1. Trade Balance: The March trade balance came in positive, with $1.56Bn in imports and $1.9Bn in exports. The export figure has benefitted directly from the rebound in metals prices. Here’s the chart.
Looks like things have picked up a touch month-over-month, which is good. However there’s still that very large year-over-year gap in activity, which isn’t so good.
2. Tax Revenues: Unsurprisingly, taxes levied on external trade traffic are down. However as this WSJ report notes, income tax revenues are also sharply down (21%) for April YoY. This points to a significant slowdown in internal demand. Overall, tax collection was down 17.8% YoY….not funny.
3. The Nuevo Sol (PEN) is now trading at S/2.96 to the dollar, having moved from the 3.10 mark very quickly. This stronger PEN is now affecting export trade competitivity and the Central Bank is moving to stop the melt-up. It bought into the market to the tune of U$7m yesterday , which isn’t so very much but should send a signal. With currency reserves back at U$31Bn, Velarde has plenty of ammunition to stop the PEN from strengthening too far.
4. Interest rates: The reason for the stronger currency is likely the interest rates on offer in (what they insist is) an investment grade country attracting overseas money (it can hardly be called ‘hot money’ these days…maybe lukewarm?). It is a bit pachakuti to think that Peru is considered a safe haven these days, isn’t it? So yesterday we saw the CenBank drop rates to 4% and you can bet decent cash that the trend will continue in the months to come.
As for the conclusion to all this, I’ll be writing up my views in The IKN Weekly. It’s called “another pitch”, but it’s also about preferring the paying subcribers. Life’s like that.