Peru is the loudest Latin American boom you’ve probably never heard – but should.
These are the kind of macroeconomic data that made the world swoon over Brazil in the 2000s:
- Peru’s economy has grown an average of almost 7 percent the past four years. Wall Street expects equally robust growth for the next five years.
- Wall Street also ranks Peru No. 2, behind only South Korea, when it comes to resisting external shocks to its economy.
- According to the Peruvian Association of Banks (Asbanc), Peru’s poverty rate has been halved the past 10 years, from 50 percent to less than 25 percent. Asbanc estimates 60 percent of Peru’s population is considered middle class today, up from 25 percent a decade ago. Middle class figures are notoriously subjective, but even if Asbanc’s are exaggerated, Peruvians are undoubtedly climbing the ladder.
- More important to South Florida, Miami-Dade County’s total annual trade with Peru has doubled since 2010 to more than $5 billion. In the past couple years the country has moved from Miami’s 13th largest trade partner to its sixth largest.
So why has Peru been flying under the radar while the likes of Brazil, Chile and Colombia have been beating their chests, ripping off their jerseys and roaring like strikers scoring in the World Cup?
“It wasn’t intentional,” says Erick Aponte, who is Peru’s trade commissioner in Miami and the U.S. Southeast. “But I think the numbers show we’re reaching the right people in the business community.”
This is still Peru, an Andean nation that has seen more upheaval than upturn over the past half century, and its current economic surge hasn’t erased all its problems. In fact, it’s hard not to be concerned about Peru’s security given that it recently passed Colombia as the world’s No. 1 cocaine producer – and that remnants of the Shining Path guerrillas who terrorized the country a generation ago are traffickers.
But any investor anxiety seems muted: Peru enjoys Wall Street’s second-highest investment rating in Latin America behind Chile. And here’s the best news: No U.S. or British newspaper has (so far) given Peru the kind of cheesy nickname – like “Inca Tiger” – that they foist on so many emerging economies.
We’ve been dependent on the commodities market, but you get to a point where you have to have other things to offer. –Erick Aponte
But what’s driving South America’s best kept secret? To a large degree, Peru is avoiding what has driven so much recent economic failure in South America: an overreliance on commodity exports. In the 2000s, global prices for raw materials were sky-high; since then, they’ve returned to earth, leaving economies like Brazil’s wheezing.
Peru seems to be making, as Aponte told me, “a strong effort to diversify our economy. For a long time we’ve been dependent on the commodities market – the gold, the copper, the zinc, silver. We’ve done well doing that, but you get to a point where to maintain growth you really have to have other things to offer.”
Those other things are value-added goods. Agricultural products, from asparagus to organic coffee to blueberries, loom large: Many of the fish-oil supplements on U.S. drug store shelves come from Peru.
“We’re among the top one, two or three exporters of all those [food] products in the world,” says Aponte, “and usually we’re No. 1 in terms of the United States market.”
But perhaps the most potential lies not in the wool of Peru’s famous llamas but in its pima cotton – and the clothing brands being created from it.
Peruvian pima, Aponte argues, “has been compared favorably to Egyptian cotton,” widely considered the world’s best.
One of the most popular Peruvian apparel lines to emerge is Escudo, which wowed a number of couture bloggers in May during Miami Fashion Week. Escudo’s designer, Chiara Macchiavello, is known for incorporating traditional Peruvian weaving and crocheting into contemporary styles.
More surprising is that Peru’s boom is being overseen by Ollanta Humala, a former army officer and coup leader who was once a left-wing anti-capitalist. Since being elected President in 2011, Humala – perhaps seeing the success of other moderate-leftist South American governments – has pursued a more business-friendly mix of capitalist growth and socialist projects.
“That’s clear,” says Aponte, “in terms of the growth of our middle class and our ability to lower our poverty rate.”
As for the security questions, Aponte insists “they haven’t been an issue” with foreign investors, who in the past two years have poured more than $20 billion into Peru.
Truth is, that might not be trade commission spin. One of the other curious things about Peru is that, unlike other drug-infested countries in the region such as Mexico, Honduras and Colombia, the cocaine hasn’t produced carnage.
It seems more proof that an Inca sun is shining on Peru these days. Just please don’t call the country an Inca tiger.
Tim Padgett is WLRN’s Americas editor. You can read more of his coverage here.