COMMENTARY — Peruvian economy on upswing

The general state of the Peruvian economy is improving dramatically, with inflation down to below 40% against many hundreds — if not thousands — per cent in the past. The influx of foreign capital is also a major factor in the improving state of the economy, with a massive range of companies flocking to share in the wealth of the Peruvian mines.

American Barrick and Newmont are well-known, but it is also the case that Cambior and many other smaller companies are joining the hunt. They are in competition with a large number of local companies that are bidding and tendering to acquire deposits from the government, some of which appear particularly interesting.

Much of the improvement in the Peruvian economy has come about as a direct result of the country’s move to a more authoritarian leadership under the presidency of Alberto Fujimori . . . The guerrilla and terror campaign is now all but over, with the capture of several of the leaders of the Marxist-sympathizing organization. As a result, the country is much safer for foreigners to travel through, and this has undoubtedly led to the increasing interest taken by the international investment community in both the local equity market and for major investments in large mining projects. Indeed, it is probably the case that the country’s more authoritarian regime has enabled the move to a more open economy which has, in turn, encouraged some of the world’s largest mining companies to invest in these projects. This is evident by the fact that there are three airlines flying from the capital, Lima, up to Juliaca, the nearest major town to the mine site. These are AeroPeru, Americana and Air Santa and the large degree of competition among them has led to a price war. As a result, the cost of a one way ticket has been reduced to US$51.75 from US$60 in the past. While such price falls may not be sustainable, they at least illustrate, to Peruvians, the benefits of the free market as opposed to Marxism.

This does not mean there are no longer any poor people in the country, but at least some benefits are being felt across the population as a whole. Indeed, the divide between the few very wealthy individuals and the poor remains very clearly marked and those with money are loath to see it disappear in the shape of higher taxes for social programs.

— From a recent research report by Charles Kernot of Credit Lyonnais Laing, based in London, England.