Political Crisis in Peru: How the Uncertainty of Recent Conflicts Affects Mypes

The curfew decreed surprisingly last Tuesday, April 5 in Lima and Callao generated great discomfort in the people who went out to march against that measure, and among those most affected were workers and traders who are supported by day-to-day sales. In the Gamarra textile emporium alone, it is estimated that mypes lost nearly 20 million soles in sales. The same happened in the Round Table and other large markets in the capital.

In addition, widespread protests, roadblocks and shutdowns in recent days in various parts of the country have caused uncertainty among microentrepreneurs, many of them with loans payable in finance companies and with the responsibility of remunerating their workers' salaries.

THE EFFECT OF PARALYZATIONS ON SMES

To find out what is the effect of paralyzations on mypes, we talked to María Laura Cuya, professor at the Graduate School of the University of the Pacific, CEO of Innova Funding SAC and president of Aprofin.pe.

The specialist points out that one day immobilization in the region with the largest population of people and companies in the country, such as Lima and Callao, generates serious losses.

“Serious institutions such as the Lima Chamber of Commerce point out that a billion soles are lost. Other experts indicate that the figure is 1200 to 1.5 billion. During the pandemic, around S/ 1.2 billion were lost for a day of immobilization nationwide, an important benchmark for seeing the proportion of these measures in the results of the month,” he explains.

He adds that during the pandemic the figure was even higher, but that now it could be slightly lower, because some do remote work and that, this time, not everyone complied with the rule.

“The measure that did not include traditional financial services and shops and was done without clear communication and at the wrong time, generated confusion, so it would be necessary to measure the level of compliance to see if it reaches 1 point in the month's growth. The damage to many MSMEs on their working capital, production commitments, sales and delivery, shortages, labor costs is serious due to improvisation and the short notice time that prevented them from taking precautions,” he says.

MINIMUM WAGE IN MYPES

On the other hand, Supreme Decree No. 003-2022-TR, which establishes an increase in the minimum wage of workers subject to the labor regime of the private activity in 95 soles (which will increase from 930 to 1025 soles) will also have an effect on Mypes, mainly on labor costs.

Cuya points out that, in Latin America, Peru ranked sixth in the minimum wage ranking with $230.

The increase in the minimum living wage could result in “less creation of new (net) jobs”. “It would potentially affect employment, at the base of the pyramid; because if it grows above the increase in productivity, it theoretically slows down job creation,” he says.

“However, these measures, together with a comprehensive employment policy, make sense, but as an isolated and unstructured measure it does not contribute to the purpose of improving profits. On the other hand, as consumption grows, the economy moves. The impacts are complex,” he adds.

Finally, he points out that the crisis caused by the pandemic hit mypes badly (in 2020, 3.1 million mypes were recorded, that is 48.8% less than in 2019) and that this new crisis of rising prices worsens the context as it may affect the payment chain.

“This affects every production chain, suppliers and customers, in the same way the families that depend on those companies. In 2020, the informality of mypes, according to Sunat, amounted to 85% (+0.8) due to the closure of numerous formal companies, among other reasons. This situation aggravates the situation of businesses that are already struggling to survive and reinvent their models,” he says.

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