Peru set to lose U$4Bn in exports in 2009...just in copper

Peru not dependent on mining any longer? Don't be stupid

Some basic numbers: This year Peru expects to finish with exports of U$32Bn, 19.2Bn of which being metals exports. The big two metals are copper and gold which together account for over 70% of all metals exports by dollar value (precisely 70.7% in the first ten months of 2008, copper U$6.85Bn and gold U$4.67Bn from a total of 16.27Bn).

However, in that 2008 period copper averaged U$3.14/lb. Hey, guess what? Copper's going to be cheaper next year. This table shows how 100,000 metric tonnes copper exports per month will turn into dollars at various spot prices. In fact, although it fluctuates by a couple of thousand tonnes per month Peru averages 99KMT right now so we're pretty close to the real numbers.

Peru Copper Export Revenues
Cu $/lb	Est. Annual Value (U$M)
1.20	3168
1.40	3696
1.60	4224
1.80	4752
2.00	5280
2.20	5808
2.40	6336
2.60	6864
2.80	7392
3.00	7920
3.20	8448
3.40	8976
est. Month exports 100,000MT Cu

As we can see, if 2008 finishes by averaging $3.00/lb and 2009 finishes by averaging $1.40 or $1.60/lb (quite likely considering today's spot price and '09 predictions from this-and-that industry body or spokesperson), the difference for Peru will be somewhere around four billion US dollars in lost exports revenues. And when you consider that this is just copper, and other heavily hit metals exported by Peru include siver, zinc, lead, iron, molybdenum, tin etc the picture isn't very pretty. Even the more promising gold will have to average around U$870/oz in 2009 to beat out 2008's country revenue total (assuming export volumes remain the same).

So, that's U$4Bn disappeared from the trade balance for 2009. Here's the monthly trade breakdown for Peru in 2008.........

..........and in the first 10 months of this year Peru has managed to put in a surplus of U$2.8Bn. Yeah, you got it; just the copper loss is going to screw the trade balance in 2009. Just copper.

So forget about the fishmeal dispatches that will drop, the asparagus exports that Costco and WalMart will trim, the grapes that Japan won't order this year, the job losses, the greatly reduced royalty payments and all that jazz. Just remember that over 50% of Peru's corporate tax is paid by miners. So the next time some idiot tells you that Peru is not going to be affected by the world economic downturn, send them the link to this post. And then tell 'em to STFU.