In the second quarter of 2025, the Cusco economy It contracted 4.9% and has accumulated three consecutive quarters of decline, a situation not observed since the pandemic. With this, it remains below the national average (2.8%) and It is located among the regions with the greatest declineonly behind Áncash (-7.9%) and Tumbes (-10.8%). Why is this and what to expect for the rest of the year?
The contraction of Cusco is mainly explained by the fall in mining and hydrocarbons sector (-7.0%), which represents 42% of the regional GDP. This negative performance responded to the lower exploitation of natural gas (-8.0%) and natural gas liquids (-14.4%), due to the maintenance of the Malvinas Gas Separation plant in Shirt and the compressor plant of Transportadora de Gas del Perú (TGP). This effect was partially offset by the recovery of copper (+2.1%), molybdenum (+1.9%) and silver (+1.8%) production.
Likewise, the agricultural sector (-17.1%), accumulating two consecutive negative quarters. The low temperatures and poor harvests affected coffee crops (-41.3%), the region’s main product oriented to the external market. The dad (-5.3%) and starchy corn (-4.4%) also contracted in the second quarter. Added to these sectors was the decline of construction sector (-12.3%), due to the lower execution of works by the municipalities (-33.5%) and the Regional Government (-18.1%), adjusted for the inflation effect.
The risk of a new contraction in Cusco remains high for the third quarter. The mining sector was affected by the protests and blockades in September, which forced operations at the Constancia mine, the second largest copper producer in the region, to be suspended for two weeks. The losses during this period would represent approximately 6.5% of the production of this metal in Cusco. However, this effect is expected to be partially offset by the greater extraction of natural gas (+4.0%) and NGL (+8.0%), according to data as of August.
The protests at Machu Picchu They would also affect the recovery of the Cusco economy in the third quarter. Between January and August 2025, the Inca citadel received 4.1% more visitors than in the same period in 2024, although still 4.0% below pre-pandemic levels. Although the recovery of the tourist flow is gradual, the protests and management and transportation problems have generated losses of more than US$3 million per day, according to the Cusco Chamber of Tourism.
The negative outlook for mining and tourism would be partially offset by agriculture. This sector grew 23.3% between July and August, driven by higher harvests of starchy corn (+407.9%), wheat (+126.1%) and dry grain beans (+256.9%). However, the coffee (-12.8%) continues to decline since the first quarter. Furthermore, the forest fires occurred between July and September, and the 0.7% reduction in the planted area planned for the 2025/2026 campaign would limit the recovery of the sector.
Cusco’s economy faces a complex recovery scenario. Given this, an agile investment environment is required in procedures, accompanied by timely management of citizen demands to avoid conflicts. This will allow, for example, to reactivate mining investment due to its multiplier effect on other sectors that promote employment and local consumption. Likewise, in tourism, it is urgent to resolve the tender for transportation to the citadel and improve visitor management. While, in agriculture, investment in infrastructure and technical assistance is required to prevent future incidents.
Prepared by Gonzalo Manrique, senior economist at IPE, with collaboration of Yamilet Senosaín.
