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Between spill and political crisis, Peru's economy weakens

2022-02-22T03:52:13.084Z


While thousands of fishermen and victims seek to make a living on the affected coast, economic activity falls nationwide


Personnel clean and collect garbage on Cavero beach in the Ventanilla district of Lima (Peru). Paolo Aguilar (EFE)

Pedro Pacheco has not been able to fish since the oil spill on the central coast of his native Peru a month ago.

He is one of the many fishermen who claim not to have received help from the company that owns the refinery at the origin of the accident, Repsol.

While the company and the State litigate to determine responsibilities, both have begun to deploy some type of aid to those affected, although the measures seem to be a star away from the magnitude of the problem.

This should have been the high season for Pacheco, with the most favorable climate for fishing, and therefore the most profitable time, but his family is eating from common pots and his hopes are in the Government, which has changed its cabinet three times in less than a year, they are few.

”We have had meetings with several ministers and now everything is in a vacuum again, we are up in the air.

I don't know what they are waiting for,” Pacheco laments.

“We can put up with hunger, but the children can't,” he says.

Like him, there are thousands who have lost their source of income and have not received subsidies.

The spill of more than 11,900 barrels of oil in the Callao region has contaminated 116 square kilometers of sea and coastline, breaking not only the economic chain of fishing, but also those of tourism and gastronomy.

Described by a United Nations expert mission as "the worst ecological disaster" in Peru's recent history, the accident came at a time when the country's economy is slowing down.

The uncertainty in the Administration of President Pedro Castillo and the lack of consensus between the Executive and Congress are beginning to impact investment.

After the rebound in gross domestic product (GDP) of 13.3% last year, analysts expect slower growth of around 2.5% in 2022. Since 2020, poverty has increased by 10 percentage points, reaching 30% of Peruvians.

According to the foreign trade company Comex, 50% of micro and small businesses disappeared in the first year of the pandemic.

At least 200 small boats and 6,000 artisanal fishermen are registered in the areas affected by the spill, which damaged two protected natural areas, according to data from the College of Engineers of Peru.

However, it is estimated that the victims are more, since -until before the spill- an undetermined number fished on the shore and on the rocks and islets without being registered in a union or before the Ministry of Production.

There are, in the affected region, about 3,000 fishermen who at this time of year earn an average of 10,000 soles per month (about 2,700 dollars, approximately) for their fish, so every month that they cannot do their work, waiting for clean up the spill, 30 million soles (eight million dollars) are lost, says Alfonso Miranda, president of the Committee for the Sustainable Management of the Giant Squid of the South Pacific (Calamasur), an organization that brings together representatives of Chile, Ecuador, Mexico and Peru.

The estimate does not take into account the stevedores, filleters, operators, transporters, market vendors, entrepreneurs, and restaurant and hotel employees who also lost their way of earning a living.

The support offered by the Government is less than 1,000 soles per month: an insufficient amount, says Miranda,

“Fishermen should not be given a tip, they should be compensated, which is not the same thing, it is not a bonus or a gift, or anything as a palliative.

They have a life expectancy and that should be taken care of”, says Miranda.

“The government cannot wait for a trial like this, which could take five or 10 years, to end.

He has to go from being a spectator to being a protagonist, ”she points out, referring to the open process to identify those responsible.

Staff clean rocks with oil residue on Cavero beach in the Ventanilla district of Lima (Peru) with solvent Paolo Aguilar (EFE)

Jhossy Arango, 31, is another victim who does not receive government support.

“I was a filleter and artisan of shells and fish scales,” Arango said at the end of a mass in Lima's cathedral.

“A month ago we were tied hand and foot, feeding our families with common pots.

I have two children and the expenses for the school year are coming, plus the electricity and water bills do not forgive, ”she shared.

That day, an association of affected fishermen from the Ventanilla district brought their fishing gear and empty baskets as an offering and the archbishop touched the nets as a gesture of hope for them.

It is in Ventanilla, one of the seven districts that make up Callao, where the La Pampilla refinery is located, operated by Repsol, in whose underwater infrastructure the spill occurred.

According to the 2018 census, 23% to 29% of the population of Ventanilla does not cover their basic needs, making it the poorest in the province.

The Spanish company Repsol has reported that it signed agreements with four fishermen's associations in Ventanilla to deliver food vouchers while the phase of cleaning up crude oil from the beaches lasts, and that it was in talks with other unions for the same.

In Congress, the executive director of the La Pampilla refinery reported that the cleaning stage will end in March.

In the Ancón resort, another of the contaminated points, the subcontracted companies for the removal of crude oil recruit some fishermen, but there are not places for everyone and they fight daily on the dock for a place.

In an email, a Repsol spokesperson reported that the oil company supports more than 3,374 fishermen and merchants, while they are in dialogue with associations and unions to support more people.

"Repsol has committed to maintaining this support until the beaches and the sea are suitable for the development of its various productive activities," the company said.

Although the economic damage from the spill does not amount to even one percentage point of GDP, the accident and its impact have put on the table the possibility of closing the refinery —something that was hinted at by the Government and Congress—, important source of income for Peru, explains Daniel Velandia, chief economist of the firm Credicorp Capital, on the phone from Bogotá.

"We do not believe, for now, that there will be a significant economic impact at the national level, but in the end it will depend on what the control agencies and the Judiciary define," says Velandia.

"If we were to have the refinery closed, it would be a somewhat negative scenario, because not only does it slow down refining, but it will surely also increase fuel prices."

For his part, Miranda, from Calamasur, remembers when, in 2018, President Pedro Pablo Kuczynski awarded concessions by decree to oil companies to operate maritime platforms that go from the extreme north of Peru to the center.

He did so shortly before his resignation, when he had already announced that he would resign from the presidency.

“Fishermen came out en masse to protest this issue” for fear that fishing would be affected, says Miranda.

"There was no guarantee in the event of an accident, and four years later, what happened makes me think that the fishermen were very right," he said.

Rains, it pours

Shortly before the oil spilled in Callao, a brake on the economy was looming.

In the seven months he has been in power, President Castillo has changed cabinets three times.

In addition, his proposals have been rejected by Congress, which generates a paralysis and this is already reflected in the drop in economic activity that began in the last months of last year, Velandia points out.

"The economy brought an inertia and that must be recognized," explains the Colombian economist.

“Peru has been highly favored by metal prices, due to the entire international context, household aid from the government due to the pandemic, savings withdrawals kept consumption dynamic and public investment.”

That said, the specialist points out, there is a slowdown starting in the third quarter of 2021. "It is clear that when Castillo arrives and there is the greatest political noise, we see an economy that begins to show a cooling down month by month."

In October and November, in monthly terms, the economy fell, while in December it rose slightly, by 0.4%.

Peru had managed, in the last 30 years, to sustain a strong economic inertia despite political instability, which precedes Castillo.

Between 2018 and 2021, Peru had five presidents.

One was dismissed, another resigned, two were temporary.

However, investment and economic activity proved resistant to instability because, regardless of the government party in power, the economy was managed pragmatically and on “separate tracks”.

"In Peru there has been a tendency or a feeling that the economy is going one way and politics the other," says Velandia.

With Castillo, this changed.

"There is a significant deterioration in business confidence, that is where the main visible impact of political uncertainty lies."

Since 2000, when business confidence measurements began, there have been three major falls: two of them due to exogenous shocks, such as the global financial crisis and the pandemic.

The recent fall is the first on record that has its roots in internal politics.

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Source: elparis

All business articles on 2022-02-22

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