Peru: holding its own in an uncertain world

By: | at 08:00 PM | Channel(s): International Trade  

Sound economic policies shielded the country from the worst of the global recession while continuing infrastructure investments boost the economy.
By Peter A. Buxbaum, AJOTPeru is a comer among South American economies. While usually not spoken of in the same breath as South American powerhouses like Brazil, Venezuela, and Colombia, Peru is on track to register strong economic growth this year, according to a report recently released by Business Monitor International.
With the forecast GDP growth of 5.9 percent, will come large increases in the volumes of freight moving across all of the Peru’s transportation modes, according to the report. Although Peru’s growth rate suffered in 2009 along with the rest of the global economy, the Andean country managed to sidestep the worst of the global banking crisis, thanks to sound economic policies.
The Peruvian government deserves credit for the adoption country of sound fiscal and financial policies, according to said Nicholas Lloreda, an attorney with the Sidley Austin law firm in Washington an expert on trade with South America. These policies include establishing an independent central bank, managing budget deficits well, opening its economy, and pursuing free trade agreements.
Now that Peru is enjoying an economic rebound, signs point to healthy increases in the level of the country’s diverse exports, which range from fresh fruits and vegetables to coffee, copper, and gold. Peru’s continued infrastructure investments is also leading to increased level so of imports of vehicles and machinery. One caveat looms on the horizon, however: the possibility that the global economy will tank once again and especially the effect of that eventuality on Peru’s two biggest trading partners: the United States and China.
The country’s main export partners are the U.S., China, Canada and Japan with Switzerland and Spain. The country’s main sources for imports are the U.S. and China, as well as South American neighbors Brazil, Ecuador, Argentina, Chile and Colombia. Peru’s location on South America’s Pacific coast allows it access to shipping routes to its Asian trade partners. It’s proximity to the Panama Canal affords access to the U.S. east coast as well as to Europe.
Business Monitor International’s forecast of real GDP expansion of 5.9 percent is all the more significant when compared with last year’s anemic growth of just 0.9 percent. “A favorable economic backdrop should provide a platform from which Peru’s freight transport sector can continue its own recovery after last year’s downturn,” said the report, “with a rebound in international trade volumes expected to benefit the country’s air, rail and maritime freight sectors.”
Mirroring the anticipated increases in freight volumes are additions to Peru’s freight handling capacities. A major new container terminal, Muelle Sur, came online at Peru’s largest international port of Callao in June 2010. The maritime sector was further boosted by news of the launch of Peru’s first liquefied natural gas shipments which left Callao for the Mexican port of Manzanillo. LNG shipments “will become a growing source of revenue for shipping lines in the region over the next few years,” said the report.
The report forecast that cargo volumes moving through the port of Callao, which slumped by 8.7 percent to 17.39 million tons in 2009, will recover nicely this year with 8.4 percent growth to 18.86 million tons. “For 2011, we expect growth at this port to moderate to 6.5 percent,” the report said. “At the port of Paita where volumes contracted by a heavy 33 percent to 847,000 tons, there will be more pronounced growth of 12.7 percent in 2010 to reach 955,000 tons. In the medium term, both these ports are set to maintain a relatively strong performance with average annual increase in throughput for Callao and Paita forecast at 7.6 percent and 5.8 percent respectively.”
Peru’s air freight sector is also recovering momentum as the Chinese airport operator, Capital Airports Holding, is bidding to

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Peter Buxbaum has been writing about international trade and transportation, as well as security, defense, technology, and foreign policy, for over 20 years. Besides contributing to the AJOT, Buxbaum's work has appeared in such leading publications as [em]Fortune, Forbes, Chief Executive, Computerworld, and Jane's Defence Weekly[/em]. He was educated at Columbia University.