Peru and U.S. Close to Signing Deal to Counter Chinese Influence

LIMA (Reuters) – Peru and Washington are in the final stages of talks on a deal to promote American investments in the South American country as part of a U.S. initiative to counter Chinese influence in the region, a Peruvian diplomat told Reuters.

The United States launched its “Growth in the Americas” initiative in 2018 to bolster private-sector investments in energy and infrastructure in Latin America after China invited countries in the region to join its global Belt and Road Initiative (BRI).

So far, the United States has signed memorandums of understanding within the Growth in the Americas framework with Argentina, Chile, Jamaica and Panama. Chile, Jamaica, Panama and Peru have also signed MOUs with China to join the BRI. “The Trump administration is interested in balancing Chinese influence in the region a bit,” Cecilia Galarreta, the director of North American affairs in Peru’s foreign ministry, told Reuters on the sidelines of an event on Thursday.

Source: Peru and U.S. Close to Signing Deal to Counter Chinese Influence in Region

How Brazil and Vietnam are tightening their grip on the world’s coffee – Reuters

With increasing use of mechanization and other new technologies, the world’s top two coffee producers, Brazil and Vietnam, are achieving productivity growth that outstrips rivals in places such as Colombia, Central America and Africa.They are set to tighten their grip.

A plunge in global coffee prices in recent months, to their lowest levels in 13 years, has begun to trigger a massive shake-out in the market in which only the most efficient producers will thrive, according to coffee traders and analysts.Rival producers elsewhere in the world are increasingly likely to be driven to the margins, unable to make money from a crop they have grown for generations. Some are already turning to alternative crops while others are abandoning their farms completely.Such shifts are almost irreversible for perennial crops like coffee, as the decision to abandon or cut down trees can hit production for several years.

“Brazil and Vietnam have had consistent increases in productivity, other countries have not,” said Jeffrey Sachs, director of the Center for Sustainable Development at Columbia University, citing advances in mechanization, selective crop breeding techniques and irrigation technology.

In Colombia and Central America, coffee is typically grown on hillsides where mechanization is more difficult, and hand-picking cherries has kept production costs relatively high. The African sector, meanwhile, is dominated by small-scale farmers often unable to raise the capital needed for new techniques.

Source: How Brazil and Vietnam are tightening their grip on the world’s coffee – Reuters

Yellow Bourbon Coffee (Photo: Roast Magazine)

Coffee Producers Demand Immediate Price Action

Coffee Prices have been mostly falling for the last few years. After the coffee rust devastation in 2012, many farms had low production until the new plants started fully producing. Today, the struggle is to try and increase prices to a level that will allow farmers to continue growing. Via Roast Magazine:

A consortium of major organizations representing coffee producers throughout the world has issued a sweeping condemnation of the global coffee industry as the “C price” for coffee sits at historic lows.Without immediate action to supply better collective prices to the world’s approximately 25 million smallholder farmers, the coffee industry may likely be contributing to a widespread humanitarian crisis as coffee farmers abandon coffee in favor of illicit crops or migrate in search of better opportunities, the group warned today.Thirteen organizations representing the World Coffee Producers Forum — including Colombia’s FNC, Africa’s AFCA, Latin America’s Promecafe, Brazil’s BSCA and the United States/Europe’s Specialty Coffee Association — have attached their name to a declaration calling for immediate action in response to low coffee prices.The groups are specifically addressing the ICE futures price for commodity coffee — often called the “C Price” — which is widely used as a price discovery and reference tool in the creation of futures contracts for transactions of green coffee. Throughout the coffee sector, the C price serves as a benchmark that affects prices at virtually all levels of the coffee trade.

Coffee Futures Prices

Source: Coffee Producers Demand Immediate Action Amidst Price Crisis – Daily Coffee News by Roast Magazine

Coffee Supply Crisis in Our Future?

To understand the most pressing problems — which appear to be exacerbated by rising temperatures, erratic rainfall patterns and other effects of climate change — the nonprofit World Coffee Research (WCR) commissioned the International Center for Tropical Agriculture (CIAT, by its French acronym) to classify global growing areas by climate condition, dividing regions into what is known in climate modeling as pixels. (Think of them as microlots, but for climates.) The pixels were grouped by common climate profiles, resulting in five agro-ecological zones: hot-wet, hot-dry, constant, cool-variable and cool-dry.

These zones are intended to help researchers focus on the different areas in which coffee currently grows, providing a more accurate forecast of where it might not grow in the future. Predicting how each zone would behave in response to 19 distinct climate-model projections shows that land suitable for coffee growing could drop by a staggering 50 percent over the next three decades.

via Daily Coffee News, full article here.

 

Dollar closes week at S/ 3.36, highest since 2006

The Peruvian Sol continues to fall against the dollar reaching levels not seen since 2006. Via El Comercio Peru:

The exchange rate rose on Friday to a maximum of more than nine years for purchases of dollars to companies and institutional investors due to increased expectations of a rise in the US key interest rate in December and fears about the health of China’s economy.

The dollar rose 0.21% to S / 3.363 units, matching the level of 7 April 2006. Meanwhile, the parallel exchange rate was S / 3.365.

To mitigate the decline, the Central Reserve Bank (BCR) sold US $ 70 million, at an average exchange rate of 3.3609 units.

During 2015, official sales total US $ 7.569 billion, while the local currency recorded a drop of 12.85%.

“Instability and weakness of China’s economy, the approaching end of the year and the odds for the US Federal Reserve to raise rates, continue to generate demand for dollars from corporate and institutional,” said one agent.

Full Article Here: Dólar cerró semana en S/.3,363, su nivel más alto desde el 2006 | El Comercio Peru

Mapping the Poorest of Peru: Report

 

Peru has made great strides in the fight against poverty. As the economy has grown, many areas have seen a reduction n the poverty rate. Sadly though, some areas remain entrenched in poor economic conditions, and have seen little improvement according to a report published in El Comercio Peru.
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Peruvian Sol falls below $3.25

The dollar continues to rise against the Peruvian Sol, which has declined in value vs. the greenback over 9% this year.

Via El Comercio Peru (Google Translate with editors corrections for clarity – original below.)

 

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Is Peru Firing Shots in the Currency Wars?

The Peruvian Sol

In today’s Gestion is an article regarding comments by Eduardo Amorrortu of Peru’s Association of Exporters, who says the Peruvian Sol needs to fall further in order to remain competitive.

While Brazil and Columbia currencies have fallen considerably more than Peru (Brazil 2.66 vs dollar at the beginning of the year- now 3.51, Columbia then 2377.50 – now 2960.89, both had fallen double digits before as well.)

The Peruvian Sol started the year at 2.985 vs the dollar (at this writing 3.23, having fallen even more since the China devaluation.)

As each exporting nation seeks to gain an advantage (which ultimately no one can,) China has fired the latest salvo in the recent devaluation, but already there are calls to respond:
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