So I was checking out the macro scene in Peru and at first sight you’d normally be happy that the percentage total of exports from mining is dropping, with less than 52% coming from its metals trade in July which is the lowest in a long time and well down on that 60% average
But the problem is that Peru is getting all modern and fancy and middle class expansive, so it’s importing more and more and more stuff from other places. So with the drop in mining exports (and the other products it sells not moving much in aggregate terms) we’re now at the point where Peru is importing more than it’s exporting.
Which makes the trade balance look like this:
Now that’s ok as long as your currency keeps up with or beats the dollar, because imports stay competitively priced in local currency terms that way and inflation isn’t fed into the system. But if the trade imbalance continues, as day follows night then the Peruvian Nuevo Sol (PEN) will reverse its upwards trend against the greenback and start weakening. Which will mean that fancy new fridge that José Publico has his eye on suddenly gets just that bit more expensive. The rest of this story you know.
Moral: Middle class Limeños that are dead set against the expansion of their mining industry are going to have a helluva lot more to complain about if they get their way. Dumbasses.