Political Crisis: For the Peru Brand to improve, Pedro Castillo should resign, says analyst

These past few weeks have been filled with uncertainty and protests that have already claimed the lives of six people (four on 3 April, one on April 5 and one this April 6). The picture is certainly grim, but Peru's reputation at the global level is also being greatly affected.

For the analyst and professor at the Pacific Business School, José Ruidíaz Rojas, he believes that the country's brand in the eyes of the world has been deteriorating for months. This goes back to the heaviest stages of the pandemic, when the country won first place in the number of deaths per million people in its population.

“The impact that the current crisis can have, in recent days, is on the same path as the impact that has already been having at the juncture of a few months ago. This situation has come about due to many external factors, but also because of the known errors in the management of the Government. I feel that it is still too early to measure it, but I think that the main responsibility is the president,” he says.

“There is inflation all over the world, but not in all countries people are protesting against their government,” he adds.

In this way, the specialist proceeds to separate the effects of the crisis on the Peru brand into two aspects: the negative, short-term, and the positive, long-term.

1. SHORT TERM

Thinking about how the country's reputation is being affected by this crisis, in the short term, clearly points to talking about tourism. For this, it is important to consider that this is a sector that was reactivating recently and slowly, due to the “poor management of the pandemic”, according to the specialist. So, recent events drive away tourism agencies and tourists themselves.

“If you were thinking about coming to Peru at this time, you probably won't do it anymore because you might think it's dangerous: because of strikes, because of demonstrations ”, says the PBS teacher.

On the other hand, indirectly, there is the impact that unemployment, the institutional crisis of the Government and other confrontations or demonstrations, can have on foreign investment, exports. This is because companies will not want to invest in a country where uncertainty is a constant. Not knowing what will happen to politics and, therefore, the economy discourages big businessmen.

2. LONG TERM

The long-term impact, for José Ruidíaz Rojas, is a 180° lap. This could turn out to be positive.

“If this political crisis has a happy ending — in quotes, because no one can be happy with a death toll of 5. But, let's say it determines an early resignation and a call for general elections, there could possibly be a renewal in consumer confidence,” he explains.

With this, the analyst refers to the context of the demonstrations in November 2020, against the government of Manuel Merino. He recalls that when Francisco Sagasti took office, one way or another, there was a calm in the population and confidence in the State returned. This calm and confidence ended up “infecting” the other agents of the national and international economy. Something similar could come out of this situation.

On the other hand, there is also the image that the Peruvian population is building: as a society that speaks out and stands up against corruption and injustices.

“In fact, that is the image we have been giving in recent times: that we are a critical society towards our authorities. I have heard that a lot in meetings with Colombian, Ecuadorian, Chilean businessmen. They say 'you Peruvians are brave, don't let yourself be trampled on, '” says Ruidíaz Rojas.

THE IMPORTANCE OF CITIZEN ACTION

For the analyst, this situation should only arouse the critical view of the population, since we are in a situation “to worry”. This is because “it is enough that there is one dead person in a protest and that has a direct impact in the short term”. Thus, Ruidíaz Rojas points out that it is not necessary to look at the statistics of tourism unions in Peru to state that the sector has already been affected by recent events.

“Right now the goal is for change to come. The look that we must have must be critical enough not to discourage the struggle that must take place, to let this Government know that this situation does not change (it stops giving work to corrupt people, it begins to submit to the processes, make things transparent and that it begins to function as a common and ordinary government) or the other is resign. Unfortunately, we have all realized that the first option is not going to happen,” he says.

WHAT IS THE EFFECT ON THE ECONOMY?

While tourism and exports are an important aspect in this area, it is not the only one. These sectors only reflect the influence of the situation on the external vision, but on the inside the effect would be even greater. “Uncertainty affects other investments, other industries, and that has a very big impact on the country's economy,” says Ruidíaz Rojas.

This is exacerbated by considering that more than 95% of companies in the country are mypes. So the impact of the crisis is greater for them. “The impact of the crisis on the economy may be much greater than the impact on the Peru brand,” he says.

Inflation in the country has already risen exponentially, but inflation that generates uncertainty is even more damaging to the country — and in that scenario we find ourselves currently.

“Now there is talk of an impact of hundreds of thousands of suns by the day of immobilization . Then look at the damage they are doing, due to mismanagement, because of a string of mistakes made by people who don't even have the slightest knowledge of what our business structure is like,” says the PBS professor.

IS RENUNCIATION THE ONLY SOLUTION?

For José Ruidíaz Rojas, “the more days he stays (Pedro Castillo in the Government), the more damage he does to the economy.” In this way, he states that he cannot think of a more effective and rapid solution that does not involve the resignation of the president.

“There is no other way out. The other way would be for this gentleman to reset everything, that all these unpresentables, most of his ministers, all that network of corruption around him will disappear and that he begins to declare the press like any president. But I think that scenario is unlikely”, he concludes.

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