It’s not about unduly knocking a country or a region (as accused yesterday by some dumbass), it’s about looking at the facts, telling the truth and not listening to obvious bullshit from obvious bullshitters. The main reason why Peru is in more trouble than (for example) Chile is that Chile is being mature about its future problems. The government of Peru is still jawboning its people into believing that everything is fine. That Peru GDP forecast is now down to 5%, by the way. It’s going lower. Take that to the bank.
Alan Garcia is a liar: Some empiricals
At the same time President Twobreakfasts was waxing lyrical about Peru’s stability and how it was shielded from the world recession and how Peru’s GDP would grow 6.5% in 2009 (date, November 2008), the following was happening to Peru’s trade balance:
And as bad as that chart looks, if you look further it actually gets worse. This second chart shows the import/export breakdown that results in the above trade balance. As you can see, the slowdown in both sides of the equation adds further recessionary pressure:
Developing nations such as Peru rely on export capacity to drive economic growth. No exports = no growth. That’s a bit of cruel reality Economics 101 for you, dudes. S&P, Fitch and all the others can try to hoodwink you into believing that the internal economy is Peru’s new driver but that is just so much crap, sad to say. Peru is not a strong currency nation that can run an indefinite trade deficit with the rest of the world; its ability to grow is totally dependent on its ability to sell to other places. And that chart up there is not good news.