Economy of Peru

I would not be surprised if most of you reading this newsletter have worried a little bit about the U.S. and global economies this past year. As we’ve watched the U.S. spiral into oblivion, seemingly unstoppably, it would be hard for anyone—even Christians—not to worry about what tomorrow might bring. However, watching the news, I have been encouraged to see the nations of the world begin to take a united stand against this problem in a rare way. Countries are pooling their resources to bail out troubled financial groups and other businesses. If only the world could do this for so many other problems (poverty, starvation, the environment,etc.), the world would be a better place. But we work with what we have, right? 

A lot of people have wondered how Peru has weathered the “storm.” I’ll take a shot at that answer, but keep in mind that it is a general response because a lot of economic jargon is above my head and it’s not all interesting. I’ll cover the basics. Here’s the scoop: 

If you look at a broad picture of Peru’s economy you’d see some very positive things. In 2007 their economy grew by 9%, which was the highest rate in all of South America. Now that’s pretty impressive in and of itself, but remember that last year the global scene wasn’t as bad as this year. Despite the global “crisis,” Peru’s economy is still predicted to have grown by another 6-9% (depending on sources) in 2008. In a world where the “super- power” nations are seeing economic decline and recession, Peru seems to be booming. President Garcia has even boldly claimed that within 10 years Peru will cease to be a third world nation. He made this claim while reporting on the quickly falling poverty rate (now at an estimated 36%), declaring hope that in ten years it will be only 10%. It remains to be seen if the economy here will keep up this pace but for now things look, comparatively, very good. 

Sorry for all the percentages and boring economy stuff. On a more practical level, here is what this all seems to mean. Peru has been thriving, and continues to thrive, on its huge exportation business. Peru exports things such as fish, coffee, asparagus (you can find this in the US), sugar, petroleum, copper and gold. This is how they are staying ahead for the moment. The reality is that once the global recession takes hold and countries cut back on importing, Peru’s economy will be tested in a hard way. For the everyday person, that means price increases on everything they buy from groceries to gas. We’ve mentioned before that the wages people earn here are usually insufficient for a good quality of life. As prices increase, people will be forced to cut back. When they already only eat one full meal a day, the change will affect their lives in ways many Americans find hard to imagine. 

So what does this mean for us as Americans living in Peru? Actually, Peru’s economy affects us less than that of the U.S. The primary economic factor affecting us is the exchange rate. When we arrived, 1 U.S. dollar was worth 2.9 Peruvian nuevo soles. When we were here the summer of 2007 the rate was 3.15 nuevo soles to the dollar (3.2 in 2006). Things get better for us as that number gets higher, but it gets worse for the people here at the same time. In the last three months, the rate has climbed to 3.10 nuevo soles to the dollar. I’ve heard many people say that if the rate could stay closer to 3 then things would remain stable. I’m not sure how true that is, but it is clear that as the local currency loses its spending power, the people here living on 10 soles per day ($3.22) will have a hard time getting by. 

Join us in praying for Peru’s continued economic stability. Pray that the economy remains strong enough for the poverty rate to drop below 10%, for people not to merely subsist but to thrive. Pray that families tomorrow will find the money they need to buy clean water, to eat two good meals and not fear the days to come.