Download Diapositiva 1

The Ongoing Crisis in the USA:
Should we worry about its impact on the
Peruvian Economy?
Carlos A. Anderson
© 2007 Europa Partners Ltd. All rights reserved.
Table of Contents
1. Decoupling Theory: Myth or reality?
2. Contagion Channels
• Current Account
• Financial Channel
• The Dollar Channel
3. Scenarios & Their Likely Impact
4. Conclusions
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© 2007 Europa Partners Ltd. All rights reserved.
Theory: Decoupling
World Trade Simplified: Trade between 4 main Blocks
USA
EU
1
2
ASIA
3
4
OTHER EMERGING
COUNTRIEs
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© 2007 Europa Partners Ltd. All rights reserved.
Dimensions in World Trade
Trade between 4 main Blocks (2007)
USA
North America
Exports: 9%
Imports: 15%
Europe
Exports: 48%
Imports: 48%
1
EU
2
ASIA
3
Other Emerging
Economies
Exports: 13%
Imports: 10%
Asia and
Australasia
Exports: 31%
Imports: 28%
4
OTHER EMERGING
COUNTRIEs
Note: Region 1 includes USA only; Region 2 includes Europe and Canada; Region 3 includes Asia and Australasia and Region 4 is formed by the rest of the world
Source: GMID Euromonitor International
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© 2007 Europa Partners Ltd. All rights reserved.
Since 2002 World Trade has duplicated
World Exports
(2002=100)
210
220
200
185
180
161
160
141
140
120
116
100
100
80
2002
2003
2004
2005
2006
2007
Source: GMID Euromonitor International
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© 2007 Europa Partners Ltd. All rights reserved.
Decoupling for Some, not All
GDP Growth correlation Latin America vs. USA
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© 2007 Europa Partners Ltd. All rights reserved.
Impact of Recessions …
 Impact of USA Recessions usually felt in Latin America
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© 2007 Europa Partners Ltd. All rights reserved.
And Slowdowns
 While USA slowdowns have a limited effect Latin America
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© 2007 Europa Partners Ltd. All rights reserved.
Some Decoupling Remarks
1. Decoupling varies from region to region and country to country
2. Past events will not necessarily repeat themselves
3. However, sheer size of the USA and its still undisputed
economic leadership in the world imply that a crisis in the USA
will be felt throughout the world.
4. We will now focus on the mechanisms behind and the extent of
the possible impact in Peru.
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© 2007 Europa Partners Ltd. All rights reserved.
Contagion Channels
1. Current account
• Direct trade with USA
• Remittances
• China & Commodity Prices
2. Financial System
• Banking system and Foreign Banks
• Capital Markets
3. Dollar Channel
• Exchange rate fluctuations
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© 2007 Europa Partners Ltd. All rights reserved.
Direct Trade with USA & China
35.0%
USA
30.0%
China
30.9%
29.1%
25.0%
24.1%
20.0%
19.0%
15.0%
10.0%
9.8%
10.9%
9.5%
11.0%
5.0%
0.0%
2004
2005
2006
2007
Source: Promperu
 Share US in Peruvian exports is decreasing  lower potential impact
 China and other emerging economies increase their participation
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Remittances & FDI
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Volatility in Development Flows
Low volatility  Remittances flow most likely stable
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Commodities Spur Peruvian Exports
80%
3,000
70%
2,500
60%
2,000
50%
40%
1,500
30%
1,000
20%
500
10%
0%
0
Ene00
Ene01
Ene02
Ene03
Ene04
US$)M)
totales (mill.
Export.Exports
Total
(USD
Ene05
Ene06
Ene07
Mineros/Total
Mining
Exports/Exports
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© 2007 Europa Partners Ltd. All rights reserved.
Commodities: Contribution to Exports & GDP
M USD
2000
2001
2002
2003
2004
2005
2006
2007
CAGR
GDP
53,323
53,935
56,756
61,342
69,735
79,485
93,027
109,069
10.8%
Exports
6,955
7,026
7,714
9,091
12,809
17,368
23,800
27,956
22.0%
Mining
4,804
4,730
5,369
6,356
9,199
12,950
18,374
21,493
23.9%
Non Mining
2,150
2,295
2,345
2,734
3,611
4,418
5,426
6,463
17.0%
Mining / Exp.
69.1%
67.3%
69.6%
69.9%
71.8%
74.6%
77.2%
76.9%
-
Exp. / GDP
13.0%
13.0%
13.6%
14.8%
18.4%
21.9%
25.6%
25.6%
-
Mining
9.0%
8.8%
9.5%
10.4%
13.2%
16.3%
19.8%
19.7%
-
Non Mining
4.0%
4.3%
4.1%
4.5%
5.2%
5.6%
5.8%
5.9%
-
Source: IMF & Promperu
•
Mining exports boom after 2003  share of GDP almost doubles from 10.4%
in 2003 to 19.7 in 2007
•
Experts as a share of GDP double between 2000 and 2007
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Commodity Prices are the Main Driver
Price Metal Index
2001=100
Source: Perspectivas del precio de los Metales. Apoyo Consultoría. Diciembre del 2006.
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© 2007 Europa Partners Ltd. All rights reserved.
The Financial Channel: Foreign Banks in Peru
Market Share of Foreign Banks in Local Banking System
Percentage of Total Assets
•
Participation by Foreign Banks in Peru relatively low
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The Capital Markets
10%
10%
8%
Volatility IGBVL
8%
6%
6%
4%
4%
2%
2%
0%
0%
-2%
-2%
-4%
-4%
-6%
-6%
-8%
-8%
-10%
-10%
may-07
jul-07
sep-07
nov-07
ene-08
mar-08
may-07
may-08
Volatility Dow Jones
jul-07
sep-07
nov-07
Correlation
ene-08
mar-08
may-08
Volatility
Period
Daily
Weekly
DJIA
IGBVL
2006 H1
20.3%
-3.3%
0.5%
1.5%
2006 H2
-1.0%
0.0%
0.4%
0.9%
2007 H1
15.5%
7.2%
0.5%
1.2%
2007 H2
47.3%
79.7%
0.9%
1.4%
2008 H1
10.6%
38.3%
1.0%
1.3%
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© 2007 Europa Partners Ltd. All rights reserved.
The Dollar Channel
Sol versus Dollar (last year)
3.2
3.1
3
2.9
2.8
2.7
2.6
Source: BCRP
•
The Impact through the exchange rate can be significant
•
A US crises could lead to a dollar collapse, which would result in a much
cheaper Dollar and a more expensive Peruvian Sol
•
The possible impact on the Peruvian economy:
1. Exports to the US will fall
2. Remittances send from the US will be worth less
3. The international crisis will likely affect the worlds economic activity
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© 2007 Europa Partners Ltd. All rights reserved.
Scenarios
Impact on Peruvian Economy trough
Crisis US
Direct
Trade
Remittances
Commodity
Demand & Prices
Banking
System
Capital
Markets
Dollar
Channel
Moderate
L/M
L
L/M
L
L/M
L/M
M
L
M/H
L
M
M
Severe
•
A moderate crisis will be felt through direct trade, lower demand for
commodities combined with lower prices, and tightening of capital markets
•
A severe crisis in the USA, with spillovers to the rest of the world including
China, is the worst case scenario. Considerable lower demand for
commodities combined with considerably lower prices as well as temporal
investment stop as a result of higher interest rates could have considerable
implications for Peru. An even weaker dollar will make exports to the US
more expensive while imports will be cheaper and as a result the current
account will worsen
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© 2007 Europa Partners Ltd. All rights reserved.
Conclusions
•
Peru's exposure to US economy is important given current account channel,
(trade and remittances) financial channel (effect on the Lima Bolsa) and the
dollar channel.
•
However, the impact of a US slowdown may be more reduced than in the
past given:
1. Robust internal demand
2. Improvement of credibility and fiscal policies
3. The increasing role of the rest of the emerging countries in the worlds
economy
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© 2007 Europa Partners Ltd. All rights reserved.