Connect with us

Global Affairs

Foreign Direct Investment in Peru

 3 min read / 

Peru has the fastest growing economy in South America, averaging 6.4% GDP growth over the last ten years. However, growth has slowed in the last year due to a reduction in metal prices, the decrease in value of the Nuevo Sol and the recovery of the US economy. Historical high growth has attracted large amounts of foreign direct investment in the country, totalling $22.6bn in 2013. This has been led by Spanish investment, totalling $4.5bn, followed by British ($4.3bn) and American ($3.9bn).

The extractive industries account for 12% of the country’s GDP and are the principle beneficiary of foreign investment; receiving $5.4bn in 2013. Unsurprisingly China leads the foreign investment in this industry; Chinese interests own 33% of the copper industry in Peru. Chinese impact on this sector is illustrated by the acquisition of Las Bambas copper mine in the Apurímac region by a Chinese consortium led by MMG Limited, partially backed by Beijing, for $5.85bn.

Sceptics are worried that Peru’s reliance on copper makes the country’s rapid growth unsustainable; reductions in metal prices may give credence to these views.  In 2000 the extractive industries accounted for 5.5% of national GDP, this figure more than doubled to 12% in 2011. Conversely the tertiary sector’s share of GDP dropped from 62% to 57% in the same period, breaking from the usual developmental model in which reliance on the primary sector decreases and the tertiary sector grows.

Peru is the world’s third largest producer in copper and silver, sixth in the world for gold. Peru’s mining industry is heavily reliant on Chinese demand, as the Chinese economy slows their demand for metals such as copper will ease, severely impacting growth in the Peruvian economy. It is hoped that the government would use the $9bn worth of sovereign wealth in the Fiscal Stabilisation Fund to prop up the Peruvian economy should this happen.

Growth in foreign investment is partially responsible for the 50% growth in the Peruvian middle class over the last ten years. According to the World Bank; the middle class now accounts for 30% of the population (income $10-50 per capita per day). In 2013 direct foreign investment in finance ($4.2bn) and communications ($3.9bn) trailed behind the mining sector but had a larger impact on the quality of life of the middle classes. Foreign investment in finance is extending credit to the middle classes, that this service had not been offered previously is surprising but gives insight into why 60% of the population build their own homes but only 6% are granted a mortgage. Improvements in the quality of life are a key reason why an estimated 80,000 Peruvian migrants have returned to the country since the recession.

Peru recently joined the Development Centre of the OECD, a possible precursor to OECD membership. The Humala administration aims to join Mexico and Chile in the OECD by 2020. This marks a new stage in Peru’s relationship with the outside world and will possibly raise issues with the Andean Community of Nations (Peru, Ecuador, Bolivia and Colombia). Of the four permanent members; Peru and Colombia favour more liberal economic policies, offering a friendlier climate to international investors. It is unclear what effect the decreased GDP growth rate will have on foreign investment on Peru; likewise the elections in April next year will have an impact on investors’ perceptions of the country.

Click to comment

0 Comments

  1. R G Sr.

    November 23, 2016 at 5:48 AM

    Very Imformative

Leave a Reply

Your email address will not be published. Required fields are marked *

Global Affairs

BP and Iraq Sign Development Deal for Kirkuk Oil Fields

 2 min read / 

BP Kirkuk deal

Iraqi Government and British energy giant BP have signed an agreement for the future development of the Kirkuk oil fields in Northern Iraq.

A statement on the Iraqi Oil Ministry’s website said the “memorandum of understanding” between the government and the London-based oil company would enable further development of the oil fields as well as “to open a new page of work” for the North Oil Company, a subsidiary of the Oil Ministry, on “solid foundations”.

BP Director, Michael Townsend, said the company would conduct the necessary surveys and prepare the required statistics.  He claims the company will increase production by 750,000 barrels of oil a day.

The Kirkuk Oil Field, discovered in 1927, is one of the largest oil fields in the world, producing half of Iraq’s oil exports, a reported million barrels a day. However, it has also been a wellspring for local instability: the fields had been seized in 2014 by the Kurdistan Regional Government, who piped oil across the Turkish border, a few hundred kilometres to the north. The fields were only retaken by government forces in October 2017.

Baghdad is attempting to reassert its authority throughout its provinces and according to Iraq’s Minister for Oil, Jahbar Ali al-Allaibi, Thursday’s announcement will “speed up the rehabilitation process”.

During the Saddam Hussein era, the fields suffered irrecoverable damage due to poor management. Excess production was reinjected back into the ground making Kirkuk’s oil thicker and therefore harder to extract.

On Wednesday al-Allaibi met with Britain’s ambassador, John Wilkes, where according to the ministry’s website, they talked about joint cooperation between the two countries in the oil and gas industry.

Keep reading |  2 min read

America

Trump’s Presidency and Russian Relationship: The Future

 4 min read / 

Trump Russia

Much has been said about Donald J. Trump’s love affair with Russia. Questions deserve a thorough and honest investigation. As distasteful and risky it may be, the best outcome of the enquiry is accusations continue to swirl, Trump limps through three more years, and in 2020, he is crushed at the ballot box. The world moves on. If removed from office, odds are Trump whips his base into a frenzy. Only the height and duration of civil unrest is in question. A worse case is that Trump emerges emboldened, eager to settle Putin’s longstanding challenge.

Putin Mocks Trump

The competition is real. Putin’s economic and political dominance gnaws Trump. Putin knows this. So, he taunts the President and dares Trump to employ the same ruthless tactics he exploited to consolidate power and possibly become the world’s richest man. Since Trump only sees green, he took the bait. The race is on to be the world’s first trillionaire.

Russia’s population is 142 million. Its $3.86trn translates into a measly $26,900 per capita GDP. In contrast, the 326 million people of the United States generate $18.62trn in GDP, nearly five times Russia’s total. The US per capita GDP of $57,600 more than doubles Russia’s. Despite Russia’s meek economy and reports  that Putin has embezzled up to $200bn in assets, Putin remains incredibly popular in Russia.

The apathy regarding this unparalleled heist makes Trump and Putin salivate over what they could jointly pilfer from the world economy. To advance their contest, the pair will identify a common threat. US-Russia relations will warm. Under the guise of “Peace through strength,” Russian sanctions will be lifted, and the Magnitsky Act repealed.

The administrative state in retreat, animal spirits will run wild. Trump’s name will be emblazoned across the globe. Countries desperate for jobs will be compelled to forge deals sponsored by Putin and Trump. Ethics be damned, the race to the bottom of the $120trn global economy will prompt a wave of corruption never seen before. Every facet of human decency will be compromised: environmental regulations, free and fair-trade by-laws, intellectual property, and human rights protections. The collusion is real.

In time, complicity will turn to double-crossing. It’s the Trump-Putin way. Makeshift “me-first” trade deals will collapse. Boycotts, divestitures and sanctions will be commonplace. Cooperation will evaporate. New political boundaries will be drawn with little world condemnation.

It doesn’t have to happen this way. Patience is a virtue. The checks and balances of the three branches of government are powerful mechanisms to thwart overt corruption.

Yet, for the impatient who seek Trump’s impeachment or removal via the 25th Amendment, be careful what you wish for. Only Trump can tame his army. To assume Trump will plead mercy at the feet of the administrative state contradicts Trump’s lifelong persona. He will relentlessly counterpunch and encourage his followers to do likewise. The short and long-term political and social risks are astronomical.

If Trump stems the tide, consolidates power and aggressively partakes in Putin’s race for two terms, the risks outstrip his forced removal. The consequences will be multi-generational.

Rope-a-Dope Is the Key to Containing Trump

The only path that possibly prevents extensive collateral damage is to check Trump into policy oblivion. Legislators must play rope-a-dope for as long as it takes, even three years if necessary. If Democrats take back both houses in 2018, the tactic will not set up Trump and his base for a final knock-out punch in 2020. For that to occur, numerous members of the GOP must join the effort. They too must throw periodic jabs at Trump then absorb a barrage Trump’s counterpunches.

With foes in every corner, even Trump – the self-proclaimed greatest counterpuncher in history—and his base will wear themselves out well before 2020. Then the decisive knockout punch can be delivered at the ballot box—without collateral damage.

Trump is severely wounded. If he gracefully and peacefully surrenders the Presidency, great. But don’t expect it. Rope-a-dope deployed by both parties is the countries best hope for a peaceful end to the Trump Presidency. Any other scenario risks the once unthinkable; an ‘American Spring’.

Keep reading |  4 min read

Europe

May Meets Macron

May Macron

The UK prime minister agreed to pay £44.5m towards tighter border security at Calais.

Editor’s Remarks: The French president arrived in the UK for the Anglo-French summit amid widespread complaints from the Tory party about just why Britain is paying another £44.5m for tighter security in France. One Tory MP pointed out that this addition brings the total figure the UK has paid to France in recent years up to £170m. France, meanwhile, says that the amount is necessary because the migrants in Calais are trying to get to the UK, who must, therefore, contribute towards their costs. The talks were also consumed by the imminent task of reaching consensus over the UK’s trade deal with the UK after Brexit goes through.

Read more on Europe:

Keep reading |  1 min read

Trending

Send this to a friend