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Peru’s Recession Proof Economy is Booming

The Economist

Despite a global bust and slowing domestic growth, Peru's economy remains in good shape

Peru had one of the best-performing economies in Latin America last year, with GDPgrowth of 9.8%—higher even than that of China (9%). Despite a severe global economic bust and sharply decelerating domestic growth, the Andean country is likely to remain, relatively speaking, a star performer in 2009.

Peru’s growth has exceeded that of most other countries in the region during the last seven years, driven by high global minerals prices and expanding output from the natural-resources sector, including from the huge Camisea natural-gas field. In 2008 only Uruguay’s spectacular rate of growth of 11% eclipsed that of Peru.

Yet all economies have been slowing since the latter months of last year in response to deteriorating external conditions, a tightening of credit, and more cautious consumers and investors. Many will slip into recession this year. Peru will not be one of them.

The country’s GDP growth rate did decline in the fourth quarter of 2008, to a three-year low of 6.7% year on year, from 10.7% in the third. Real export growth slumped to 2.1% year on year from 6.5% in the third quarter. Domestic demand growth remained relatively strong, however, despite easing to 9.3% after nine consecutive quarters of double-digit gain. Private consumption rose by 8%, after hitting a 13-year high of 9.5% in the third quarter, while gross fixed capital investment expanded by 22.3%. By contrast, government consumption fell by 0.4%, the first decline in six years, although this was mainly due to a high base of comparison.

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# Mike says :
9 March, 2009 [ 10:35 ]

While I hope I am wrong, I would venture to guess that economies like Peru's are going to feel the "bust" a little later.  If it does happen, I hope it won't be too bad.

# SA says :
9 March, 2009 [ 16:23 ]

I have to agree. Peru is better positioned to endure the global economic recession than most nations. However,

1) Metals exports and prices have declined as has the demand for them.
Over 8000 miners are out of work because of this in Peru.
2) Hotels are noticing 30% less bookings than last year because of global recession.
3) Wages in Peru are stagnant or declining as companies look for ways to cut costs.
4) The Peruvian government will run a deficit this year after paying off their national debt last year.                         

# noname says :
9 March, 2009 [ 16:51 ]

Hmm!

Has anyone watched PP Kuchinsky on Prensa Libre last week?  ... I don't know about the rest of the people in here but I trust him a lot... I actually think that he is the one to get credit for any improvement there is with Peru's economy and his take is definitely better than what SA states above.
According to PPK, there are two main things why Peru should do much better than other countries, that is the amount of reserves ($$$ in the Federal Bank) and the other one is that he said that normally during global recession periods like this one, people tend to secure their wealth through "gold" so this metal climbs up (unlike the rest of metals)... now he said that it should take still a few more months to see that happening... but considering that Peru is producing a lot of gold, both formal and non formal, that should counter balance for what's left of the worldwide shock-wave which he said would last another 8 to 10 months.

Let's all cross our fingers and hope that he's right AGAIN!

# c. schmidt says :
9 March, 2009 [ 17:55 ]

I agree with SA parcially- Peru will be somehow  impacted like other countries but might be protected for a time because of the gold and other resources - but definitely world bank forecast from today should make think those in charge. (they spoke about a big depression)
With GDP expectations around 4.5  (economist) we should not run in to much illusions.  I expect if things on international markets are continue to go not well here in middle of this year things might become in economical field slightly unpleasant.  Peruvian debt remains the mayor problem among with down fall of export demand.
If like some already forecast in developed nations inflation will be in upraise than Peruvian economists should take rather now their preparation and by necessary stuff NOW!!! Which Peru needs to import later in change of more money – or saying later when money runs in risk of might having less value-I mean let’s be honest here- in CNN we see images how money is printed printed- this images come all the time.  Bank of England also softened their rules and start to print- this cash is backed up by what- by production, much lower consumer demand and because of huge bailout measures the money is in risk to lose some of its value. It is also a crisis of trust and at the end money is means only trust. If inflation (in webs already discussed among prestigious economists) might follow period of deflation (market killer number one) than this will have serious impact here too because all money reserves will have less strength to by something necessary. Myself I count with inflation as side effect from credit crunch and bank crisis- to many years people though money could be made out from money and now the bill comes heavily. Definitely I think mister Carraza is the right men in charge- he does not seem like locking for being a celebrity. Would it make sense if Peru starts to stock up its own gold reserves- Definitely yes because if gold prize rises more it could be the seat belt for a country which is not exactly defined for having a number one economy and bases its income mainly in export from material prima and natural resources and has not enough production.As additional income Peru should aggressively promote immigration into the country- selling Peruvian residency for little investors who come here could buffer up negative effects on Peruvian economy. If Peru opens to 300000 foreigners who by residency in 5000 euros/dollars  per head and addiconally invest here in something small than just by selling residency without further complication and burocracy there is 1500000000 Euros / dollars more in the country directly and more indirectly coming in  and if not “disappear” this money could be vital in infrastructure, schools and hospitals-or direct help to those in need.  

In the last century in time of first depression one Peruvian president (Legua ?) was up to this idea and therefore with all this little ambitious pioneers who brought their savings and little amounts of money  Peru went quit through the time, besides gold and minerals helped . So why not doing it again?i mean it worked already in the past .  The only reason not to want is because some 2 world oligargia feel afraid and any reason not to do it and keeping it poor is just good enough.

# Rachel in Peru says :
9 March, 2009 [ 18:41 ]

Somebody in the Peruvian government needs to lay off the chicha flavored Kool-aid if they think Peru is going to come out of the global financial crisis unscathed.

Peru won't slip into recession, but the growth of the economy for 2009 is expected to be around 6% instead of the 9% it was previously growing at.

A large part of Peru's growth is based on speculation and I have seen little evidence of a contigency plan should the positive speculation decline or even fail.

I hope Peru continues on a sustainable pattern of growth, but IMHO, Peru still has too many eggs in one basket.

# Mike says :
9 March, 2009 [ 20:28 ]

I'll have to look for the article I saw this in, but the growth for Peru for 2009 was forecast to be 4.7% recently.  That's about half of the growth for 2008.

# noname says :
9 March, 2009 [ 21:12 ]

ok, 4.7% .... so that means 09 is going to be a year with the same growth as 2005?... that's not too bad... so maybe in 2010 once everything goes back to normal, we can experience another "outstanding" year of growth as we did on 2006 with a jaw-dropping 10+%

# Star says :
9 March, 2009 [ 21:20 ]

This is fantastic. But remember what goes up ALWAYS comes down.

# mericorps says :
10 March, 2009 [ 12:17 ]

Record trade deficit,
AFP's lost over 12 Billion Soles
Bolsa down 35%
Consumer goods price rising
Unemployment up
Wages down
Mineral prices down
Tourism down

How anyone can say Peru is recession proof is beyond me.

# Mike says :
10 March, 2009 [ 13:19 ]

And every month since last fall they have been lowering the growth figure.....

# noname says :
10 March, 2009 [ 15:24 ]

mericorps, mike and other alarmists...

Peru's economy is in worst shape than any other country IN THE ENTIRE WORLD... including the great US of A.

And things are getting worse by the minute... you guys should start running away while you can... PLEASE DO IT NOW!!!

happy?

# Mike says :
10 March, 2009 [ 15:46 ]

Of course not.

I think people are just worried - there's no need to get sarcastic.

# Ricardo says :
10 March, 2009 [ 17:18 ]

GDP is just another macroeconomic index. If you want to see how the country is going: Go to Apurimac, Huancavelica, then return in two years, if the economy and these places look the same, it doesn't matter how fancy the GDP numbers look, the country is not sharing the wealth pie.
Only a small elite is reaping the benefit on the increasing of the GDP. And I hope this changes in the future, otherwise, the gap between the wealthy and the poor will increase, and there will be more Shining path to be worried about.

# mericorps says :
10 March, 2009 [ 17:26 ]

noname is just silly.  I do not think anyone ever said Peru is in worse shape, however, he needed to suggest that to make a point.

No one said Peru is spiraling out of control, but he needed to add that to make his point.

In fact the 2 things he claimed no one ever said..my grandfather always said if you have to make up a point, you have no point to make.

Sorry no-name...we are just saying things are not as good as the propoganda claims, nothing more, nothing less, your hysterics are a humerous side-not, but have nothing to do with any legitimate part of this conversation.

# noname says :
10 March, 2009 [ 18:10 ]

mericorps.... maybe is me just tired of trying to make legitimate points... tired of dealing with all the negativism abundant in this website.... it is very rare to find you guys commenting on the news that are somehow positive... but you all hurry to come in whenever there is something bad about the country and/or the people...  It is true that there is a big gap between the rich and the poor... well yes! isn't that the case in most parts of the world?  It is very true that there are departamentos like Huancavelica and Ayacucho that are far behind, but of course that should take a long time to even out... my point is that your continous whinning doesn't help at all... and I really don't care about the propaganda that you are refering to, I care most about what my people (friends and family) continously feed me with... things are much much better nowadays... but I just find it UNFAIR! that you guys all you do is just burn your time pointing out everything from a negative POW...
Maybe to your eyes.. .I need to be negative and whine with you in order to be legitimate...

# AjideGallina says :
10 March, 2009 [ 20:37 ]

So, basically, if we do not only say positive things (and of course many of us have, I love this country quite a bit and have made many positive comments...again..you please feel free to ignore facts like that because..well..it is what you do) ..if we do not only say positive things your idea is to make up things we did not say and attack them.

Interesting approach..one I would never have thought of.

# noname says :
10 March, 2009 [ 21:45 ]

Aji,

Did I mentioned your name here or somewhere else? please show me where

thank you!

# Star says :
11 March, 2009 [ 02:38 ]

Its not negativism. Its your egotism that keeps the optimism alive. How can anyone reasonably believe the Peruvian government financial statistics. They don’t even have a accurate Department of Motor Vehicles for Christ sakes. Geezus..wake up because a Sunami is coming.

 

# noname says :
11 March, 2009 [ 03:47 ]

the more I learn from foreigners visiting this website... the more dissappointed I get...  very depressing...

I used to have an entirely different opinion of people coming from "developed countries"....  not anymore...  this has been nothing but an eye opener experience.  this guy's spelling is even worse than mine.. and he had to use bigger font OMG!...

# AjideGallina says :
11 March, 2009 [ 07:43 ]

I agree with the other posters, this is propoganda, not honesty.

For love of Peru, there must be honesty.  I do not think speaking the truth about the economy is bashing Peru.

Noname, you miss the mark if you ONLY want to hear good news.  If you really loved Peru, you would want to make it as good as possible and would want the country to be as honest as possible.  You do not understand the difference between patriotism and nationalism.  Nationalism is turning a blind eye and saying your country is right, no matter what and quite often leads to failure in a country.  Patriotism is loving a country and searching for weaknesses and exposing them with the goal of improving your country.

Basically, the others are right, Peru is entering recession, and the economy is having severe problems that the government is simply ignoring or pretending are not there and counting on people like you to play along.  I love Peru too much to let that happen..I guess you do not.

# Leivaman says :
11 March, 2009 [ 08:05 ]

The comments I read from you all are of a continual sense of amusement that really makes my day.  You guys really should stop the bickering.  Whilst I absolutely agree that you can and should express  your opinions, just try once in a while to feel the love.

Mwah

 

# Star says :
11 March, 2009 [ 09:20 ]

That was funny thanks noname LOL.

I love reading and love writing; that doesn’t change the fact that I use horrible grammar and cant spell. I love Peru and Love the USA that doesn’t mean we cant be honest with reality. When I sold my home in California back in 2006; I sighed with relief and went mostly liquid with almost all my other investments.  All the warning signs were there. I made it out before the market collapsed. I’m a 38 year old willing and eternally optimistic business man. In my short years  I have failed and succeeded many times. One lesson I learned however was to check my ego and listen to the doubters with an open mind so that I don’t fall into the cracks. Thank Gawd that this time I listened and came out on top. If invested in Peru. Make moves before the stampede. Smart money is already making the moves and will wait to jump back in when they (the general population) has been bled.

Ask yourself are you really watching, are you  prepared and is your ego checked enough to make some bold moves in advanced . Don’t be fooled by the Peruvian government. Of course there gonna state great things. So did Bush.  Make moves before the stampede.

 

# noname says :
11 March, 2009 [ 15:09 ]

I am too old and wise enough to know that I should never expect anything from the government... COME ON!!! .. that's exactly my point... seems to me that you guys just can't see my point because you don't want to. government is not only corrupted, but also inept! they are not even good at being corrupt... cause they get caught in the silliest way, unlike here in the US... where corruption escalates to higher levels but us the general public won't ever see it. I even think that guy that got caught trying to sell Obama's congress seat oughtta be Peruvian descendent.. haha! so don't take me wrong, here I continously see people saying that I love Peru blindly... that's BS!!!  I know what's good and what's bad better that anyone else in here... but I honestly don't see the point of having people making a circus here echoing everything that is bad FOR WHAT??? do you honestly think by doing that is going to change or help in any way???  huh???

If you all like or love the country as much as you say you do... well, go ahead and invest the money, become an entreprenour and don't look back. Time is right!  is like if you miss a trip to the beach, just cause your shoes are a bit too tight and you are afraid you might get a blister... not knowing that later on you might realize that you didn't need to wear shoes to go to the beach in the first place... just stop the whinning and GO!!

# c. schmidt says :
12 March, 2009 [ 18:22 ]

 interesting comments- from my opinion everyone who writes in LIP tries to reach out to make things better- there might be harsh disagreements - but what we all seem to have in common is- we take our time on regular base to make our points and we mean it to make it a little bit better here , it does not matter if we are outraged, frustrated or delighted about our ideas or if we just observed something which we feel is important to tell or if we want  just want to chare our expericances -  it is important that we keep writing, we tell our story . That we reach out- every one of us- our political line does not matter what would matter is that we try to be fair in our judgment and have good intensions for the country.  I agree with Ricardo’s view- because I know rural areas in some part of Peru- richness does not arrive- thee is not enough smart engagement of how to use state money- it gets many time lost in silly projects here and there and poor people feel that things are always the same no matter who steps in. 
Lately I find it kind of dangerous how political scandals are pushed aside- it sees that some press only serve special orders. Some common Peruvians say - there is only democracy when justice system works well and there seems to exist a certain gap between what people think and what some newspapers tell.   
BBC must have a good reason to keep  Peruvian country per file like it is online- this pages are readed by eventual foreign investors and no matter which lies are told here- this kind of news count- because is neutral based.   
I think no matter- Rachel, Mary corps (who was so funny to compare me with Mc carthy in one occasion), SA , no name, the Davids , Rice and sugar  , no name and ricardo and all the other regular writers which  names I don’t have right now in mind - it is good that we are in this forum- when something gets really our attention we should put it off or online on international level in international newspapers.
I tried on private base to make little difference in favor of better justice online  and offline   and can reassure- it was not easy- since years I have suffered threats in different versions  by not knowing the origin  - run into people who told me " they will make my life impossible until I have to leave Peru" and there happen many strange things which make me believe there are people outside which want to make my life hard. It is sad that this happens because  I am foreigner here and try to animate foreigners to come here because I thing even with all problems the country has great potencial.  

# Jet says :
16 March, 2009 [ 18:02 ]

Well both opinions could have some validity. For example January of 2009 thru april should show the slowest growth in Peru, maybe of only 2.5 to 3.5% because this is the low point before economic stimulus money has really kicked and large scale projects have not begun yet.  And the newly signed or soon to be signed free trade agreements won't have a felt effect until about mid-year.  So just as markets go up and down, those predicting gloom are partially correct, specially for the first part of the year.  But those that are more hopeful will probably be correct in the 2nd part of the year as many of the positive factors start to take effect such as the free trade agreement with China which alone is predicted to add an entire percentage point to the Peruvian economy. People tend to be so polar on these issues lol.

# dr. roger Hazeldine says :
3 May, 2009 [ 01:31 ]

The comments passing between the many writers seems to contain one thing ; they all love to see themselves in print.

A short note high lighting their give point would make for much more construtive insight into Peru .

So many seem to adore ( love this country ) i take it they wonder into the country side and perform sexal acts with the rocks and trees  !!! me i just like it warts and all. Amen.

# Jet says :
3 May, 2009 [ 02:02 ]

uhhh ok..... yeah.... wtf?

# Dr. roger Hazeldine says :
3 May, 2009 [ 06:24 ]

Jet is it possible that you may have over extended yourself with you deep and well defined statement it was so very revelling. your pesonality shone through like the high flying eagles i see around here. are you related ??? just brain wise. !!

# Jet says :
4 May, 2009 [ 01:29 ]

Well let's see "Dr" Roger..... you come here only to complain about what other people wrote, and then inslut them by asserting that they probably go in to the country side to perform sexual acts with rocks and trees, and yet mention nothing about the subject of the actual article itself.  
And yet, even though you only comment on what others said, and not about the article itself, you still elevate yourself to such a grandiose level as to tell others how they should comment on an article, even though your own comment doesn't even follow the advice you give and comes off as pompous and hypocritical. 

And by the way, considering you are a "Dr"  and feel yourself so elevated as to lecture others on how, and what they write, you should really improve your own usage of the language, syntax,  and writing skills.

"A short note high lighting their give point would make for much more construtive insight into Peru ".

It's highlighting, not high lighting.
It's constructive, not construtive.

"So many seem to adore ( love this country )  i  take it they wonder into the country side and perform sexal acts with the rocks and trees"

When refering to yourself in a statement or sentence, you should use capitals, not lower case.  It's "I" not i.

In order for that statement to make any sense at all, the second underlined word should be wander, not wonder.

You really feel yourself so above others (despite your sub highschool usage of grammar and syntax) that you think you need to define "adore" for them by then putting (love this country) in parentheses?

"!!! me i just like it warts and all. Amen."

You are the only "Dr"  I know that feels it correct to use not 1 but 3 exclamation points at the end of a sentence.

But even regardless of that, the exclamation point indicates the ending or closure of a sentence, thus you are starting a new sentence afterwards, which should then begin with a capital letter, not lower case. Yet you began it with "me" which even in itself should have been capitalized also, even if it weren't at the beginning of the sentence.  Then the very next thing, you again say "i"  should also be upper case.

Then at the end you choose to say "amen" to your own statement, which makes it seems as though you are so very desperate to put some sort of validation on your own point. 

Next -

"Jet is it possible that you may have over extended yourself with you deep and well defined statement it was so very revelling"

No it's actually not possible, since what I said is exactly what was appropriate and representative of a genuine reaction to your disrespect for everyone else that posted on here and then trying to tell everyone how they should post, when your very own post verges on the ludicrous and very obviously, quite hypocrital considering your frequent misspelling, error in syntax, and sub-high school level usage of grammar.
Oh and I think you meant revealing, not revelling, since revelling, a 14t century mid english term is a transitive verb not pertinant in context to the above statement.

"your pesonality shone through like the high flying eagles i see around here. are you related ??? just brain wise. !!" 

Really?  And what do you think it's shows of your personality that you come here just to insult everyone that has posted and then give them advice about how they should post while simultaneously you show less than even a highschool level of grammar and yet imply that you are above everyone else Mr "Dr"?

Based on everything that you've posted up to now including your opinion of others, your poor usage of the language, by your own form of judgement it's quite obvious that you really love seeing yourself in print, since your silly attempts to valiadate yourself and your deluded air of superiority over everyone else Mr "Dr"  gives the impression that perhaps you did a few too many experimental drugs back in the 60's.

So to all of that I said and repeat  , uh ok...... yeah....... wtf? 
Sounds like drugs to me. LOL

# Carlos Benavides says :
15 July, 2009 [ 02:00 ]

Despite Peru’s economic performance being among the best in Latin America poverty remains high and widespread. Peru had the fastest growing economy in the region in 2002 but unemployment was still very high and poverty reduction strategies have not had sustainable results. Peru’s poverty levels are above those of Argentina and Brazil based on US$2/day poverty line.

Crecer (Grow) is the latest government initiative which focuses on child malnutrition.

25 percent of children under five years have stunted growth in relation to their age and this rises to 66 percent in the seven poorest regions. The aim is to reduce the average to 20 percent by 2011.

Almost half the population is poor, significantly higher in the rural areas, and 20 percent are classed as extremely poor. In the urban areas poverty is the most unequal.

More than 39 percent of the total population and two thirds of the rural population in Peru live below the poverty line.

Inequalities in human development can be seen between urban and rural areas, Spanish and non-Spanish speakers and across the climate zones. Most of the extreme poor live in rural areas in the highlands and the rural jungles and have Quechua, Aymara and other languages as their native tongue rather than Spanish. They have fewer opportunities to progress through life due to the obvious discrimination caused by language barriers.

Despite National trends showing a reduction in child mortality and an increase in school enrolment since the mid 1990s chronic rates of under – nutrition prevail in rural areas. Children’s growth and development are affected by poor nutrition. Despite progress in access to services for the poor, disparities between urban and rural areas and across different regions mortality remains high. A quarter of the population has no access to health services despite free health care since 2002.

Children are the most vulnerable and unprotected. Of the 3.8 million people living in extreme poverty 2.1 million are children. Of the 10.2 million under 18 population 6.5 million live below the poverty line. Poverty remains high and the proportion of children who live in poverty is much higher than figures for the population as a whole often indicates.

Socio – economic disparities and exclusion continue to affect children and adolescents who are not benefitting from the economic growth. Enrolment for school declines with age due to the expense of keeping a child in school. Child labor is a factor here as nearly 90 percent of children help out at home or work on the family farm.

Levels of poverty, mortality rates and malnourishment among indigenous groups are twice as high as national averages. Peru has one of the highest levels of income inequality and the gap between the rich and poor is widening.
http://www.articlesbase.com/economics-articles/poverty-in-peru-1018333.html

# Carlos Benavides says :
15 July, 2009 [ 03:05 ]

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