The lack of wineries´ formality

 

    The wineries or little shops (bodegas) in our neighborhood have survived generation to generation through various market trends from economic crises to the appearance of a new business format. However, for 500 thousand winemakers nationwide in this type of family business fell between 10 and 20% due to unfair competition from informal workers and the Selective Consumption Tax ISC.

    On the other hand, the Ministry of Production approved the regulation of the General Law of "Bodegueros" to promote the formalization of these businesses because it is generating incomes for a wide variety of families during the health emergency. Apart from that, it will promote the entry of new entrepreneurs in this economic activity. According to the Asociación de Bodegueros del Perú, "It also involves the formalization of a large number of this total universe of wineries, which are currently developing their economic activities without an operating license." 

According to the president of ABP (Choy, 2020), more than 60% of the wineries are not formalized, it is more difficult  to obtain an operating license with a certificate and the approval of the municipalities that they need than obtaining a RUC as a natural person.

    Finally, we can mention that of 500 thousand wineries in Peru, 300 thousand are informal due to the great discretion which inspectors of the municipalities apply the norms and make it difficult to grant an operating license. Also, the products sold in the wineries are not controlled and do not have a guarantee or comply with Peruvian standards. For instance, cigarettes and liquors by the street sellers or informal stalls sell contraband products that are cheaper which leads to unfair competition, and the same occurs with products such as cookies, oil, rice, sugar and other perishable items. 

Bibliography:

1. Flores, C. (2020). Formalizar las bodegas es un reto del Gobierno. Lima, Perú: Correo.

2. Comercio, E. (21 de Enero de 2020). Noticias Retail. Bodegas redujeron sus ventas tras el incremento del ISC y la competencia informal. https://www.peru-retail.com/bodegas-redujeron-sus-ventas-incremento-del-isc-competencia-informal/

 

Transport informality in Lima, Peru over the years

    Peru faces many types of informality in different economic sectors but this post will address specifically informality in public transport.Our country has many public transport services such as busses (micros), taxis/“colectivos” and modern ones like “Metropolitano” and its different lines and a train “Línea 1” that has a limited coverage of the capital. There is another public transit service named “mototaxis” that is mainly found in the peripheries. 

    “The bus service started back in 1920 and had a few routes which covered the districts of Miraflores, Barranco and Magdalena.” (pg. 9)  As the amount of busses on the streets increased, informal busses started to appear and compete with the formal busses and these informal public transport had much bigger power than the private companies that in the long run ended bankrupt. After the hyperinflation of 1980’s, ex-president Alberto Fujimori, in order to help the economy recover, enabled Legislative Decree 651 that gave “ free access to routes to any natural person to provide transport service without approval from municipalities.” (pg. 10) As a result of this policy, between 1990-2000, informal transport increased from 10.500 to 47.000 units not only because of the restrictionless policy but of the high unemployment rate the country was struggling through and until this day, “micros” keep functioning. 

    These informal “combis” do not have a legal contract on how their employees are being compensated. The workers live off a daily profit and the fare for passengers is really cheap (0.50 cents of a sol up to 5 soles)  and depends on the distance covered (can go from 5 blocks to more than 1 km). Eventhough the government has made several approaches to this conflict and attempted to convert these busses to the formal economy, many private companies sub-rent their fleet contributing to the corruption found in this economic sector. Many of these busses owe several million of soles to the government due to unpaid transit  fines as well as a large number of accidents due to the irresponsible driving of the bus drivers that not only cause infrastructural damage but have taken the lives of people on many occasions. 

    Although there are many formal alternatives of transport such as “Metropolitanos” or the Metro Line, many people still choose to use informal busses and there are many reasons such as the price, people prefer cheaper, and the flexibility of these busses. Usually on “micros”, passengers have the chance to tell the driver they want to get off the vehicle regardless of whether there is a bus stop or not, whereas on the metropolitanos this is not possible. There are different reasons why a peruvian person would choose an informal type of public transport rather than the formal and this attitude is what contributes to the long existence of informality. 

Bibliography

Jauregui F., Kenworthy J., Almaaroufi S., Pulido N., Pereira S., Golda K. (July 11th, 2019).

“Anatomy of an Informal Transit City: Mobility Analysis of the Metropolitan Area of Lima”. Urban Science. 

 Bibliography:

1. International Labour Organization. (2019, October 9). Lima’s Gamarra market: The benefits of moving to the formal economy.  https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_723278/lang--en/index.htm

2. Horton, J. (2020). Covid: Why has Peru been so badly hit? BBC News, 1-7.

3. Staffing America Latina. (2018, January 18). Informal employment reached 73% in Peru. https://staffingamericalatina.com/en/el-empleo-informal-alcanza-el-73-en-peru/

4. Post, C. (2016, August 25). Peru’s informal economy to persist for decades: report. Perú Reports. https://perureports.com/perus-informal-economy-persist-decades-report/3901/

How COVID-19 is affecting the peruvian population?

As we all know we are currently facing a pandemic world wide and every country has
different methods of how to control it. We want to talk specifically on how it is affecting the peruvian population. 

The first instance of discovering  COVID-19 in a peruvian was registered on the 7th of march 2020 and the first death the 20th of the same month. The government started taking action of the pandemic on the 11 of march declaring national sanitary emergency, then making a total quarantine on the 16th of march. Meaning most of the workers had to stay home doing nothing, only essential workers could go out on the streets. This brought panic to all the population but especially informal workers who were self employed or employed illegally because they could not stop working for prolonged periods of time.  The government tried to help every family who was in need, by giving them bonuses, the first one being handed on the 16 of March.  Also tried helping small businesses by giving them low-interest credit lines(FAE-MYPE and Reactiva Peru). But even this is not enough for the informal workers who have to provide for their families.

In the table below we can see how it's affecting the different types of families in Peru

It's a reality affecting the formal and the informal sections of workers. Many people admit that they are losing their jobs because of the pandemic. This will induce that the population will find ways to make money even if it is informally, because the reality is that they need to provide for their family and would do anything for them. This has negatively impacted the economy, but also has helped the government to identify a list of workers who had no previous contact with the state, initiating a process that could lead to further efforts toward formalization in the long term. This is an opportunity for the government to reduce the percentage of informal workers that could help the PBI of Peru.

Information taken from:

Chacaltana, J. (25 May 2020). Rapid Responces to COVID-19 under high informality? The case of Peru. International Labour Organization.  wcms_746116.pdf (ilo.org)