Downturn coming?

[Sergio Bernales]

It seems a slowing of the economy is coming - hopefully it'll be gentle and take some of the froth off the housing markets and hold prices down rather than being anything more severe. PPK is also expressing a lot of doubts at the moment.

By the way, you might have to register to read this article, but it's free to register.

http://www.ft.com/intl/cms/s/0/3542a4ca ... z2UELTcYJv

[chi chi]

If there will be downturn then it will be in Lima. Property prices are way too high. Prices in the provinces will keep going up. There a hugh shortage of home in places like Tarapoto.
It's almost impossible to rent a place in Tarapoto as demand is too high. In Lima, it's easy to find a place. Especially in the expensive districts.

But I don't think there will be a big crash anytime soon.
Just like in Europe. They have been saying that the economic crisis will be over next year. They have been saying that allready 7 years in a row and crisis got worser year after year.

[Sergio Bernales]

If there will be downturn then it will be in Lima. Property prices are way too high. Prices in the provinces will keep going up. There a hugh shortage of home in places like Tarapoto.
It's almost impossible to rent a place in Tarapoto as demand is too high. In Lima, it's easy to find a place. Especially in the expensive districts.

But I don't think there will be a big crash anytime soon.
Just like in Europe. They have been saying that the economic crisis will be over next year. They have been saying that allready 7 years in a row and crisis got worser year after year.

Yeah, I'm inclined to think you're right. I don't think any big crash is coming soon - unless there's some major disaster elsewhere in the world, but hopefully there'll maybe be a slowdown that will stop the crazy rises in prices and bring a few people back down to earth.

Are prices high in Tarapota then, for renting and buying? I've noticed that although house prices have risen a lot in Lima, rental prices in here have merely nudged a little higher in the last few years.

[tupacperu]

The gov't is taking measures to stave off the slowing economy. It was blamed on Semana Santa/Easter having fewer days. But many believes it is an economic slow down or correction. Credit delincuencies are up, exports are down, metal prices are down. Peru failed to diversify the ecomony in the boom times, relying on mining and exports solely.

Personally, we have been waiting for the correction to purchase an Apt in Lima.
We are waiting on the tourism numbers, the airline ticket prices are ridiculous. JetBlue is entering the game in Nov 2013 with reasonable prices and many flights are sold out.

I do not think the economy is in for a crash, but the housing market is in for a correction. Many will be wanting to cash out their homes. I do a search on "Remato" on Peruvian classified sites including Mercadolbre and there are a homes showing up . Remato=discount

[falconagain]

The gov't is taking measures to stave off the slowing economy. It was blamed on Semana Santa/Easter having fewer days. But many believes it is an economic slow down or correction. Credit delincuencies are up, exports are down, metal prices are down. Peru failed to diversify the ecomony in the boom times, relying on mining and exports solely.

Personally, we have been waiting for the correction to purchase an Apt in Lima.
We are waiting on the tourism numbers, the airline ticket prices are ridiculous. JetBlue is entering the game in Nov 2013 with reasonable prices and many flights are sold out.

I do not think the economy is in for a crash, but the housing market is in for a correction. Many will be wanting to cash out their homes. I do a search on "Remato" on Peruvian classified sites including Mercadolbre and there are a homes showing up . Remato=discount

Delinquencies are always up in Peru, exports are down due to the strong dollar, metal prices are also down
because of a strong dollar. Peru has been talking of economical diversification since the 19th century.

The strong dollar has provided additional financing to non viable companies like Jetblue. The
price of oil will eventually go up until it reaches true equilibrium. With the new High oil price,
it will be a joke to say that americans can afford flying anymore. As soon as the dollar goes down
or collapses things will improve. The main problem is the lack of diversification and the excess
in the Peruvian government welfare programs.

[Alpineprince]

The strengthening Dollar has already reduced new construction prices in PEN by about 4%!

[tupacperu]

http://gestion.pe/economia/centrum-sobr ... ia-2067110

Centrum on economic slowdown: "We are about to lose the train of history"
Tuesday, May 28, 2013

ECONOMÍA07 53
Cesar Alvarez researcher compared the economic boom in the prices of the metals with the guano boom and rubber. "This year is the turning point. Reforms should be implemented in the next two or three months, "he said.


Urgent. Alvarez points out the need to reform and Ceplan Proinversion (Video: Bryan Bathrobe)



A country that does not know history are doomed to repeat it. It is not the first time that the Peruvian economy grew at high rate by external factors. "We are about to miss the train," says the Catholic Centrum researcher, Cesar Alvarez Falcon.

The expert compares the growth of the boom in the metals, which is coming to an end, with the boom experienced by the exploitation of guano and rubber in the late nineteenth century. "When it bubbles, always generates internal political turmoil," he warned.

For the expert, Peru can maintain annual growth rates greater than 6.5%, but the 2013 is "the breaking point". "Everything will depend on that in the next two or three months the Government decides to implement effective reforms," ​​he said.

These reforms-said-are easier to implement in the first year of government, because the political environment is favorable. The researcher had an impact, for example, the need to reform Proinversion, because in the last two years did not launch new projects "for lack of trained personnel."

Another institution that would violate that work would Ceplan. "They have a strategic plan, but they are two pages that say nothing. We must not let things run on autopilot "whipped.

In this sense, the economist noted that the infrastructure deficit of $ 80 billion, it lags our competitiveness, it also represents an opportunity to develop public-private partnerships, which in turn would demand labor.

No referee
A weak role Alvarez-alerted state discourages investments mainly in the extractive sector. "If the government does not perform its work, is like playing a football game without a referee," said the teacher, using the example of the problems caused around consultation.

"Article 169 became law in Peru. Then he issued a regulation, and later, as it was not clear, it took a guide. It is a set of laws that generates fear. Above, the President said that the Andean communities would not be part of the query. Merino Minister then went on to say that assessed case by case. But finally the query would not be binding, creating the possibility of more conflict. Nothing is clear, "he argued.

"We need a more organized driving. If you do not know where to go any way is right, and so are we, "says the professor, to paraphrase the cat tale Alice in Wonderland.

[tupacperu]

Like a Business - if you do not invest in expansion, or improvements and rely on a buy/sell mentality, your product will lose steam.. Product life cycle is an important part of planning, coming up with new strategies for the future, to expand and update your product. Where does Peru go from here??? They may have picked up the ball too late to run for the goal. Internal Demand (consumption) is not a long term strategy, as they are stretching the limits of the credit market. To me they are setup for the domino effect. We will see in the coming months.

[ariel]

An economy that has all the potential to become an APEC powerhouse but does not adequately attempt to look beyond its nose (mining, tourism) is headed for a disaster. Diversification is key. But not only that, it also needs to identify which industries can be tapped for a symbiotic relationship with another economy. For instance - China mulling an "economic dream team with Germany". China requires high-quality machinery from Germany to manufacture goods that end up back in Germany. China is also a giant market for German luxury cars, while Germany gets textile, electrical goods, and toys from China. Etc, etc.

Gina Rinehart (Australia) correctly sums it up like this: "Mining is not an ATM for the government."

Peru is either on the verge of missing the proverbial train or, if it plays its cards right, boost the regional economy in this part of the world. One thing is for sure, the road is never really straight and there are bumps ahead.

[falconagain]

An economy that has all the potential to become an APEC powerhouse but does not adequately attempt to look beyond its nose (mining, tourism) is headed for a disaster. Diversification is key. But not only that, it also needs to identify which industries can be tapped for a symbiotic relationship with another economy. For instance - China mulling an "economic dream team with Germany". China requires high-quality machinery from Germany to manufacture goods that end up back in Germany. China is also a giant market for German luxury cars, while Germany gets textile, electrical goods, and toys from China. Etc, etc.

Gina Rinehart (Australia) correctly sums it up like this: "Mining is not an ATM for the government."

Peru is either on the verge of missing the proverbial train or, if it plays its cards right, boost the regional economy in this part of the world. One thing is for sure, the road is never really straight and there are bumps ahead.

To change Peru requires a lot of capital which is currently tied in the main and local governments on a national level. That money is being wasted and then we expect foreign companies to come and invest even more. Companies will not move to Peru until the normal capital flow is restored, otherwise Peru can miss
the train anyway, but not because it cannot do it. But because it does not want to.

[tupacperu]

Latin America Disappoints After Squandering Commodity Boom

http://www.bloomberg.com/news/2013-05-2 ... cmpid=yhoo

The region won’t recover to levels of growth seen during the previous decade because the commodity boom is over and policy makers failed to reduce their dependence on primary goods when money flowed into their economies, said Michael Shaoul, chairman of Marketfield Asset Management in New York.
“Latin America hasn’t bottomed yet,” Shaoul said. “It’s in the middle of a painful adjustment.”

http://www.ft.com/cms/s/0/b622f752-b967 ... z2UhVcnuHB

“Blissful external conditions will not last forever,” Alejandro Werner, the International Monetary Fund’s chief economist for the region, warned last week. “Peru, losing the Midas touch,” was the title of a recent Bank of America report. “Region increasingly vulnerable” was another by Capital Economics, a London-based consultancy.
Feeding fears are increasing qualms about the sustainability of Latin America’s economic model. Its two motors – record commodity prices spurred by Chinese demand, and strong growth in domestic credit which propelled a consumer boom – are starting to slow.
The windfall from the commodity boom, which began in 2002, has been huge. The IMF estimates it was equivalent to an extra 15 per cent of output a year. But now China’s slowing economy has undercut commodity prices, raising questions about how long the “commodity supercycle” will last.



This part of the world is use to the BOOM and BUST cycle. Keeping a close eye on that Apartment in Lima... lol

[ariel]

In this economy, lack of sustainability and heavy reliance on an industry or two without something solid to fall back on is the perfect recipe for disaster. It's a one-dimensional approach. And it's also an 'economic Agent Orange', so to speak.

What are those business and government leaders doing the road show selling the world when a quick check of the recent report card of the Peruvian economy isn't so encouraging? Shouldn't they have developed and established the "Peru brand" first before embarking in such an exercise? But how exactly does one define the Peru brand? These are rhetorical questions, but ones that also require answers.

An economic 'boom' is just a tempest in a teapot. Meanwhile, I'd also think twice about buying real estate until this volatile market self-corrects.

[victmanu]

Everyone speak about to start a sustainable source of income for this country and the answer Usually is to promote an industrial model against a natural resource extractive model. You are missing other type of economic model Switzerland, liechstentein, Panama and the extreme of caiman island the financial paradises, London city maybe ?. Colombia of the 80s and 90s would be a bloody model.

The dutch disease is a real threat or just a myth ? . The export of commodities have worked for countries like Canada and Australia for long time .
Something You do not notice is that Brazil the sixth economy is slowing down since they tried to enhance the development of their industry, they also expanded the emission of their currency to support their financial market , in order to extend the credits to their enterprises and the consumers what provoked inflation added with the speculative attack from foreign speculators like george Soros. All of this made them to freeze their finance market for a while and push the brakes. They were taking too much debts, losing foreign exchange reserves and at the same time the prices of their commodities were cheaper than before and There was a downfall in their incomes.

To set a sustainablke industry You need a sustainable source of energy and water, You need a cheap access to credit and competitive prices to export your products. To set an industry Your expenses are initially more than your incomes . For the countries they have to use their foreign exchange reserves to support the import of technology, capital goods,industrial inputs and raw materials, the country and the enterprises have to set industrials parks with appropiate infrastructure and conectivity to trade the goods locally and- or internationally.
Remember that the downfall of the dollar and the euro strengthented our currency what made our products less competitive. What decreased our exports and slowed the investment in extractive projects not only mining and industrial projects. At the same time our potential clients are having a financial crisis and the chinese economy is having also a slow down.
Peruvian government still have funds to push the economy ahead If they invest in productive projects and do not waste their funds. To attract foreign direct investment they are trying to relax the labor regulation to make it flexible and to draw back the investment taxes and the export taxes and trying to relax the enviroment regulation to attract oil companies.


Is this an exclusive peruvian economic slow down ?
Is Peru losing momentum ?
Is this the end of the expansive cycle for Peru and latin America economies ?

[tupacperu]

Latin America Boom Starts to Fade
Slowdown in China, a Major Commodities Importer From the Region, Drags on Growth; Xi to Visit

http://online.wsj.com/article/SB1000142 ... 83222.html


This is a crisis which affects most all countries in Latina America, Not only Peru.
Countries which are export and commodity driven. Peru should have move to developing finished goods mfg as a long term strategy. Instead it relied on exports and internal demand. ( turning some of their resources into finished products/Consmuer Goods. Autos, electronics, etc.....). Imports have jumped 10% from last year. The dollar is at 2.7 soles,

Lima (Andina). - Peru's imports amounted to 3.588 million dollars in April, 9.8% higher compared to the same month last year, which was driven by consumer goods whose imports increased 27.3%, the National Superintendency Customs and Tax Administration (Sunat).

[cab]

How this situation has been handled by the gov?

[tupacperu]

There should be no Gov't intervention/.... LOL. That would be called SOCIALISM.............

Humala (President Peru) is taking measure to attract more investment. It may be a little too late in the game. There is some speculation that gold is going to drop 30%, which is one of Peru's major exports.

[richiecry]

Peru has done some things recently which will help during a possible coming downturn. These include the expansion of the Callao container port (mostly private money) as well as the completion of the road linking Peru with Brazil. There have also been other logistics improvements over the last 10 years. A lot of the posts here are correct....perhaps Peru could have done more...but in a global marketplace, Peru is not competitive in many ways with the lower tier of countries (wages, costs too high) or with the upper tier (tons of inefficiency and corruption). I personally think the one area that should be focussed on is corruption and the strengthening of institutions in Peru. These would lead to better confidence in Peru and serve to better extract value from Peru fortune at being located where it is (due to location, could be central hub for a lot of manufacturing or logistics activities).

[tomasb]

Chile's economy is also down due primarily to a dramatic drop in copper demand and prices. Also, the largest Australian gold company is also experiencing a downturn in revenue due to the drop in gold per ounce prices. Same thing happening with aluminum prices. The mineral industry in general appears to be heading for a fall, which has been long predicted.

Someone on this board mentioned investing in Newmont, which is a partner in the now closed Cajamarca mines. Their stock is way down from a few years ago. Unfortunately, a lot of the nouveau-riche in Lima and Arequipa are in this industry.

[minos]

If the U.S. economy is reactivated the better, so do not just have an option to Asians. I prefer to be optimistic about that.

[chi chi]

If the U.S. economy is reactivated the better.

But when will it get reactivated in the US. The economy in Europe is far from improving.

[minos]

But when will it get reactivated in the US. The economy in Europe is far from improving.

Sorry, probably the last climb to 2.7, is a sign that this may be, suddenly left the States and "ventilator" monetary injection by the pure. Anyway Chinese international trade is not paradise stable, have their problems, and the same for its domestic economy declined slightly in recent months.

[chi chi]

But when will it get reactivated in the US. The economy in Europe is far from improving.

Sorry, probably the last climb to 2.7, is a sign that this may be, suddenly left the States and "ventilator" monetary injection by the pure. Anyway Chinese international trade is not paradise stable, have their problems, and the same for its domestic economy declined slightly in recent months.

That's means that things from the US will get more expensive so less things will be sold and the dollar will fall back on it's bum.

And the EURO is always in concertó with the dollar. 3.60 soles to the EURO right now. A few weeks ago, it only stood at 3.24

[goalie3443]

As an Economist I am Bullish on the dollar vs nuevo sole for the coming 5 years. Just too much volatility in recent years I see a correction coming in the next 9 months.

Cheers,

[tupacperu]

As an Economist I am Bullish on the dollar vs nuevo sole for the coming 5 years. Just too much volatility in recent years I see a correction coming in the next 9 months.

Cheers,

The Correction is already starting 2.75 Soles = $1.00 on the currency exchange. Other factors also are signs of a coming crisis> Reuters:

History may repeat itself for Mexico, Peru as Fed eyes exit

In Peru, where foreigners own a whopping 57 percent of local currency debt, a comparable rise precedes a 61 percent drop in inflows, while a 40-48 percent fall could be expected in Chile, Colombia and Brazil, which has just dropped a tax on foreign investment in domestic bonds to attract more capital

But Peru is also pressured by slower growth in China, undercutting the high commodity prices that have buoyed its economy. The minerals exporter has just posted its first quarterly trade deficit in more than four years and economists are trimming growth forecasts.

To some investors, the sell-off in May was a wake-up call to those who had preached that emerging markets were the new global safe haven amid ongoing weakness in developed economies.

[Retired in Lima]

Anybody else notice investors piling into the EPU today? Traded at 3x normal volume. I nibbled a bit.

[Retired in Lima]

Another Big volume day (2x avg 30 day volume) and up better than 2% today!

[tupacperu]

Primary index accumulated a 20% loss so far, and the remainder of the year would fail to fully reverse the loss. Investor are fleeing the market from this article in GESTION (6/17/2013):

Unless you are about to jump in now, investors took a hit during 2013. The BVL will rise by end of year (assumptions) .. But looks like investors are spooked and are starting to call in investments while still in the black on their portfolio.




BVL would rebound in second half, but end the year with losses
Monday, June 17, 2013

MERCADOS07 10
Lima Stock Exchange is also affected by the reduction of funds placed in the UPR, from $ 600 million to $ 300 million this year, before the departure of foreign investors. Compass recommends patience and invest selectively.


ALVA PINE FRAME
[email protected]
The 2013 began with good prospects for the Lima Stock Exchange (BVL), however, to date, its primary index accumulated a fall of 20%, and the remainder of the year would fail to fully reverse the loss.

This is estimated Alberto Arregui, portfolio manager of Compass Group Peru, who projected a Square Lima rebound by the end of the year, but would be insufficient to carry positive.

"It's very difficult for the index (General Index) significantly reversed by the weight in the mining stocks," he argued.

While many of these actions are now listed far below their fundamental values ​​(expected price), the tendency is to reduce the latter to the fall in metal prices and increased costs of mining firms.

It also found that the expectations of securities linked to domestic demand will also be adjusted downward, to a lesser extent, in line with a slight slowdown in the local economy.

"There is potential for the stock rally, but not sufficient, would have to rise more than 20% to reverse (losses), and in six months it is difficult to make that happen," he said.

Capital outflow
Among the factors behind the poor performance of the LSE this year, said the drop in metal prices, with the weight that mining stocks in the domestic stock market.

The prospect of slower growth of the Chinese economy hit industrial metals prices.

Arregui also referred to the negative net investment flows (outflows) from emerging markets, mainly equities.

The fact that Latin America or Peru grow less than expected, and that developed countries had exceeded expectations at the beginning of this year, generated a marginal change in investment flows, he said.

Additionally, signals that suggest a slight recovery in the U.S. economy and the possibility of an upcoming reversal of the expansionary monetary policy of the Fed pushed interest rates of government bonds that country.

These higher rates, in turn, raise the U.S. asset performance and reduce the appetite for instruments that are not denominated in dollars.

At the local level, the slowdown of some macroeconomic data has made any dent in the Lima stock market.

The volatility of the LSE is also explained by the reduction of funds placed in the UPR (package Peruvian shares traded in New York), from $ 600 million to $ 300 million, before the departure of international investors, explained Arregui .

The executive will participate tomorrow in the International Investment Seminar "From uncertainty to the basics" organized by Compass Group.

THE DATA
Selective. Arregui recommended patience to investors, who must concentrate on actions with good fundamentals (not deteriorate substantially). "It is crucial to be very selective in this market, no more times when one could buy everything, and everything went up or down in the same way," he said.

[tupacperu]

Anybody else notice investors piling into the EPU today? Traded at 3x normal volume. I nibbled a bit.

Unless you are entering the game now, does not look good... The forecast is, the price may recover slightly by end of year, but will not make up the 20% loss on the year.

iShares MSCI All Peru Capped Index Fund EPU +1.05% Sometimes it is not fun being right, but we did forecast EPU's demise in February, well before gold truly rolled over. The situation here is easy to explain. Peru is South Amercia's fastest growing economy, but growth is slowing. That is not even the worst problem.

More concerning is that Peru is the world's largest silver producer and a major copper and gold producer, too. That toxic cocktail has helped EPU lose almost 19 percent in the past 90 days. Since the start of the second quarter, EPU has lost almost $84 million in assets. A new 52-week low? It happened early in Tuesday's session. When EPU closes below $35, which could happen this week, it will be the first time since October 2011.


http://finance.yahoo.com/echarts?s=EPU+Interactive#symbol=epu;range=6m;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

[Alpineprince]

Good new's today on the economic front. With the economy expanding rapidly again it would appear the downturn has been avoided!

[tupacperu]

Someone is cooking the books.

Waiting for June's Results (July 15th 2013)

The Peruvian economy will grow 5.9% according Focus Economics
Tuesday, June 18, 2013

The international consultant projected a preview of our economy than 6% a month ago, but expectations were modified after revealing the slowdown in the first quarter.



Maximixe Peruvian economy projected to grow only 5.6% in 2013
Tuesday, June 18, 2013

While analysts estimate an average economic growth of 6% this year to reach that figure Maximixe only optimistic scenario projects a 5.6% advance.

Jorge Chavez Alvarez, CEO of the consulting firm, argued that there are signs that "converge" to a slowdown in investment and consumption loans, despite the advance of 7.65% in April.

[tupacperu]

Melvin Escudero: "Volatility has been hard and will continue in the coming months"
Tuesday, June 18, 2013

MERCADOS12 45
The president of El Dorado Investment said that there are three areas to put the magnifying glass: United States, China and Europe. They-said-impact on the exchange rate, interest rates and commodity prices, which hit the Peruvian economy.

China Factor
, Escudero explained that commodity prices have had minimal corrections and are yet strong dollar global help them recede more.

"The other important area is China. He has shown signs of weakness and if it grows less than 7%, will impact commodities. We are in a scenario where, if China and the U.S. grows less recovers, commodities have additional corrections and this is an element of risk for the Peruvian economy, "he said.

[bobg]

I'm not a money guy don't follow the stock market, but i just sold my apartment , had two appraisals from two different banks, for prospective buyers , to get there loans. both were around $280,000 sold it to a doctor , Peruvian , for$ 275 and the bank would only loan $191000 you tell me whats happening. This is in Chocarilla a very good area.

[Retired in Lima]

I am very happy as EPU is up about 7% since I bought last week! I think the Fed decision today to give Wall Street more "fiscal crack" will help fuel further growth here. Nice "double bottom" in Gold today, If it holds I might buy a bit tomorrow?

[Retired in Lima]

I'm not a money guy don't follow the stock market, but i just sold my apartment , had two appraisals from two different banks, for prospective buyers , to get there loans. both were around $280,000 sold it to a doctor , Peruvian , for$ 275 and the bank would only loan $191000 you tell me whats happening. This is in Chocarilla a very good area.

Me thinks your Doctor needs to raise his prices and qualify for a higher mortgage! Also banks are being instructed NOT to lend in Dollars anymore.

[bobg]

Not to lend in dollars ? The doc lives in San Diego Ca. but is from Peru . Well that's what the Peruvian government is like , stupid !!! and they don't have enough money to give the military a raise but still make it mandatory to join ! *I can't say enough about the Peruvian bureaucracy, Happy to get out in one piece.

[falconagain]

Looks like things are going downhill again. So back to normal for the US.

[SmartKitty]

:shock: Not to lend in dollars ? The doc lives in San Diego Ca. but is from Peru . Well that's what the Peruvian government is like , stupid !!! and they don't have enough money to give the military a raise but still make it mandatory to join ! *I can't say enough about the Peruvian bureaucracy, Happy to get out in one piece.

100% agree with you. That's why the productive and good people gets out of Peru, even Peruvians themselves emigrate because the mentioned above. Peru become more and more the country for lazy cheaters and crooks.

[bobg]

Thanks Kitty yes I also agree that the people who control Peru are a bunch of crooks they really don't have Peruvians on their, agenda just what they can get for themselves.

[tupacperu]

May 2013 growth figures showed an increase of only 4.96% . Not good news. Slightly better than April 2013, which was blamed on the short month (Easter week).

[tupacperu]

Barron's July,19, 2013:
oil rose 2%, while gold gained 1.2%. Copper, however, fell, as did Peru, which was the exception among commodity producers this week. The iShares MSCI All Peru Capped Index ETF (EPU) dropped 0.8% and is now off 30% this year, the worst of the ETFs I follow.

[Alpineprince]

They recently reaffirmed that growth this year is still on track for 6.3% this year "best in the region". I have also started buying EPU this week and would continue to buy if we can get down to the mid 20's.

[tupacperu]

MEF Estimates are 6% as of July 15

Castilla: "Mantenemos la proyección oficial de crecer 6% en el 2013"

[chierchio]

Seems like there might be more of a correction coming for the SOL.

Below is a graph of the last 5 years of activity USD and PEN trading.



Maybe it means better opportunities when purchasing Peruvian goods.

There was a noticeable jump in the last 6 months. Changes like this can't be great for forecasting.

If one was considering purchasing an apartment in Miraflores in January for $400k - if this trend continues, just the increasing purchasing power of the dollar may reduce that cost by $50k-$60k. Not taking into account the problems with the mining industry or the price of natural gas.

I am not an economist, but I definitely now have a wait and see attitude when considering purchasing property here.

[Alpineprince]

Seems like there might be more of a correction coming for the SOL.

Below is a graph of the last 5 years of activity USD and PEN trading.



Maybe it means better opportunities when purchasing Peruvian goods.

There was a noticeable jump in the last 6 months. Changes like this can't be great for forecasting.

If one was considering purchasing an apartment in Miraflores in January for $400k - if this trend continues, just the increasing purchasing power of the dollar may reduce that cost by $50k-$60k. Not taking into account the problems with the mining industry or the price of natural gas.

I am not an economist, but I definitely now have a wait and see attitude when considering purchasing property here.

Explain to me how an apartment priced in dollars, is going to lose $50k-$60K? I could understand if it were priced in Sol's and the builder/seller did not adjust the price.

[chierchio]

I am assuming that properties are priced according to actual value in Peru.
I understand that many property owners are looking to sell in USD, but does not the local value have anything to do with the true value?

In January $400k x 2.50 = S/1,000,000 - Value in January - 1 million Soles

Today: S/1,000,000 / 2.74 = $ 364,900 (savings of $35k)

Lets look at what might happen if the trading rate goes to a rate of 3.00
That same S/ 1,000,000 now costs $333,333 (saving $66k vs same cost in January)

My thinking is that if we don't adjust property value of property in a country using that country's currency - then people are living a fantasy regarding true value of their property.

If that is the thought - then the same property at $400k in January was:
Jan S/ 1.00 million
Now S/ 1.10 million
If the rate goes to 3.00 - then S/ 1.20 million

The property value in local currency keeps going up, based on the price of a different currency. Would make no sense.

[Alpineprince]

I am assuming that properties are priced according to actual value in Peru.
I understand that many property owners are looking to sell in USD, but does not the local value have anything to do with the true value?

In January $400k x 2.50 = S/1,000,000 - Value in January - 1 million Soles

Today: S/1,000,000 / 2.74 = $ 364,900 (savings of $35k)

Lets look at what might happen if the trading rate goes to a rate of 3.00
That same S/ 1,000,000 now costs $333,333 (saving $66k vs same cost in January)

My thinking is that if we don't adjust property value of property in a country using that country's currency - then people are living a fantasy regarding true value of their property.

If that is the thought - then the same property at $400k in January was:
Jan S/ 1.00 million
Now S/ 1.10 million
If the rate goes to 3.00 - then S/ 1.20 million

The property value in local currency keeps going up, based on the price of a different currency. Would make no sense.

I do not understand what the difference is between Actual value,True value and Local value?
Most resales in Peru are priced in Dollars and the "ASKING PRICE" is not affected by currency fluctuations.An astute buyer however may bring that up as a negotiating tactic.

Most new property is priced in Sol's and a referential dollar exchange rate is included in advertising or in the contract.

[chierchio]

That makes sense. Then a stronger dollar will lessen the purchase price of property.

[tupacperu]

New Flash: Peruvian Economy does not meet expectations and grows 4.4% in June

http://gestion.pe/economia/economia-per ... io-2073722

Thursday, August 15, 2013

Analysts had expected an increase of 5.2% in economic activity for the month, according to a Reuters poll. The only sector with negative numbers was the agricultural, INEI said. In the first quarter, GDP increased by 5.1%.

The Peruvian economy grew by 4.4% in June, well below market expectations, according to the National Statistics Institute (INEI.)

Analysts had forecast economic growth of 5.2% in June, according to a Reuters poll.

The figure is lower than the 7.4% expansion in June last year and growth of 4.96% yoy in May.

In the first six months, the economy accumulated an expansion of 5.07%, while the annualized growth reached 5.7%, added the INEI.

He explained that only the agricultural sector fell in the sixth month of the year, with a decline of 0.63%. Among the sectors that are highlighted Construction, with an advance of 6.98%, followed by services and companies, with 5.95%, and trade, 5.02%.

[chierchio]

Maybe relevant - maybe not...

Peru Bank: Central Bank May Let Sol Depreciate Further Against Dollar

[tupacperu]

Excerpt from various economist, Emerging Markets:

This week, Nobel prize winning economist Paul Krugman wrote on his New York Times blog that in retrospect, the flood of money into emerging markets looks like a bubble.

But Krugman said "for the moment, I don't see a good reason to believe that the bursting of this particular bubble will be catastrophic".

Standard & Poor's rating agency agreed.

In a report it called the capital outflows "disruptive not destructive", and said most Asian developing nations will "weather the disruption without a sharp slowdown in economic growth or prolonged financial volatility".

Simon Derrick, chief currency strategist at BNY Mellon said that "letting the currency take the strain might be the smartest move for some emerging market nations".

He noted that in 2008, when emerging markets last tried to stop the outflow of funds, they failed despite spending up to 20 percent of their foreign currency reserves.

Derrick suggested that central bank forex intervention during a time when easy money poured in only gave investors an artificially cheap exchange rate to enter the markets.

"It also provides an artificially advantageous price at which to leave now."

Still, several countries have moved to defend their currencies.

Brazil, which had led emerging market complaints that Western stimulus measures had resulted in the appreciation of their currencies and eroded its competitiveness, turned around, saying it would make $55 billion available to prop up the real.