The Biblical version of the Golden rule was that you should treat everyone as you’d like to be treated. The more modern version is “he who has the gold, makes the rules”. Then there’s a final twist to it, and it’s something akin to “he who has great natural resources, will take in all the gold”. Which brings us to Peru.
Most Americans would probably have a hard time finding Peru on a map, yet it’s our belief that this is going to change as the country’s economy continues to grow. In fact, for the past 6 years, Peru’s economy has grown at an amazing 6%, and registered over 7% last year. So, what’s the contributing factor to all this growth, and why is it important to us?
The world is hungry for resources. The stellar growth in the Asian Pacific Rim, and especially China, has placed incredible demand for Sugar, Cane, copper, gold, iron ore, wheat, corn, soy, fuels, and other desirable commodities, on the world markets. Peru is in an envyable position when it comes to supplying that demand, since it enjoys large deposits of mineable metals, and a climate that’s simply perfect for growing the types of crops the world demands.
The Peruvian Government’s views have been quite prescient concerning the shaping global economy, and they have implemented liberal trade agendas to capitalize on the growing demand. This is especially true concerning the “Free Trade Agreement” with the US, which follows aggressive trade agreement pacts with Chile, Thailand,Singapore, and is in talks with China, the EU,Mexico, and Canada. As global investors see the promise of Peru’s stable growth, with contained inflation, and positive demographics, they are eager to become involved in the area, and investment dollars are plentiful. Yet that in itself isn’t what is important. The proper use of investment monies is what separates continuing success, from flash in the pan, boom/bust cycles.
South America has in the past been littered with economies wrecked by poor Governmental policies. Peru decided years ago that it would build it’s economy correctly, and it has done so quite methodically. By keeping spending under control, keeping inflation pressures contained and wisely allocating resources, their economy is particularly well diversified, with construction, industry and commerce leading the growth. In fact, Peru has the lowest inflation rate of all the Latin American countries, despite GDP growth that far exceeded any economists estimates. According to information released by the state statistical agency, INEI, in December 2007, Peru’s GDP grew by 10.4%y/y far and above the most aggressive estimates.
Political stability, a rising currency, a rising global credit rating, a near perfect growing climate, tremendous growth demographics, large precious and semi precious metal deposits, and a world hungry for all of it, makes Peru one of the few investing “fairy tale comes true” opportunities of the last decade. Peru and the businesses that operate within it, should be on the radar of any serious global investor.
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