Informality, an obstacle for everyone

Informality, an obstacle for all When we compare Peru, with over 70% informality in its economy, with developed countries like Switzerland, where informality is only 10%, we can see the enormous task of formalization that lies ahead of us. Informality in our country extends to all sectors, such as commerce, transportation, agriculture, and mining, and transversely affects the entire economy. This informality goes against the proper order of things, negatively impacting the economic, social, and environmental aspects. It is not a cosmetic issue, but rather leads us to illegality and, in some cases, to crime. Additionally, it encompasses activities outside the system that do not generate income for the government, contributing to the deficiency of public services and affecting the quality of life of the population. The current regulatory framework incentivizes informality, burdens formal companies and those wishing to formalize. The mining sector is also affected by informality, with a high incidence of organized crime and unregulated practices that have a negative impact on the economy, the environment, and society. According to the Permanent National Employment Survey (EPEN), informality decreased from 74% to 71% in the period 2022-2023. But this figure, far from being encouraging, is explained more by the loss of over 600 thousand jobs in the informal sector during that period. Informality is responsible for thousands of Peruvians not having severance pay, bonuses, paid vacations, or contributions to a retirement plan. It mainly concentrates in Lima, Tacna, Arequipa, Puerto Maldonado, and Pucallpa. From the business sector, we propose some solutions. First, to boost economic recovery by unlocking projects and streamlining permits, with the aim of creating new formal job positions. It is also necessary to flexibilize labor legislation with fiscal and administrative incentives that make it more friendly to formalization, instead of discouraging it. And the issue of informal mining must be addressed as a priority. Every time the government makes arbitrary decisions on wage policy or when Congress tightens labor regulations, thousands of workers and companies move towards informality. We must seek the opposite effect. For this, public-private collaboration is key in the development of formalization programs, focused on labor competitiveness. Additionally, international cooperation can be sought, such as from the World Bank, which has extensive experience in this field. Peru is not the only country facing this issue, and we can incorporate effective formalization policies that have worked in other countries. It is imperative that we have the political will to confront informality with brave and well-thought-out decisions. Multisectoral collaboration and the commitment of all involved actors are essential to implement innovative solutions. Only then will we be able to continue building a more formal, prosperous, and just Peru for all.