France is taking notice of the emerging economic panorama that is taking shape in Latin American countries. Among them, Peru, a nation with which the French have historical cooperative ties. Thankfully, there is reason to continue to strengthen these ties of friendship.
According to the prestigious economic newspaper Les Echos, Peru’s currency is holding its ground against the financial shocks of the COVID-19 pandemic. No devaluation is in sight, experts predict.
In an article under the name "Peru: the currency of the Incas, protected against the wrath of the gods," the French media outlet, who on average circulates more than 120,000 copies a day, highlights that the Peruvian currency "has resisted the coronavirus crisis well." How? The export of minerals, specifically gold, guarantees assets that will enable us to face a long period of global economic depression.
"Les coffres sont pleins au Pérou" (The coffers are full in Peru), the newspaper analysts would say. But let's take a look in a little more detail at how Peru is resiliently facing the financial onslaughts of a pandemic that nobody expected.
In a recent statement to the official newspaper El Peruano, economist Melvin Escudero said that Peru is one of the best positioned countries in Latin America, along with Chile. Peru's important exchange rate position is due, the expert said, to the stable level of reserves, low inflation and low public sector debt (one of the lowest in the region). In this regard, it is understood that Peru's Net International Reserves (NIR) availability is around 69 billion dollars. As for public debt, it has been estimated to amount to only 26.7% of GDP, much lower than that of the so-called emerging countries, whose average is 53.8%. Magnifique!
Where do Peru's revenues come from? Mainly from mining and agriculture. A report by the Lima Chamber of Commerce indicates that the primary GDP accumulated growth of 35% in the last decade. In this regard, the Peruvian mining sector showed greater dynamism, with an average annual increase of 3.7%, followed by the agricultural sector.
According to the National Society of Mining, Oil and Energy, although copper is the mineral that generated the most income last year with 13,893 million dollars, the figure saw a slight reduction of 7% compared to 2018. On the other hand, gold, which accumulated 8,482 million dollars in 2019, showed an increase of 2.7% over the previous year. This increase is the focus of French analysts.
The article in Les Echos states that: "A situation of slow recovery in the world economy [due to the pandemic] would particularly penalize Latin American currencies (Brazil, Mexico, Chile, Colombia), with the exception of the Peruvian currency. If growth and trade remain depressed for a long time, foreign exchange markets will focus on other factors to assess currencies and their vulnerabilities: strength of the country, net international position, political risks, capacity to carry out reforms, etc."
On the subject of reforms, Peru has shown throughout these months that it is ready to carry out the changes that are necessary to maintain economic growth. "We have already taken some steps in the economic revival such as the legislative decree for housing and the emergency decree for agriculture. These measures are a sign that we are already thinking about that stage," said Economy Minister María Antonieta Alva in April.
So it's not just a matter of friendly trust. Based on these figures, the analysts of Les Echos see the great potential in Peru that the Peruvian historian Jorge Basadre spoke of decades ago.
Sources: Les Echos/ Andina/ Radio Nacional/ Ministerio de Europa y de Asuntos Exteriores es el ministerio del gobierno de Francia/ Cámara de Comercio de Lima/ Alerta Económica