after Brazil and Chile. According to the Lima Chamber of Commerce, 77% of Peruvians make purchases on social networks.
The uptake of digital commerce has to do with a number of factors, such as widening internet access and the changing habits caused by pandemic, but mainly with the popularization of alternative payment methods, such as digital wallets, account-based transfers, and Buy Now Pay Later (BNPL) solutions.
“Sometimes this growth is not even only about digitization, but about doing business online, through social networks and marketplaces.”
Paola Villar. Journalist Bloomberg Línea – Peru section.
Peruvian digital wallets, especially the most widely used, Yape and Plin, have already become the main form of payment in the country and facilitate e-commerce over the networks, with transfers made via cell phone or QR codes. The habit of making digital transfers in Peru has even become a verb: “yapear”. Data from Beyond Borders shows that digital wallets have grown 52% in the last year in the country’s digital commerce.
For Paola Villar, the expectation is that the industry will continue growing. “Digital markets will continue to advance, regardless of these difficulties,” says Villar. “Peruvian companies have made a tremendous leap in the e-commerce sector in Peru and this is already consolidated,” completes the journalist.