FIDEL A. LARIVA
Kantar Worldpanel Peru
When Ollanta Humala was elected President of Peru in 2011, FMCG (Fast Moving Consumption Goods) in the country grew at about 4% per annum. One of the main drivers of this growth were cities of the interior of the country that overall showed an average 7% growth rate. Another driver of consumption was that C and D socio-economic levels, which constitute 70% of the households in the country, grew at a rate of 6%. Today, these levels show virtually no growth, and provinces have had twenty-four months in the red.
Corruption issues within regional governments, delay in implementing infrastructure works, reduction in funding for local and regional governments as a result of lower prices in mining commodities, the social conflicts that hindered private investment – these are some of the reasons why, from 2013 onwards, consumption in Peru’s provinces has slowed. The situation has been exacerbated by the lack of response from the administration of Ollanta Humala to try to counteract these problems rapidly and efficiently.
A NEW PRESIDENT
Last July, after a hard-fought presidential election, the economist and politician Pedro Pablo Kuczynski, born to a German father and a French-Swiss mother, became the next president. PPK, as we call him in Peru, is the oldest president in the history of the country. He takes office with 77 years of a long and dynamic professional and political career, both at a national level and in some international agencies. However, he is taking on the role at a very complex moment for Peru.
- In 2016 and 2017, Peruvian GDP is expected to be 4%, one of the highest in Latin America. Approximately 80% of this growth comes from the mining sector, specifically from copper production, which encompasses 1% of urban labor in Peru.
- Domestic demand is at one of its lowest levels in the past four years, and FMCG is growing less than 1%.
- Meanwhile, consumers’ and entrepreneurs’ trust is at one of the highest levels of the last five years. They are all optimistic about the new Government.
It is clear that, due to the “collection” of unmet demands of many population segments, the poor or zero effectiveness of economic measures from the previous government, and the need for Peruvian entrepreneurs to rediscover the path to economic growth, the new Government has been well received. At least, it has been for its first 100 days. However, the ability of PPK’s administration to implement measures to move the country’s economic machinery forward, and drive consumption, will be critical. Otherwise, given the demands and the lack of tolerance from some political sectors, this new administration’s “honeymoon period” could end soon.
It is important that the construction industry starts growing again, that public spending, namely on large infrastructure projects, is channeled to activate Peru’s provinces, and, above all, that there are clear rules established so that investors decide to take a chance in Peru.