Peru’s economy fell more than 1% in January, registering the first decline in 22 months

As expected by most analysts, the Ministry of Economy and Finance (MEF), and the Central Reserve Bank (BCR), Peru’s economy registered its first decline in 22 months in January 2023, negatively impacted by social protests due to political tensions and road blockades that affected several productive sectors in the Andean country.

According to the National Production report of the National Institute of Statistics and Informatics (INEI), Peruvian economic activity fell by 1.12% in the first month of this year and registered a contraction for the first time since February 2021.

In February 2021, when the Peruvian economy also declined, Peru was affected by quarantine and the closure of some activities due to the second wave of Covid-19 at the national level.

INEI remarked that national production was affected by the fall in the Construction, Telecommunications and other information services, Mining and hydrocarbons, Financial and insurance and Transport, storage, mail, and courier sectors.

Construction was the sector most affected by the economic downturn, which registered a contraction of 11.7% in the first month of the year compared to the same period in 2022.

As reminded by INEI, in January, Peru’s economy was affected by social conflicts in the midst of political tensions and rejection of Dina Boluarte’s government, which led to a national work stoppage and more than 100 road blockades around the country, interrupting a series of economic activities.

INEI remarked that there were cases of forced closure of markets, “impediment of free transit of people and merchandise, among other affectations, occurred in some areas of the country”; all of this impacting the economy at the national level.

According to the Ombudsman’s Office, there is a record of 219 social conflicts that resulted in 1261 collective protest actions.

Alex Contreras, Minister of Economy and Finance, had anticipated that January would see an “important blow” in the Peruvian economic activity due to protests and road blockades.

The expectation of the head of the MEF, however, is that growth will recover progressively to reach up to 2% in the month of March.

The fall of the Peruvian economy in January 2023 of 1.12% was close to the BCR’s forecast.

Julio Velarde, president of the Peruvian Central Bank, said last week that the entity expected a 1.4% fall in Peru’s economy in the first month of the year, with an economic impact of 4 percentage points on the GDP.

Bloomberg Economics also anticipated an economic decline of close to 1%, a sharp drop since December.

Another sector that fell sharply was mining, with Metallic Mining activity decreasing by 3.63% due to a lower tonnage treated in concentrator plants in the face of the political crisis and social upheaval.

INEI remarked that there were collective protest actions – road blockades, stoppages, mobilizations, sit-ins – at the national level in mining areas, which also involved the invasion of mining camps, such as what happened at Glencore’s Antapaccay mine.

Some operations, such as San Rafael, Las Bambas, and Antapaccay, had to paralyze their activities for a few days due to traffic impediments in the mining corridor and other social protest actions.

According to the Social Conflicts Report of the Ombudsman’s Office, of the 107 active socio-environmental conflicts registered in January 2023, 71 cases (66.4%) correspond to mining-related conflicts, five more cases than in January 2022.

INTERRUPTED MINES IN PERU THAT AFFECTED THE ECONOMY

In its national production report, INEI highlighted that the intensification of the road blockade in Peru, particularly in the mining corridor in the south of the country, which crosses 15 districts, affected the operations of large mines such as Minera Las Bambas of the MMG company.

Las Bambas only resumed operations on the weekend of March 11, adding the latest disruption to a series of disruptions since it began operations in 2017.

Minera Antapaccay temporarily suspended operations as of January 21, 2023, following the progressive reduction of its operating capacity.

INEI recalled that on January 12, “the violent entry of a group of people to the facilities and burning of two vehicles in the mining unit.”

“Similarly, Minsur paralyzed its production activities at the San Rafael concentrate plant since January 12 due to threats of attacks on its facilities.”

“Nexa Resources Atacocha suspended production at the San Gerardo pit from January 3 to 8, due to the blockade of access to the mine on December 27, 2022, as a protest measure by the communities in the area of influence of its operations.”

“Likewise, Hudbay Peru informed that on January 19, 2023, a group of demonstrators violently entered its facilities and set fire to equipment and vehicles”, the Peruvian entity highlighted.

Copper production in Peru, the main export raw material for the Andean country, fell 1.6% in January after maintaining a growth trend since September 2022 due to lower production volumes reported by Antamina, Marcobre, Minera Las Bambas, Sociedad Minera El Brocal, Southern Peru Copper Corporation, Minera Antapaccay, and Cerro Verde.

With information from Bloomberg