The human and financial toll of the COVID-19 pandemic pushed 95% of Peruvian companies to undertake a comprehensive strategic and portfolio review in 2020 that, for most, was unplanned. This was a profound response from Peruvian executives who participated to the latest edition of the EY Global Capital Confidence Barometer (pdf).
The backdrop in Peru was dire. Peruvians experienced one of the strictest lockdowns in the world, and the 17% decline in Peru’s GDP during the first half of 2020 was the largest in Latin America. Executives’ top three strategic considerations in their portfolio reviews were managing the long-term impact of the pandemic, identifying areas for technology investment and zeroing in on potential areas of inorganic growth. These reviews could be paying off: Peru’s economy has been the fastest to rebound in the region, and the International Monetary Fund (IMF) forecasts GDP growth of 8.5% for the country in 2021. In addition to the negative impact of the global pandemic, political turmoil and social unrest were a constant in 2020 for Peru — and that could extend through 2021 with a presidential election in April and possible runoff election in June.
Stringent pandemic response: sharp decline, mighty rebound
Nearly half of Peruvian executives believe their company’s financial performance was worse than that of their peers.
But Peruvian executives remain relatively positive about their ability to rebound from a year of disruption; a majority (61%) expect to see revenues return to pre-pandemic levels by 2022 or earlier. Nearly half (47%) expect a return to profitability by 2022 or sooner, while another 39% anticipate pre-pandemic profits will return in 2023.
Pandemic puts digital transformation on the fast track
Prior to the pandemic, Peruvian companies had increasingly launched online offerings as buyers shopped online for their convenience. Low internet penetration slowed their progress.
But Peru experienced an unprecedented acceleration in online purchases during the pandemic. Peruvian companies, in turn, had to significantly accelerate digital transformation efforts to meet increased online demand. Companies with three-year digitization plans had to shorten their time frame to months or weeks. They remained hampered, however, by immature software and insufficient infrastructure (telecommunications and internet) across the country to operate a digital ecosystem.
Peruvian executives say they are increasing strategic investment in digital transformation (76%), while also identifying, evaluating and responding to emerging risks in real time (66%) and innovating new products and services (58%). They also recognize that accelerating the digitization of customer journeys and business processes, and attracting and retaining customers are at the heart of their growth ambitions and improved profit margins.