viernes, 13 de octubre de 2017

Peru Economy 2017

After going through economic crises such as the first government of Alan Garcia (1985-1990) that gave rise to the famous Fujishock in which there was 7000% inflation (the price of a box of milk grew from 120,000 intis to 330,000 ), the Peruvian economy experienced a golden age in 2000 that has been termed the 'Peruvian economic miracle'. Good macroeconomic management, the expertise of its finance ministers, financial responsibility or the ability to offer credit made the country grow at a rate of 8% over several years.

Foreign investment and multinationals set their goals in Peru, and whoever knew the country in those years could not fail to be surprised to visit it today. In spite of its great deficit in infrastructures and the still existing inequality between rich and poor, the achievements that have taken place in the country continue being topic of study for a great number of academics.

For 2017 the expectations of the Ministry of Economy and Finance (MEF) and the Central Reserve Bank (BCR), estimate GDP growth of 4.8% and 4.5%, respectively. Less optimistic is the Association of Exporters (ADEX), which indicates a figure of 3.7%.

According to the 16th Annual Survey of Executives of the Chamber of Commerce of Lima (CCL), 85% of Lima metropolitan businesspeople are confident that their business will improve throughout 2017, compared to 46% who did so only a year ago. However, there are questions among Peruvian economic analysts regarding private investment or monetary and fiscal policy.

When defining the behavior of the current year in economic matters, one must speak of "two rhythms": the one that moves the extractive sectors with a transitory impulse by the maximum operational levels in Las Bambas or Cerro Verde (mining projects); and the part that affects sectors more linked to domestic demand such as construction, services or trade, which together have shown a much more discreet performance.

The measures announced by the government of President Pedro Pablo Kuczynski will favor private consumption to move from current rates of 3.4% to 3.7%, and that investment as a total, rebound from a -4% drop to a rise around 5%.

One point in which the country's economists are in agreement is the need for key measures such as those proposed by the new Executive focused on boosting infrastructure investment by unlocking large projects and administrative simplification.

However, closing the infrastructure gap would not be enough to reduce the fiscal deficit, which was at 3.2% during the last quarter of 2016, one of the highest figures in recent years. All this within a context where it is intended to reduce the IGV by one percentage point with the intention of formalizing the economy and increasing tax collection.

The major projects in the portfolio are 17 and represent S / 18 billion, among which could be highlighted  Chincheros, the road network to Ica, Talara refinery, South Gas Pipeline, and Metro Line 2, which will add growth capacity to the economy.


Construction should become a new sector on which to recover the economic activity. The non-primary industry will also have better conditions for growth after years of stagnation. For this, it is necessary to have urgent structural reforms led by a comprehensive reengineering of the state.

It should not be forgotten that during this year the mining sector still has a lot of potential and that investors are beginning to be encouraged by the low costs of production that exist in Peru and the rise of metals such as copper. The agricultural sector, with large irrigation projects led by Chavimochic, has growth to give, especially in organic products for which there is an impressive demand.

In summary, it is expected that during 2017 there will be no productive activity without any sector in decline, with a primary activity that is more balanced with respect to the non-primary and, above all, the country should prepare to face greater volatility towards 2019.

Francisco, PeruTravelsBlog
October 2017

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