Hope for poverty reduction in Peru

Peru’s Prime Minister Jorge del Castillo yesterday announced that half a million Peruvians have “escaped from the shadow of poverty” thanks to the country’s sustained economic development.

He stated that the country’s overall level of poverty has dropped from 48% to 44% of the population, while recognizing that some regions are harder hit – for instance, 88% of people in Huancavelica region live below the poverty line.

To help address this problem, which is shared by neighboring Andean regions such as Ayacucho, he announced a new law that relaunches Agrobank, a state-run entity that offers credit to small-scale farmers to help them develop their income.

Peru defines poverty as the economic inability to maintain an adequate food intake.

Record losses on Lima Stock Exchange

The all-time record for losses registered on the Lima Stock Exchange the day before yesterday (around 4%) did not last long – yesterday’s trading made even that drop seem like a minor readjustment.

The General Index (IGRA or IGBVL, the most representative of the exchange as a whole) crashed by 7.59% to close at 18,543 points; while the Selective Index (ISEL or ISBVL), composed of the 15 most traded stocks, dropped by even more: 7.67%, closing at 32,171. Trading was fast and furious, with 3,991 operations totaling 510 million soles or US$161 million.

Among stocks that lost most value were Volcan Inversión (-15.00%), Minera Corona Inversión (-15.00%), Aceros Arequipa (-14.50%), Volcan B (-10.70%), Graña y Montero (-10.40%), Cerro Verde (-10.00%), El Brocal (-9.20%) and Austral Group (-11.00%).

Analyst Willy Espinoza, of Interbank’s trading company Centura SAB, said that a number of external and internal factors combined to make this the biggest drop in the exchange’s recent history. The mining sector, lynchpin of Peru’s economy, saw the biggest drop with an average of 8.12% lost.

“The exchange’s behavior was due to international metals prices, such as that of copper, which dropped due to fears of reduced demand from China. Gold also dropped, as the dollar rose against the Euro,” said the analyst.

He told the Andina agency that the Chinese government’s decision to triple taxes on stock exchange operations had repercussions on the Peruvian market, as well as on other trading floors around the world.

Another factor that he saw as a reason for the drop was “a number of individuals who invest in mutual funds liquefying their assets, as they do not realize that the profitability of the exchange is better measured in the long term, rather than day to day”.

All the same, analysts agree that yesterday’s move does not signal a long term downward trend, but rather a readjustment of stocks that may investors saw as overbought. Economic growth, the successful renegotiation of the Club de Paris foreign debt and continued strength in mining, agroindustry and tourism all present strong indicators for the market as a whole.

The drop in the Lima exchange was in no way mirrored in other stock exchanges in the region, which all closed trading yesterday with overall increases – in Chile, a neighboring country that is also heavily concentrated in the mining sector, the market indices reached record levels yesterday. New York exchanges also rose mildly.

Bus crash outside Lima leaves one dead, 22 injured

A crash between a local bus and a heavy truck left one passenger dead and 22 wounded in Chaclacayo yesterday. The public transport vehicle was headed from the popular weekend destination of Chosica to Lima, about 30km away, when it struck a goods vehicle that suddenly pulled out of a fuel station.

A 19-year-old woman was killed instantly, and some other passengers were left trapped in the wreckage. It took firefighters from Chosica, Chaclacayo and Lima some hours to free them and transport them to clinics and the local hospital.

They are being treated under the compulsory accident insurance that both vehicles carried.

Lima bus prices set to rise up to 50%

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Lima’s urban transport prices may be set to rise by 20-50% due to increases in fuel costs, according to East Lima transport corporation leader Julio Raurau.

He explained that this month’s price increase, by around 80 centimos per gallon, have forced the corporation to conduct a technical study into price increases to offset costs.

He said that other corporations are conducting similar studies, and that increases may come into effect on Monday in Lima and Callao, and he called on the government to reduce taxes or make available a compensation fund in order to prevent such rises from occurring.

He claimed that companies will be forced to raise prices as they are unable to meet operating costs.

Raurau, who represents a group of some 200 bus operating companies, failed to explain how a fuel price increase of well under 10% can justify a ticket price increase of up to 50%.

The standard price for bus transport in Lima has long held at one sol for short and medium distance rides, despite companies’ attempts to impose higher rates that are more dependent on distance traveled. It remains to be seen whether the public would accept this proposed increase.

Peru stock exchange takes heavy loss, but analyst remain optimistic

Heavy selling on the Lima Stock Exchange (BVL) today brought about its biggest fall in the past 18 months, with a drop of 3.25% as against yesterday’s close leaving the General Index (IGRA or IGBVL) at 20,066 points.

The Selective Index (ISEL or ISBVL), composed of the 15 most traded shares, fared even worse: it dropped over 4% to 34,845.

A total of 147 million soles was traded in 3,094 operations.

Mining stocks were among the heaviest hit, with Peru Copper losing 14.88% over the day’s trading. Other significant losses were experienced by Cerro Verde (-8.40%), Scotiabank (-6.80%) y El Brocal Inversión (-6.70%).

Jorge Luis Rodríguez, head analyst for the Interbank-linked Centura investment broker, attributed the majority of the loss of the index as a whole to Peru Copper’s loss, after it failed to find a bidder for an acquisition or merger. He said that this one company’s losses account for a reduction of over 1% in the general index as a whole.

The rest of the loss he attributed to a continuation of the trend that has been apparent over the past two weeks for investors to sell shares in mining companies, due to a perceived volatility in international metals prices.  He pointed out that “while we didn’t see a further drop in metals prices today, we didn’t see any rise in them either”.

The exchange has been growing in value steadily for some 18 months, over which time it has quadrupled in value – mainly due to activity in the mining sector as international metals prices have continued to rise. The sudden drop in the Lima market over the last two weeks has been seen by many as a readjustment after slight overbuying of mining firms.

Rodríguez remains optimistic about the BVL’s future trends, once this readjustment is complete. Assuming no disastrous drop in international metals prices, he predicts that Peru’s strong and rapidly-growing economy will once again provide the impetus for continued increases in the value of Peruvian shares.

Other markets in the region are not sharing Peru’s current slump, with moderate increases registered around North and South America. In the country dubbed “the economic miracle of South America”, and where fortunes have been made in months on the stock exchange, investors are hoping that this downturn will prove just a blip in a record of ever-increasing growth.

Pisco to strike against alleged Paracas pollution

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Pisco’s Mayor, Juan Mendoza, yesterday revealed that the city will hold a civic strike on June 6th, to protest against Pluspetrol’s alleged pollution of the Paracas Bay.

He described the move as a call for the national government’s attention regarding the situation of his community, and that a decision will then be made as to whether a further 72 hours strike will go ahead.

He added that the 11 members of the provincial council had voted unanimously in favor of the strike action.

The protest will start in the main square of the city of Pisco, a city popular with tourists heading for the nearby Paracas Nature Reserve and Ballestas Islands. The action is set to begin at 3pm on June 6th.

Residents are unhappy at Pluspetrol’s new natural gas liquid fractionation plant, designed to process the output of the controversial Camisea gas project in the Urubamba jungle region.

Locals are concerned that the plant may damage the unique ecosystem and biodiversity of the reserve, a popular stopping point where tourists heading south from Lima take tours to see wildlife such as the sea lion colonies and the endangered Inca tern (pictured).

Amnesty International: Fujimori cannot be trusted

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Peru’s Amnesty International Director Ismael Vega has said that it is hard to believe that fugitive ex-President Alberto Fujimori will abide by the decision of the Chilean courts if they rule in favor of his extradition to Peru, given his track record of dishonesty.

“You cannot believe Fujimori. He can say that he will respect the judgment and that he has no plans to try to escape, but his track record shows that he is not necessarily going to keep to his word,” he said in an interview on Ideeleradio.

For that reason, the Amnesty International official said that measures must be taken to prevent any possible escape by the former head of state, who spent 5 years after leaving office in voluntary exile in Japan – where, as a Japanese citizen, he was immune to extradition proceedings.

Vega stated on Radio San Borja that “the track record that Fujimori has in terms of keeping to his declarations, of justice and of respect for the law goes totally against his recent statements. He is a person characterized by a lack of respect for the rules”.

He added that Fujimori has an “irresistible compulsion to distort reality and try to change the facts,” as the ex-president claims that the corruption and crimes against humanity of which he stands accused were the result of a cooperation between his intelligence chief Vladimiro Montesinos and the military command, without his having any say in the matters.