Peru

While COVID 19 has hit Peru particularly hard, with about 1.4 million cases as of March 2021, the pandemic further emphasised the importance of water and sanitation for health, the environment and the economy. The country is not yet on track to meet the targets of SDG 6 'Clean water and sanitation' by 2030, with 3 million Peruvians (9.2% of the population) lacking access to water services and 8.2 million Peruvians (25.2%) lacking access to sewerage services, and a large urban rural divide. In addition, between 2000 and 2020, floods affected an estimated 4.43 million people, while inadequate management of solid waste and some economic activities are amongst the causes of water pollution, leading to severe public health issues, and social conflicts. In the face of climate change and demographic growth, strengthening water governance in Peru is key for long term water security improvements. The report provides an analysis of water governance in the country and policy recommendations to: strengthen the multi sectoral approach to water; improve the use of economic instruments to protect and sustainably use water resources, its sources and related ecosystem services; and strengthen regulatory conditions to improved access to safe drinking water and sanitation in urban and rural areas.

The COVID-19 crisis has had a profound impact on SME access to finance. In particular, the sudden drop in revenues created acute liquidity shortages, threatening the survival of many viable businesses. The report documents an increase in demand for bank lending in the first half of 2020, and a steady supply of credit thanks to government interventions. On the other hand, other sources of finance declined, in particular early-stage equity. This paper, a special edition of Financing SMEs and Entrepreneurs, focuses on the impacts of COVID-19 on SME access to finance, along with government policy responses. It reveals that the pre-crisis financing environment was broadly favourable for SMEs and entrepreneurs, who benefited from low interest rates, loose credit standards and an increasingly diverse offer of financing instruments. It documents the unprecedented scope and scale of the policy responses undertaken by governments world-wide, and details their key characteristics, and outlines the principal issues and policy challenges for the next phases of the pandemic, such as the over-indebtedness of SMEs and the need to continue to foster a diverse range of financing instruments for SMEs.

The economic performance of Peru in recent times has been impressive. There is now a transition underway as commodity prices fall, and the key challenge for Peru is how to improve productivity and maintain this growth trajectory. Peru is a territorially diverse country and addressing these challenges will require policies that are designed for the specific needs of different cities and regions. The importance of regional policies is particularly important for the case of Peru. Within the OECD only four countries have a larger land mass. The physical geography of the country is shaped by a thin coastal region, the Andes and the Amazon forest in the interior. These different areas are not well connected and have vastly different levels of service provision and infrastructure. The report sets out how regional policies can be improved to address these challenges. This includes ensuring the preconditions (such as revenues, capabilities and coordinating mechanisms) are in place for decentralisation to work. Lifting national productivity will largely depend on well-functioning cities. The report also includes recommendations for how Peru can develop a comprehensive approach to urban policy, including enhancing linkages with rural areas.