Peru's Economy
Informality in Peru
Why around 70% of Peruvian workers are informal, how this limits tax revenue and social protection, and what it meant during COVID-19.
Peru has a very large informal economy.
Scale
Around 70% of workers are informal: no contracts, pensions or health insurance.
Examples
Street vendors, market traders, mototaxi drivers and small workshops.
Costs
- Low tax revenue.
- Weak social protection.
- Low productivity.
COVID-19
Peru had one of the world’s highest COVID death rates; informal workers couldn’t stay home without income.
Causes
- High costs of formalisation.
- Complex regulations.
The market trader
A trader in Lima's Gamarra market sells clothes without registering her business or paying into a pension.
Thinking growth automatically formalises jobs
Informality stayed high.
Key takeaways
- About 70% of Peruvian workers are informal.
- This limits taxes and protection.
- COVID hit informal workers hard.
- Formalisation is costly.
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