Lima, Peru — Anti-government protests that have killed dozens and wreaked havoc on some of Peru’s most important sectors are beginning to wane, but are leaving a mark on the country’s economy.
Operations in the copper-rich south of the country are steadily increasing, and the iconic ruins of Machu Picchu, the country’s crown jewel, are once again open to foreign tourists.
But for three months, important highways were blocked by boulders and burning tires, profitable copper mines were paralyzed, and railroad lines leading to ancient Inca citadels, like much of Peru’s economy, were staggering. Stopped amid violent demonstrations.
Analysts who have examined the damage done to the monolithic mining sector and the country’s iconic brands as must-visit destinations tell Al Jazeera that there are signs of a cautious reopening of these key sectors. But months of turmoil, continued political conflict and the threat of renewed protests will pose serious challenges to the country’s economic growth in 2023, they warned.
As a clearer picture of the economic impact emerges, they say one thing is certain. That said, greater volatility would hinder mineral investment and hinder tourism. These economic engines account for 10% and he 3.9% respectively of the country’s Gross Domestic Product (GDP). .
“GDP growth in 2023 is 2.5%, with a large downward bias,” BBVA Research Peru economist Hugo Vega told Al Jazeera via email. He said the impact of the political crisis had reduced growth by about 0.3% from this year’s growth in his January alone. In addition to incorporating February and March, the long-term impact on tourism and overall investment “pictures a very difficult picture for the year as a whole,” he said.
Even in a country as accustomed to political turmoil as Peru, which has had seven presidents in seven years, the chaotic ascension of President Dina Boluarte in December following the dismissal of his predecessor Pedro Castillo , the country plunged into a violence the likes of which had not been seen in decades.
Despite a 77% disapproval rating, Bolarte remains in power, and a deadlock between the executive and the judiciary has stalled hopes for this year’s new elections.
Impact on mining
The chaos that has killed more than 50 people is centered in the mineral-rich, indigenous highlands, where vast copper reserves have pushed Peru to overtake China as the world’s second-largest producer. .
In Apurimac, a region shattered by recent unrest, the Campesino community, demanding the resignation of President Boruarte, has blocked a highway leading to the Chinese-owned Las Bambas mine, which produces about 2% of the world’s copper supply, and has cut off the material. disrupted the transportation of In nearby Cusco, protesters set fire to workers’ homes at the giant Antapaccay mine, temporarily shutting down operations.
The extent of the impact on production is still unknown, but experts point to a long history of social conflict between local communities and local mining companies, with production stabilizing amid the recent turmoil. Assuming that there is no temporary logistical problem due to highway blockages, long-term damage to the sector.
“If you can’t get your product out there by continuing to produce it, exporting it when there’s new potential will bring you back quickly in terms of export volume and financial revenue,” says the Center for Research and Development Promotion or DESCO. “[But] If it has to stop operations, it will not be easy to restart its production because the value chain is broken. “
The mining sector, which accounts for 62% of Peru’s exports, contracted 3.6% year-on-year in January, and continued volatility is feared could dampen private investment, which reached $5.4 billion last year. .
But Monge and other analysts emphasized the mining industry’s resilience amid political turmoil and copper’s key role in the electric vehicle boom.
“More broadly, there are two positive trends to watch: higher prices and demand, and [clean] Energy transitions that are highly dependent on specific minerals. One of them is copper. “
loss of tourism
Heading north from the Mine Corridor, the rugged Andes mountains lead to the Sacred Valley. There, his 15th-century Inca citadel at Machu Picchu was once again isolated from the world for about a month.
Peru’s Ministry of Culture closed the site in late January after a highway blockage and damaged railways left hundreds of tourists stranded.
Its closure was another blow for Sofia Arce’s boutique travel agency Intense Peru, which sells personalized tours in the Cusco region.
“My business survived the pandemic and is now going through this social crisis,” said Arce, 49. “Since the beginning of December, business has been zero.”
Arce closed 2022 with 63% of revenue compared to 2019, which was a booming year for many tourism operators in Peru.
“[I]It will probably be around 2025 or 2026 before it recovers to 2019 levels. And that is if there are no more political crises,” Arce told Al Jazeera.
From spicy ceviches and pisco sours to the Amazon River and Rainbow Mountains, the country that attracts backpackers and luxury travelers has brought in a pre-pandemic peak of 4.4 million foreign tourists. However, recent unrest has battered the sector. According to Peru’s Ministry of Foreign Trade and Tourism, the country’s political crisis has already caused tourism losses to reach $600 million.
The hotel industry was hit particularly hard, with an 83% drop in occupancy.
“We’re losing our employees, we’re losing money,” said Jose Queclin, founder of Inkaterra, a luxury hotel chain in the Andes and Amazon.
His largest hotel, with 162 rooms, was closed from December to February due to a lack of tourists. He said he was.
But he remains optimistic, partly because Peru’s Ministry of Finance recently announced a major capital injection involving about $130 million in the tourism sector alone.
“The downward curve has stopped. No more cancellations. We are now accepting bookings and guests.”
This week, local communities in the Andes called for renewed anti-government strikes, including blocking highways. This is alarming news for Sophia Arce, who prepares to guide her 24 tourists from the United States on the trek of a lifetime. sacred valley.
So far there have been no cancellations and no highway blockages.