Economic Prospects in Peru buoyed by agriculture and mining sectors

by Dave


For instance, Peru — South America’s fastest-growing large economy — has excellent economic prospects with reasonable valuation levels.

Until last year, investors could only buy into Peru through companies like gold miner Compania de Minas BuenaventuraADR (BVN_), copper miner Southern Copper (SCCO_), or the financial Credicorp ADR (BAP_). But iShares MSCI All Peru Capped Index Fund (EPU_) now offers a new way.

Granted, 20 years ago Peru struggled with raging hyperinflation and violent attacks by communist guerrilla groups. A lot has changed since then, and it’s set to grow 7% this year. Most economists can’t help but notice the difference — so should you.
Peru’s Commodity Advantage and More
Peru can trace its mining ties back to a time before the Inca Empire. That same tradition has helped push it into a successful economy today. Similarly, much of its future success relies on its exports of gold, copper and the like.

Fortunately, global mining companies can’t seem to get enough of any of those. In all, they have $41 billion in investments planned there over the next decade. That should quadruple Peru’s copper exports, putting it neck-and-neck with Chile, the world’s biggest producer right now.

Along with mining, the country has other factors going for it, such as agriculture. In the past decade, such exports have surged from $300 million to $2.5 billion.

* Peru exports the world’s largest amount of asparagus.
* The country produces the most specialty coffees, paprika and organic bananas.
* It also reaps significant amounts of cocoa, sugar, artichokes, avocados and mangos.

Right now, that sector only accounts for 8.3% of GDP, though it employs a third of the workforce. But it should grow fast with the introduction of superior farming methods such as drip irrigation. With strong sales in the first half of the year, revenue rose 19% over the same time in 2009 to $1.37 billion. That highlights Peru’s potential in the global agricultural market.

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