Tag Archives: Andean Countries News

PERU`S COLD CHRISTMAS, STILL

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The past week three main elements dominated the economic context in Peru. First, the demand, even in Christmas retail campaign, did not respond by far to the expectations. Second, the commercial credit for small and medium entrepreneurs showed a decline of 3.5% vs. previous year. Third, the dollar price had some troubles, and motivated a major buy from the BCR in the Lima money market.

 

It means the Fiesta ended? Not at all, have we thought. Export prices and foreign investment can conduct the expansion for the next year.  But the response to the context of the major economic actors really worried us a lot. 

 

The Government tries to start its spending plans as soon as possible. But bureaucracy and over-ruled sectors block the rush. The Peruvian privates conducted as ever: they urge for major capital access, after confessing they had to lay-off 60,000 workers in 2008. And Unions claim for a real wage increase, lower interest rates, and tax exonerations, all at the same time.  

 

We need a national project.  We need to set the major lines of our own development as a nation. Total cooperation is needed.  Zero lobbying, national interest above all.

  

 

 

 

 

 

 

 

 

 

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CHRISTMAS JOKE & DOUBTING 2009 IN PERU

This post is motivated by an unusual Christmas Season in Peru.  This is the coldest we have seen in years.   Low traffic flow in the streets (and its Friday Evening, take note), and even fewer customers in the Department Stores.  Asked for the situation,  a retail sales clerck anwsered with hope: they expect to make this weekend its major sales. But important, the salesman recognized that theres no public, and a feeling of absence of  buying rush in the whole peruvian retail.

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As former Sales Manager, my instinct appoints to the exactly the same feeling.  Worst, appoints directly to a cold 2009.  It means, the Fiesta ended, and its highly possible that we return to the normal context in Peru: fight for survival, again.      

As Economist, the panorama seems to be crystal clear: there is no disposable income now. Not at the levels of last year for example.  Peruvians are calculating with care every penny they spend. 

Because to the usual expenses they are accustomed to, this Christmas they are confronting a brand new member of the family: the credit bill. In average, its taking as much as a 20% of the net income.  Result of two main factors we are going to explain.

First, the credit consumption since middle year was growing at an unusual raging pace. According to the ASBANC, the National Banking Association, we are ending the 2008 with a 40% growth rate in consumption credit vs. 2007. Too much, for my professional opinion. 

Second, the given consumption credit has no relation to the disposable income of its target population.  With a net income of S/ 2,000 (600 Dollars) there were S/ 10,000  credit lines approved.  Five times the income! At first sight, a wonderful business, at an annual interest rate of 18%, to be payed in 24 months.  But, …read the little letters: the monthly credit bill is around S/ 600, a third of the net income. Thats because theres no money to spend now.

In addition to the two main factors ennumerated, theres no credit culture in Peru. Thats why the current problems in consumption (and soon in production) are not hundred percent customer (ir)responsability. The Banks and its salesmen are half responsable for this unusual cold, cold Christmas.

Recommended: we need urgent a Possitive  Income Shock, because wages in Peru did not rise since the 80`s. And the cummulated inflation was…simple too much. We need recover minimum a half of our consumption capability.  Scheduled, and carefully conducted, because if not…once time again, our dreams of a better years will as ever remain in dreams.

And the above mentioned Christmas Joke: One Joker (with all respect to this Character, that with Heath Ledger became a Legend) recommended in public…to drop the minimum wages (since many years around 150 Dollars) to prevent an eventual increase in unemployement….that means, ….Ha, He, Ho…Call Batman!

PS. Its Saturday Evening…the streets would have been captured by christmas consumers. But its not happening