A long dreamed railroad connecting the Atlantic coast of Brazil to the Pacific coast of Peru may finally become a reality. Meanwhile economic news is mixed in Peru. The dollar has remained relatively stable vs the Peruvian Sol lately, but it may just be a pause before the dollars rise again according to Charles Hugh Smith of the Of Two Minds Blog.
Fresh Peruvian Asparagus & Blueberries will be exported to the US according to a recent article in El Comercio. Both countries are developing systems to mitigate the risk of pests such as the fruit fly and allow more a more open process for exports to the US. Continue reading Peru News Roundup→
Peru’s explosive housing market is showing a decline as inventory increases. As I’ve mentioned in these pages before, the amount of debt in dollars is weighing on the marketplace, and the overbuilt market is screaming “bubble.” Furthermore, as many new units are set to come on the market in the next year, expect declines in prices as builders realize that they have to sell something in order to keep up with debt service. The construction sector has been a big employer in recent years both through construction jobs & all of the ancillary services and products related to housing. As construction slows, so will the overall economy.
The rapid descent of the Peruvian Sol is affecting consumers in Peru. While the US is seeing official rates of inflation below the Fed target of 2%, Peru is paying a lot more for imported products including appliances because of the decline in the national currency the Peruvian Sol.
As I first began to think about this post I imagined that the line “Why the Peruvian economy matters to the world,” would be considered by some in high finance circles to be somewhat comedic relief, maybe like a night out at the improv comedy club for Keynesian economists and bankers.
It’s not to say that Peru’s economy is so large or anything like that, being just 51st in nominal GDP worldwide, (source) but rather that its run to glory is so typical of what has happened to little countries all over the world since 2008. As the “free” Federal Reserve dollars sloshed around the planet searching for anywhere to grow faster, faster, those same dollars found a happy home in many emerging and smaller nations. Peru by itself is just one of the many, but the sum total of debt between all those “little” emerging nations is a significant sum that could easily cripple the banking system.
With emerging markets showing signs of stress after the end of QE, will Peru also see foreign money leaving the economy? With around 50% of all loans denominated in dollars, a sudden exit could leave Peru vulnerable. Continue reading Will the Hot Money Leave Peru?→
Today, the Peruvian Sol fell to S./3 to the US dollar at least for bank customers. In what has been an almost daily event, the Central Bank has been selling dollars to stop the fall of the Sol.
From El Comercio (Via Bing Translator)*
The price of the dollar is appreciating in the foreign exchange market and your (the) quote already reaches the S/.3,00 on the banks of the city since this morning. On the other hand, the Bolsa Valores de Lima (BVL) (Lima Stock Exchange) record positive indices at the opening of business.