While the World Crumbles, a Peruvian Boom

Living in Peru, it can be tough to remember that much of the West is facing economic turmoil unlike anyone under the age of 80 has ever seen. The news of the world looks grim: Unemployment remains at staggering highs in the U.S., a few of the major economies of Europe face the very real possibility of default and serious economists speak in hushed tones about the possibility of a double-dip recession.

But in the midst of all this despair, it’s boom times here in Peru. The country is going through a historic growth spurt. In the last decade, its economy has nearly tripled in size, ballooning from a GDP of around $50 billion in 2001 to more than $150 billion today.

A rooftop view of Miraflores, the modern, confident center of Lima's burgeoning economy.

Yes, the good times are rolling in Peru, and the evidence is everywhere you look. A quick scan of the Lima skyline reveals dozens of buildings under construction; So many that cranes and construction crews can barely keep up. A particularly telling headline in Lima’s El Comercio newspaper asked not how the country should brace for the effects of S&P’s recent downgrade of the United States’ debt, but how its central bank could take advantage of this news, raising Peru’s global profile and credit rating. Even in the midst of global uncertainty, Peru remains brashly confident about its future prospects.

The evidence of this is even more pronounced among Peruvians themselves — especially the young. The 20-something Peruvians I’ve met all seem to be preparing for, or are in the midst of, shining careers in fields like economics, tourism and finance. They project an easy confidence about their futures, something you simply don’t see in young people back home. Many of my friends are simply trying to find a job that will pay the rent, or are entering grad school in the hope things will be better when they come out. I was with them, until I decided to pack my bags and come down here.

Peru is part of the Global South that was left relatively untouched by the Great Recession of 2008-2009, as this map clearly demonstrates (click for a full-sized view).

But even with its economy surging ahead, Peru still suffers from grinding poverty. More than 30 percent of the country’s population is considered poor by the Peruvian government, and just over seven percent face extreme poverty, with incomes less than $1 a day. As with much of Latin America, Peru has some of the highest income inequality in the world, a legacy of Spanish colonialism and the divisions between whites and indigenous peoples that carry on to this day. That widening disparity has left its mark on the landscape, with shantytowns existing just blocks away from modern high rises.

So what does the future hold for Peru? As with the world at large, nobody can know for sure. One thing that is clear is that the economic engine is humming along here and throughout much of the developing world, while it’s sputtering to a standstill up north. Whether fast-growing countries like Peru, Brazil and China can drive us to a global recovery is a question for another day.

3 thoughts on “While the World Crumbles, a Peruvian Boom

  1. So what can the US learn from Peru? According to Wikipedia “In 1990 the neoliberal government of Alberto Fujimori ended price controls, protectionism, restrictions on foreign direct investment and most state ownership of companies.”

    Neoliberalism is a nice way to say Reaganomics (i.e. a market-driven approach to economic and social policy that emphasizes the efficiency of private enterprise, liberalized trade and open markets to maximize the role of the private sector in determining the political and economic priorities of the state.)

    The US is going in the opposite direction by taking over banks and car companies and rewarding crony capitalists like GE through the tax code. By going down the dark road to social democracy we have diminished our prospects for employment, economic growth, personal wealth, and tax revenues.

  2. Hi Eric. Really interesting article. I think that an important factor for this crisis to turn into a large catastrophe is the fear. Look: when the crisis began to show its first signals, Alan Garcia (former peruvian president) used to say on TV with a big smile: “hey, nothing is happening. It’s just a little thing. Dear investors, keep investing in Peru. This is the perfect moment”. And he repeated it all the time, every day. And apart from that, the goverment started a very intensive program of construction of infrastructure.

    Everyone regard Alan Garcia as a person with a powerfully convincing speech (almost like a snake charmer, otherwise he wouldn’t have been elected president after his catastrophic first period in the 80s), and it seems his words worked very well with investors.

    On the other side, if you’re an investor and you hear the president of the most powerful country (Obama obviously) giving a speech with a face taken from a funeral and saying that everything is going bad, it obviously has a negative impact.

    I agree with Christhopher: taking the US to the opposite direction has diminished the prospects of growth of the US.

    Apart from that, you’re right: poverty in Peru is still a huge problem, but fortunately. According to UN statistics, 54.8% of the population was under the line of poverty in 2001, and now it’s 30%, as you said. We hope that new president keeps following the same policies in economy that the country has been following in the last two decades.

    Finally, I’d like to recommend you these two web pages:

    This one is one of my favourites and I read it very often. It publishes good articles related to the development of the country (economics, infrastructure, etc)

    News from Peru in English. Its founder is a Danish guy that fell in love (with a peruvian girl and with Peru).

  3. Pingback: #OccupyWallSt Has Arrived. So Where’s #OccupyLima? | Roving Reporter

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