Peru’s Social Policy Response to Covid-19: Jeopardizing Old-Age Security

Abstract

Peru has one of the highest number of deaths proportional to its population and a severely hit economy, even though it was one of the first countries to implement strict social distancing measures and an ambitious plan for fiscal stimulus and economic relief for households. The response of the state was mostly based on (i) various cash transfers for the most vulnerable; (ii) policies to activate the economy such as a program to guarantee loans to firms; and (iii) allowing withdrawals from individual pension pots. Unfortunately, a combination of low financial inclusion, deficiencies in registers and structural limitations compromised the effectiveness of the social transfers, reaching recipients late or never. Furthermore, depleting pension funds may ease liquidity concerns in the short run, but the negative consequences on securing a pension for the future are immense. Worse, individuals who are not experiencing hardship can also make these withdrawals. Other countries, like Chile, have followed, paving the way for a dangerous trend that can jeopardize old-age security.