Even as Peruvian companies expect the pandemic to have severe impact on profitability, their desire for M&A remains strong.
When the EY Global Capital Confidence Barometer (pdf) survey was undertaken — between 5 February and 26 March 2020 — few executives in Peru had a truly accurate view of the impact COVID-19 would have on their people or the economy. Consequently, they were more optimistic than global executives. Peru’s economy has thrived for much of the past 20 years, so they had every reason to be optimistic.
We see this optimism in Peruvian executives surveyed between 5 and 19 February, where 55% had a positive view of the local economy. However, between 19 February and 26 March, confidence eroded, with only 11% having a positive view of the local economy and 32% taking a more negative view. And yet, among executives surveyed in March, 78% thought the pandemic would have only a minor impact on the local economy, vs. 22% who thought it would have a severe impact.
Notably, even though three quarters of Peruvian executives anticipated the local economy would only be minorly affected, 56% anticipated the pandemic would have a negative impact on their company’s profitability and margins.
Even so, while a majority of Peruvian executives said they were re-evaluating their global supply chain (67%), only 33% said they were taking action to change it. More than three-quarters (78%) said they were re-evaluating speed of automation, but only 11% said they were making changes to improve. This contrasts with global executives, 52% of whom said they were taking action to modify their global supply chain and 36% who were taking steps to fast-track their speed to automation. Given that these are not areas of strength for Peruvian companies, there is room for improvement and change as they build resilience in preparation for recovery.