- The international framework 2020-21
In 2019, the value of global trade contracted by 2,9% and then, in the first nine months of 2020, it fell by 10,5%. It should be noted that this decline during the first quarter of this year was caused by the effects of the pandemic, which generated major impacts on world trade, with a 5,3% drop reflected in foreign trade activity.
However, at the end of 2020, it was forecast that the volume of world trade would increase by 8% for 2021, after having been stagnant due to the pandemic. To date, there is no final forecast. update, but noting that the projections as current forecasts remain in an optimistic commercial scenario, despite the great difficulties in the supply chains and in the face of a possible resurgence of Covid-19 with the new Omicron variant.
The Omicron variant of Covid-19 represents a new threat to global trade, even though companies, especially exporters, have only recently shown signs of recovery in their activities. Many specialists from the World Trade Organization (WTO) say that it would only cause a small shock, given that many governments are better prepared in how to combat this pandemic.
It is important to note that the impacts of this new variant on global trade are not fully under control because this variant was recently reported on November 24 by the World Health Organization (WHO).
- The current national framework
In Peru, since March 2020, when the mandatory quarantine began, many economic sectors have experienced stagnation, especially those in foreign trade.
At the end of October this year, Peru recorded an annual trade surplus of US$ 13,653 million, thanks to the increase in exports of some mining products due to their high prices and agricultural products, among other non-traditional products such as textiles and chemicals, according to the Informative Bulletin of the Central Reserve Bank of Peru (BCRP).
Despite the lockdown in Peru from 2020 to 2021, Peruvian exports as of last October amounted to US$ 5,676 million, exceeding by 36.5% and 21.1% the same month in 2019 and 2020. It should be noted that this was thanks to high international metal prices.
Likewise, from January to October of this year, Peruvian exports totaled US$ 50,726 million, 29.8% higher than the same period in 2019 and 51.7% higher than the same months in 2020. Along the same lines, total traditional exports for October 2021 amounted to US$ 4,010 million, an increase of 36.9% compared to the same month in 2019, due to high prices for copper, zinc, hydrocarbons, and coffee.
It is also highlighted that gas and oil exports increased by 122,3% compared to the period from January to October 2020, with mining exports increasing by 59,3% and fishing exports increasing by 58,9%.
On the other hand, non-traditional exports totaled US$ 1,641 million in October of this year, an increase of 35.3% compared to the same month in 2019 and 15% in 2020, due to the shipments of larger volumes of agricultural, textile, chemical, iron and steel-metallurgical products and jewelry.
- The fight against the exchange rate: The dollar price reached a historic record after 11 years
Another important aspect to mention is the rise of the dollar, which reached historic records after the results of the second round of elections. On June 06, the exchange rate rose to S/. 3.84 and remained on the rise until reaching S/. 4.11 in July of this year. In other words, this figure was determined according to the statistics of the behavior of the evolution of the exchange rate from January 2010 to July 2021. According to the Central Reserve Bank of Peru (BRCP), so far this year, the Peruvian currency “el sol” has had an accumulated increase of 13.1% against the dollar.
Because there are more economic agents - companies, investors and the general public - buying dollars, demand increases and, therefore, the price rises. For example, the export sector benefits from the rise of the dollar since income will be in favor of the dollar currency; however, if it is an exporter that imports inputs from abroad for its finished products, this is affected.
Therefore, the rise in the exchange rate benefits certain business groups that have completely dollarized trade flows, with products that do not require imported inputs. However, it affects businessmen and entrepreneurs who depend on imports for their export products as well as for national trade.
On the other hand, it is estimated that the dollar could fall between S/. 3.75 and S/. 3.85 if the government restores investor confidence; In contrast to the above, a new and possible rise to S/. 4.30 is projected while awaiting the stability of a suitable board of directors at the BCRP amid great political, social and economic uncertainty.
However, this rise in the dollar did not prevent the increase in Peruvian exports during the first ten months of 2021.
Conclusions
The EFE Agency (2021) indicates that Peru will maintain its growth projection of 11,9% to 13,2% for this year 2021, which places Peru as the country with the second highest growth rate in Latin America after Panama. However, for 2022 a rate of 3,4% is projected and 3,2% for 2023.
This growth rate is also attributed to the historical record of surplus in the trade balance for the current year 2021, this is due to the good performance of exports of some minerals as well as their prices.
Copper was one of the main minerals exported, as Peru is the second largest producer of this mineral in the world.
In addition, the head of the BCRP, Julio Velarde, indicated that Peru is the third country in Latin America with the largest international reserves, after Mexico and Brazil. In other words, these reserves represent Peru's international liquidity to be able to face adverse macroeconomic phenomena or shocks.
Finally, the central government is urged to continue supporting health authorities to improve biosecurity management and controls in public and private sector workplaces, in order to contribute to Peru's economic recovery, especially in the economic sector of foreign trade activities.
Likewise, governments are encouraged and recommended to eliminate or relax trade barriers to facilitate access of products to international markets.
Mayron W. Ponce de León Sierra is a Data Analyst in the Directorate of the Origin Unit of the Ministry of Foreign Trade and Tourism of Peru.
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