Economists = Dumbasses in suits, part 88,945

Today in the FT, guest blogger Kevin Gallagher gives us the old chestnut about "The Chinese Threat", but this time from a LatAm angle. The story is not new and it goes without saying that the classic line of thinking, the one about how LatAm must diversify and add value to exports and how it's key to sustainable growth and how without it we're all gonna die etc etc, yep that one's front'n'centre:

"Latin America needs to diversify its exports - away from oil, iron, soya, meat and the like - if it is to grow sustainably. Unfortunately, as the region has focused yada yada guess the rest it's easy continues here"

This bullshit really gets my goat. Not the theory behind it, mind you, because economics being a social science is always up for debate, there are no empirical answers and opinions (as long as they're backed up by research and logic) are welcome. Nah, the thing that pisses me off about this is that people like Gallagher who bemoan LatAm's lack of added value growth, wag their little fingers at the overwhelming exposure to primary material and commodity exports and give countries like Brazil, Argentina, Bolivia, Venezuela, and Ecuador a stern piece of their mind on these occasions are the very same economorons that cheer and laud the economic progress made by Chile since the early 90s, a GDP growth totally dependent on primary exports that has....errr....has....well, like...err....made for 20 years of successful and sustainable growth in the country.

It's the freaking hypocrisy of these dumbasses that sticks in my craw. So Mr Gallagher, accept this week's coveted award for yourself and all your two-faced colleagues who trot out their monotonous balderdash on LatAm macro:

I feel better now. DYODD, dude.

Power growth in Peru

These charts document the growth (or otherwise) in electricity demand in Peru over the last three or four years, depending on the chart. First up the total demand per month, which is clearly on an uptrend.

click to enlarge

This next chart takes it a little deeper and shows the Year-over-Year (YOY) change in demand. It's pretty clear the recession hit the country hard, but this year the bounceback has been rapid and the previous growth trend is back on track.

click to enlarge

Things like electricity demands are far harder to fake than GDP numbers, but they follow the country's economy well enough. What the charts here say is that Peru bullshitted the world back in 2009 when it pretended not to be in recession and played fast'n'loose with the official stats to help the subterfuge. However, the country is doing well now. It also suggests that the current headline-making growth figures (GDP etc) are a one-time-only experience and as of next year, when Peru has to measure itself against the 2010 rebound, the GDP numbers won't be up there with China any longer but back to a more reasonable level. If the country can add at 5% per annum going forward, it would be a solid and likely sustainable rhythm.

Peru sees macroeconomic in-fighting

Back last week (while commenting on the normal level of dumbassery displayed by economists regarding Peru) we noted that the Central Bank, headed up by Julio Velarde, was worried about the overheating of the economy. This is why they raised rates from 2% to 2.5% of course, but the thing that caught mine eye at the time was the phrase used in the communique that mentioned public spending was causing inflation. Here's the snippet of snark from that IKN post:

Particularly interesting is the bit about accelerated public spending causing inflationary pressures....hey, you'd never know Peru is in an election year, would you?

With that background, let's check this Reuters note (that displays great insight, must be said) about how Peru's FinMin Araoz is opposed to the Peru CenBank position and is pushing to keep public spending at high levels.

LIMA, Aug 10 (Reuters) - Peru's finance minister on Tuesday bristled at a suggestion by the central bank that she slow spending to curb inflation and vowed to meet her fiscal target for this year in one the world's fastest-growing economies.

'If there were no public investment then we would unnecessarily be putting the brakes on the economy,' Mercedes Araoz told reporters. 'Our fiscal deficit this year will be 1.6 percent of gross domestic product. Next year it will be 1 percent.'

The central bank, citing a surge in public spending and sizzling domestic demand, raised its benchmark interest rate by more than expected last Thursday to 2.5 percent from 2 percent. It was the biggest increase of the current tightening cycle in an economy investors see growing about 7 percent this year.

The next day, its monetary policy director, Jorge Estrella, said: 'The finance ministry will need to start stepping on the brakes to gradually reduce spending and in this way help domestic demand grow in a more sustainable way.'

Araoz, who on Tuesday responded publicly to the central bank's comments for the first time, said there were no signs the economy was overheating.

Public investments rose 65 percent in the first half of this year from the same period a year ago, though that pace should slow to 20 percent in the second half of this year as the government is winding down its economic stimulus program launched last year, said Araoz.

She ruled out criticism from the opposition that President Alan Garcia wants to ramp up spending before regional elections later this year.

SPECULATIVE CAPITAL

At the same time, Araoz issued a warning that too much monetary tightening could attract more short-term capital to Peru, which has been flooded with dollars this year, pushing the sol to a two-year high of 2.80.

'You have to make sure that the interest rate is not raised too much, so as not to make it so attractive to speculative capital, this is a measure that the central bank will have to study at the appropriate time,' she said.

The central bank has repeatedly intervened on the local foreign exchange market this year to soak up excess liquidity, buying nearly $6 billion since January to prevent currency volatility, which could contribute to inflation if the sol were to sharply reverse direction after excessive strengthening.

In recent weeks, the finance ministry has said it would complement the interventions with purchases of its own.

Araoz said there were no signs Peru's economy is overheating. Inflation in the first seven months of this year was 1.79 percent. The central bank's annual target range is between 1 percent and 3 percent.

Along with Brazil, Peru is expected to grow the fastest in Latin America this year.

Peru's economy grew more than 9 percent in the second quarter as its construction and finance sectors expand at double-digit clips, swifter than the traditional engine of mining exports.

Araoz said her office plans to upwardly revise its 2010 growth forecast, which at 5.5 percent is well below more optimistic projections by lenders and the International Monetary Fund.

'It would be around 6 percent, something like that,' she said.

Once again, politicians care more about the short-term feelgood reflection of a higher GDP rate (which in itself is a dubious metric for measuring a country's progress) than being economically responsible and checking back growth to a sustainable level. Viva freakin' investment grade, peeps.

Peru import/export update

We haven't done this for a while, so last week's publication of Peru's January Imp/Ex numbers gives a good time to check out the state of play.

Let's start with exports-only. There were superduper fanfares in the local press about exports rising 44% or 48% or some weird number, but a more careful look at the numbers show that January 2010 compares very closely to Janaury 2008. In other words, two years have gone by and the net result for the country is zero.

click on charts to enlarge

On the one hand, it's a good thing to see Peru coming out of the crisis trough of course. However, it hardly merits the rah rah you hear (and keep hearing all year) of the YoY comparatives that get spun out of Lima.

Also let's note, once again, just how little Peru's export mix has evolved. It's still a primary materials monoculture with metals (mainly copper and gold) making up the largest chunks of the total. How do you add value to a 1kg ingot, Twobreakfasts? Meanwhile, other traditional exports have trodden water along with the non-traditionals too. Here's the percentage breakdown of exports for January 2010:

Mining exports: 62.48%
Other Traditional Exports: 17.2%
Non-Traditional Exports: 20.31%

Peru's historic exports mix is with 60% metals....nowadays it's even higher. So much for the productive "miracle" of Peru's growth, which in fact rests squarely on the shoulders of large world miners that remit all profits back to Canada, Australia, the USA, the UK etc. Viva investment grade, baby...

Now comparing imports to exports, we again see that 2010 is no better compared to 2008 or even 2007, such is the inertia.

A recovery is on? Yes no doubts, with that steady climb in imports underlying the good news. Anything better than 2007 or 2008? Nope. So next time the headlines scream the Kool-Aid at you, remember the real context of the "growth" figures that you'll see out of Peru this year.

Economic Growth: Peru vs Bolivia

Peru: A bullshit statistically manipulated and massaged 1.12% GDP growth for 2009 that isn't being taken seriously by anyone that looks beyond the headlines and studies the figures. But all the same, Peru is being lauded by the empty-headed suits for its great effort amidst adversity.

Bolivia: A genuine and statistically sound 3.7% GDP growth for 2009, the best in the whole of the Latin America region (from Tijuana to Tierra del Fuego). Totally ignored.

That Bolivia's has the best performing economy in the whole region is just too hard to swallow for the neolibs. So rather than address the issue they just pretend it doesn't exist and praise the economy of Peru that relies on 28% of its child population as workers to make money (and we're not talking paper rounds, folks, we're talking sweatshops, shoeshining and working in gold mines). Of course I'm not saying that child labor doesn't exist in Bolivia; all you need to do is check out who's guarding the sheep or llama herds to see the story. But the important thing is that you gringo types get the chance to invest your money in the child labor sectors of Peru. Far better for the world, right?

In Peru, the rich get richer & the poor get poorer....again

Every month in Peru, respected polling firm IPSOS-Apoyo runs a survey amongst residents of the Lima/Callao conurbation and asks them, basically, "how are things going, folks?". Thanks to the deeply marvellous Jurgen Schuldt and his blog, I caught up with the end-of-year survey results in this post yesterday. Here we go with the visuals:

First, this chart (stolen from Schuldt and re-dubbed into English) shows how Peruvians think things are now compared to the same time last year. When answering the question, "Are you much better off, better off, the same, worse off or much worse off than this time last year?".....

...17% said "better/much better off", 26% said "worse/much worse off" and 57% said "the same". So at first light it looks as though Peru's citizens have found themselves a little bit worse off, but basically the country has been treading water for the last year.

But then if we delve deeper into the IPSOS-Apoyo numbers, something different is seen. When the survey results are split into socioeconomic grouping (in the system, the A's are the hoi polloi and the E's are the scummy proles that they try their hardest to ignore) new pattern comes to light. This chart shows how many of each sector think they're better off than this time last year:

And this chart (note the green/red colour coding...subtle, aren't I?) gives us percentages for the same groups who consider themselves worse off than last year.

Hey wow, shock and surprise: In SEG A, 31% are better off and 12% worse off. And then in SEG E, 3% are better off and 31% worse off. Hoodathunkit, eh? Or in other words, the rich get richer and the poor get poorer. Check Jurgen's blog for more details.

Viva investment grade. Viva, viva, viva.

Peru: Viva investment grade (part 14,279)

This chart (English trans Otto)........

....... comes from this report on Caretas today that shows up close and personal, once again, that Twobreakfast's obsession with GDP and his KY Jelly attitude to foreign direct investment have not helped Peruvians in the slightest. Note that between 2006 and 2008 and according to the official figures (i.e. this is not a case of making shit up):

• an extra three percent of Peruvians don't reach the minimum daily calorie intake. Put in simple terms, that's ANOTHER 700,000 people who don't get enough to eat. Note to those who have been to Peru for their three week aventure vacation and now consider themselves experts on the country; you are unlikely to have met these people on the Inca Trail or in that cozy four star hotel where you stayed.

• by World Health Organization standards (not the BS stats of the Twobreakfasts gov't), chronic malnutrition still affects 27% of the population of Peru

• illiteracy levels are still at 10% of the adult population

• more people have no access to running water in their homes than in 2006

• home phones are a luxury

And the biggest takeaway from all this is that this was the supposed "boom period" in Peru, with GDP growth rates over 9%! What are these figures going to look like after our present crisis year is over? Are you beginning to understand why Twobreakfasts is such an unpopular president in Peru yet, or do you need "I am a moron" tattooed on your forehead?

Viva Investment Grade. Viva, viva, viva.

PS: for those that don't suffer under a Castilian challenge, here's the original table

Carlin nails Twobreakfasts

'Carlin' is about the best political cartoonist in Peru and has his corner of the world at national daily, 'La Republica'. Here's today's offering, translated into English and then in its original Spanish. Enjoy.

Peru: Where has all the money gone?

This chart .....

.....is taken from this superlative post by Rendon over at Gran Combo. Even though Rendon's post is in Spanish there are plenty more charts in English that give more information about the situation in the "miracle economy" that, by some miracle, forgets to benefit its own people.

Bolivia: In a spooky development, mainstream financial newswire actually does its job for a change and reports facts about Evonomy

Hats off to Eduardo Garcia of Reuters Bolivia (we've feted the dude before due to his better-than-the-rest reports on Bolly) who published the following report on Reuters newswires last week (h/t reader PD).

To finally see some credit given by serious financial media (not just sillyblogs like this one) to the Bolivian economic success story is a refreshing change, but Garcia gets into the nitty-gritty as he explains how Evo's radical communist idea of "giving money to the poor" actually helps the economy.....wild huh? It also has wild'n'crazy things called "facts" that include:

• Bolivia's record international currency reserves
• How Bolivia is on track to be the fastest growing country in the whole of Latin America this year
• The manner in which children are getting better schooling
• The communist conspiracy of giving retirement aged people a pension
• The red-in-bed way of "helping pregnant mothers"
  
• The way economic growth brings social stability (neocons: read&weep, dumbasses)
• The absence of bad debts in Bolivia's macroeconomic make-up
  

So here's Garcia's piece. By the way, it's unlikely you've seen it before, because although it was a strong note on the Reuters newswire service, strangely and weirdly not a single open web service picked up on the note so strangely and weirdly it has managed to miss the eyes of those of us not equipped with a U$1,500/month Reuters terminal. It's almost as if they didn't want to you read it...strange'n'weird that, innit?

LA PAZ, Oct 1 (Reuters) - Bolivia's economy is healthy despite the global slump because leftist President Evo Morales is redistributing soaring state revenue as subsidies to the poor, the country's finance minister told Reuters on Thursday.

The Bolivian economy grew 3.2 percent in the first six months of this year, despite lower export income for natural gas, which is key to the Andean country's economy.

The International Monetary Fund says Bolivia is likely to post the highest growth in gross domestic product, in Latin America at 2.8 percent.

Finance Minister Luis Alberto Arce is even more optimistic. He expects GDP to grow 4 percent this year, largely because Morales has handed out money to the country's poor majority, which is boosting their spending.

"Our policy was to make the cake bigger for Bolivians with the nationalization policies, to increase state revenue. Our second policy was to divide the cake better in order to give more to those who have less," said Arce.

Arce said the subsidies are the "small engine of growth" that has allowed Bolivia's economy to grow despite lower export revenue caused by drops in demand and prices for natural gas.

Moody's Investors Service and Fitch Ratings upgraded Bolivia's credit ratings last month, citing the country's good macroeconomic performance.

But they noted that years of above-trend growth, the benefits of external debt forgiveness, limited foreign banking interests in the Andean nation and the absence of bad debts prevalent in developed markets helped Bolivia to avoid a direct fallout from the global crisis.

CASH FOR THE POOR
Morales, an Aymara Indian from a poor background who took office in 2006, has increased taxes on foreign investors and has nationalized energy, mining and telecommunications firms.

State revenue from the key natural gas sector boomed to $2.65 billion last year, from just over $1 billion in 2005, and revenue from the mining sector increased fourfold in the same period to $128.1 million.

The country's foreign reserves have rocketed to around $8.5 billion from $1.7 billion at the end of 2005.

Morales' government is spending some $320 million a year in grants to encourage parents to keep their children in school, in pensions for the elderly and in cash handouts to persuade pregnant women and mothers to go through health checks.

Earlier this year the government said that in 2008 nearly 2.4 million Bolivians received cash subsidies, roughly 25 percent of the country's population.

That is on top of the nearly $200 million donated by Morales' main Latin American ally, Venezuelan President Hugo Chavez, that Morales has spent in hundreds of small education, sports and health projects since 2006.

Although critics have said the government is giving subsidies to buy support from poor Bolivians, Arce says the stipends are a good way to redistribute wealth.

"These are policies to redistribute income ... tomorrow when the poor of today are no longer poor, of course we're going to have to stop giving this support," Arce said.

But the economist said that the government is likely to continue giving subsidies in the medium term because they stabilize the country.

"We can't stop ... because it's something that brings social stability. Social conflicts have decreased greatly with our government because we're solving the social problems that people have," Arce said.

Before Morales took office, three presidents in three years were forced to step down amid social unrest.

More on Peru's economic miracle (and owls)

The INEI stats office has just published the July 2009 GDP figures. According to the normal Reuters poll analysts* expected a drop of 0.5%

The actual result?: a drop of 1.38%

Yet again, manufacturing (i.e. the real economy) dropped badly by 12.35%

Expect Spongebob Carranza to say that "we're at the bottom" AGAIN and expect our friend the owl to pop up and reply with a cheery

Here's the official INEI bulletin.

*dumbasses in suits

GDP: For Stiglitz, a fetish. For Twobreakfasts, a perversion

Joseph Stiglitz is a royal pain in the trasero for the dumbass-in-suit brigade of nodding donkey economists that led us into a financial crisis and still proclaim wisdom. Y'see, Stiglitz isn't like 99.999% of the dismal scientists because....

1) he's smart and actually makes sense
2) he has a Nobel prize for what he does

....and it's that second one that makes it tough for the brainless dumbasses that call themselves experts to dismiss him. So tomorrow Stiglitz is presenting his new findings on the world's obsession GDP (sponsored by Sarko de La France, et pourquoi pas?). Here's a Bloomie report quoting him and laying out a preview of what we can expect tomorrow and here are a few choice quotes from the man himself:

"GDP has increasingly become used as a measure of societal well-being and changes in the structure of the economy and our society have made it increasingly poor one."

"So many things that are important to individuals are not included in GDP,” said Stiglitz, a Columbia University professor. “There needs to be an array of numbers but we need to understand the role of each number. We may not be able to aggregate everything together."

"Most governments make a fetish out of it. If you take one message out of our report, make it avoid GDP fetishism,” he said. “The message is to encourage political leaders away from that."

Twobreakfasts take heed; the way you mentally masturbate over GDP, the whole GDP and nothing but the GDP whilst ignoring the disasterous social situation faced by whole swathes of your countrymen is about to be given lie by a man far, far smarter than you in these things. Twobreakfasts isn't the only one guilty here, but he's the smelliest proponent of growth at all (or perhaps 'any') cost. So I hope Stiglitz gets the traction he deserves on this issue and it gets the debate it deserves, though I suspect the status quo peddlers will want to sweep it all under the carpet as quickly as possible.

Checking in on the Peruvian consumer

Here are two charts with stats taken from this INEI bulletin. They show how Peru's national sales tax receipts have been coming on recently in Peru. The first chart shows receipts in monetary terms, month over month, since 2007. The growth has been pretty impressive.

However this chart shows more clearly the recent weakness in the growth pattern, with last month the first time that sales tax receipts have shrunk on a YoY basis.

So what happens if a country announces an economic recovery and nobody shows up for the party?

Peru's economic liars: A primer for those who need to get up to speed

It has been brought to my attention that certain higher-traffic bloggers and financial commentators who were plug-dumb enough to buy into the "economic miracle" bunkum and lies spread by Peru's government and central bank lackeys (ably helped along by the dumbasses in suits at the IMF and World Bank) and were silly enough to regurgitate official numbers to their innocent flocks of readers have recently discovered IKN and are beginning to wake up, smell coffee and recognize they've been hoodwinked*.

And thus for their benefit, your humble correspondent has thrown together this little primer on the lies spread by this most pathetic of governments. First let's take in the figures in question via this chart:

And now let's hear what we've been told all this time:

January 19th: "Minister Carranza acknowledged the strength that characterizes the Peruvian economy....with a projected growth rate in 2009 of at least 6%. "

March 8th: "The results obtained from the leading indicator studies estimate an increase (of GDP) of 4.5%, 3.0% and 3.9% for the months of January, February and March 2009, respectively." (Peru official INEI stats office)

April 16th: Commenting on the February 0.17% growth rate registered, Carranza said, "February has been atypical and has been a pothole...additionally the impulse from the finance sector will show in the second quarter of the year."

May 5 2009: ""We likely hit the bottom in the first quarter, and we should see a stronger recovery in the second quarter," he (Carranza) told Reuters."

It goes on and on, with each and all this time your humble correspondent laughing tragic laughs and explaining how much bullshit is being spread by these unclothed emperors. Then finally, after half a year had gone by, some of the dumbasses in suits who fell for this crap for month after month up in gringoworld started seeing reason.

August 3rd: ""The lack of recovery signs following the first half 2009 growth collapse has many increasingly skeptical of Peru's growth story," said Merrill Lynch in a report Monday. "

But it's not just Spongebob Carranza, either. Goes without saying that Twobreakfasts is BSsing (his only talent), but as another example Peru's foreign trade minister Martin Perez is quoted in Newsweek as late as July 30th as saying:

" As a result of these actions, during the first half of the year, Peru's economy grew 0.9 percent. Martin Perez, Peru's minister of foreign trade and tourism, told Bloomberg he expects GDP to grow between 2.5 percent and 3 percent this year.

"Exports have suffered around 15 percent but the stimulus package the government has passed is trying to bring forth internal demand," he was quoted as saying by the magazine."

Now we can argue the toss about Peru's final 2009 figure if you like (for the record, he's still aiming high), but there are not one but two factually proveable incorrect statements in that short passage. Firstly, Peru's economy grew 0.34% in the first half of 2009 according to govt figures (that are also BS and way high) and not Perez's 0.9%. Secondly Perez says "exports have suffered around 15%" which is a barefaced lie. Peru's exports dropped 29.66% in the period in question, nigh on double Perez's balderdash. Again, official numbers. And as I hear you asking "what difference does it make anyway, Otto", let me tell you; that 15% understatement makes for two point four billion dollars in exports, or around 2% of Peru's GDP.

These people are liars. Plain and simple, look at the evidence above. This is the country that has a foreign trade minister overestimating foreign trade by $2.4Bn in Newsweek and because it's Amerika's friend nobody bothers to fact check, nobody questions, the nodding donkeys nod their heads and the moving finger, having writ, moves on. Meanwhile, here follows one segment from a whole plethora of posts at IKN that nailed the real story months and months ago. March 16th:

But don't let that worry you, because Twobreakfasts says it's going to be 5% this year, and Carranza says 5% this year, and the Central Bank says 5% this year, and the IMF says 5% this year. I mean, why on earth should you listen to me and ignore all those utterly reliable and impartial sources?

Therefore, the latest story from Spongebob is that Peru's GDP will grow by 2.5% in 2009 and will see "important improvement" to 5% in 2010. Are you going to take him at his word this time? Fool me once, shame on you, fool me twice..............

Moral of this story: Be they your local mayor's office, your own country, Peru or LatAm or Asia or anywhere else you like, politicians do not tell the truth. However the mass hypnosis created by battering out the same "Peru miracle" story from all sources and feeding it to a compliant and brainless media means that the same lies and bullshit pervades into the financial commentaries of those with serious influence that are either 1) too stupid to work it out for themselves or 2) too lazy to bother checking the figures themselves before spreading the BS on. Yeah, that means you, "T"**.


*That was a mouthful of a paragraph, wasn't it?
**Before you mail and accuse me of bolshiness again note that I'm not naming you; my pathetic way of being nice, as I think you're saveable re LatAm.

Top note on Peru from Reuters

HT to Justin Delacour at LANR for the headsup on this report from Terry Wade at Reuters. He nails the story here and even points out at the end that Bolivia will grow faster than Peru this year....that's pretty readical stuff for MSM right now, but it'll be getting more airtime as the year closes out, that's for sure.

Dudes, I've been telling you this all along but now it's getting some official, bigmedia airtime. Here below is how the Reuters story kick off, but click through for the rest as it's all good stuff. Meanwhile, for those of you versed in the language of Cervantes that want to get nittygritty on the latest numbers, this report from Farid Matuk is well worth your time. Meanwhile here we go with Reuters:

ANALYSIS-Peru's hopes of being an 'Asian tiger' fade

Less than a year ago, Peruvian elites smugly began calling their country a 'Latin tiger' and predicted that it had entered a magical phase of constant economic growth that would outshine the rest of Latin America.

A leading minerals exporter, it grew every year for the past decade and capped off the heady days of 2008 with a 10 percent surge as China bid up global metals prices. But this year, Peru will be lucky to expand at all. The slowdown has been sharper than forecast and exposed the country's overreliance on raw materials exports, with minerals making up 60 percent of all overseas sales. Unlike 'Asian tigers' such as South Korea and Taiwan, which boomed as they became manufacturers of everything from cars to microchips between the 1960s and 1990s, Peru's economy still largely depends on the cyclical whims of commodities prices and exports have plunged 30 percent since December. Most economists say Peru will grow less than 1.0 percent this year, and the government appears to be backing away from its downwardly revised forecast of 3.0 percent..............

CONTINUES HERE

More downward revisions for Peru

And this time it's Spongebob and his band of liars at the Finance Ministry itself, downgrading to "between 2% and 3%" as reported by El Comercio last night. The downgrade will become official at the end of the month (when it'll probably be called plain straight 2%).

So let's look at how the official finance whores have forecast Peru 2009 so far in chart form. Now, I dunno 'bout you dude, but I kinda notice a trend developing...........

We do ornery (click to enlarge)

Otto, purveyor of an honest GDP forecast for all this time (1.28%) , guarantees further BS and downgrading as 2009 winds down. You seriously expect these people to be honest with you after that kind of track record?

Meanewhile, the pre-empted excuses for this month's disaster number (about to be published...should be a lotta fun) are already rolling out. This latest one made me laugh, the headline saying "According to analysts, economy fell 2% in June due to social protests". Y'see it isn't the Twobreakfast/Spongebob show that's at fault, oh no no no no no; it's those lousy commies that protest over nothing. But they can dress it up any way they like; Peru is falling further into recession on their watch, period. Truth beats out lies eventually.

Does Otto work for BBVA Banco Continental? Should Otto work for BBVA?

Strangely enough, today BBVA Banco Continental adjusted down its forecast for Peru's 2009 GDP to +1.4%. Here's the section (translated):

BBVA Banco Continental forecasts that the Peruvian economy will grow 1.4% in 2009 and expects a rate of +3.3% in 2010.

So let's check that chart I put together back in April again...



...oh looky, Otto said +1.28%. And that was the time when Spongebob and all at the Peruvian Finance Ministry said growth would be 5%, Twobreakfasts assured his masses 5%, the World Bank said 5%, the IMF said 5%, BBVA was saying 5% (or thereabouts) and the freaking Peruvian Central Bank swore blind that it'd be 5%. It's also the time of year that commentators like Luchillo (who pretended to be an economist from chile living in Lima) would troll this blog and tell me that I must be some kind of insurgent communist for standing up and saying "They are lying to you". How do you feel now, dumbass?

It only remains to ask whether I actually work for the bank in question (the answer being "hahahahahahahahahaaaaaaaaaaa") or whether I should work for BBVA in the future (the answer being "no way José; I'd last a week at best). Y'know, yesterday I was accused by somebody who thought he was being friendly of being too mouthy on this blog. But hey, when the whole of the financial community expects 5% growth from Peru and I'm here all year saying that's a very large crock, at some point I have the right to stand up and say "toldya so". And there's never going to be an editor here, no matter what people would like to see. If you don't like reading plain speak spoken plainly and an author that is not afraid of the truth and its painful consequences there are a zillion other corners of cyberspace to choose from. No need to return here.

Oh wow! English language media is starting to get the picture about Peru, too.

The WSJ (via DJNW) is running the story "Peru's Intergroup: No Signs Of Strong Economic Recovery" today and it starts like this:

LIMA (Dow Jones)--Peru's economic recovery will continue to be subdued, although a "mild" rebound is expected in the second half, Intergroup Financial Services Corp.'s (IFS.VL) chief financial officer said Wednesday.

"We are still not seeing strong signals of a recovery," said Jose Antonio Rosas in a conference call with analysts, adding that increased government spending will help boost growth.

Peru's gross domestic product rose close to 10% last year, while in the first five months of this year GDP has expanded by only 0.83%. CONTINUES HERE

For the record Intergroup is the holding company for Interbank, a pretty decent Peruvian high-street banking chain. So what this is is the start of a bit of reality, not much more. My eyes popped out on seeing the adjective "only" as regards Peru's GDP, cos it's the first time I've seen even a mildly derogatory comment about Peru's lop-sided, socially disgraceful "growth" in five years of MSM-watching. So suddenly the voice of English language mainstream media has changed from "Peru Economic Miracle" to "Peru flat for year", so what are they going to say when the next GDP figure comes out way, way negative?

The fruitfly analyses continue in other places however. RGEMonitor (the Roubini place full of the dumbasses in suits that you call economists) is still peddling the party line, as found in my inbox this morning:

A couple countries in Latin America have thus far been able to weather this crisis better than their neighbors. Brazil and Peru stand out for their relatively healthy fundamentals and financial systems. Both countries have benefitted from being relatively closed economies and from having diversified export markets and products.

This is BS. Brazil has an internal economy, but Peru is wholly dependent of the rest of the world and metals prices. The crap spouted by S&P last year wasn't confined to AAA ratings on US financial roadkills, as I still recall the day I guffawed non-stop about its call on the "surging internal economy of Peru" as it justified the worst ever 'investment grade' rating in the history of developing markets. Peru's single major export market is the gold that gets sent directly from Chicama and Yanacocha to vaults in Switzerland. Then comes copper to Asia and that's all she wrote, its about as diversified as the recipe for hotdogs. Not long now til the emperor is shown in his birthday suit and the arrogant know-alls at RGE eat their words, side order of crow. Short the Nuevo Sol.

Related Post: Will Spongebob Carranza resign in disgrace as Peru slips further into recession?

Bolivia leads South America

Scrawny, mouthy, opinionated people like your humble correspondent have been saying it for a while, but now the people that really matter are daring to say the unsayable:

Bolivia is the fastest growing country in the region.

Bolivia has a strong economy and low inflation

Bolivia is riding out the financial crisis better than any other regional state.

Yesterday the Bolivian Central Bank (BCB) published its half-year report. You can go look for yourself right here, but what you'll find is an economy that will grow by 4% this year (the first half of 2009 saw 2.1% growth acording to head honcho at the BCB, Gabriel Loza, mainly due to the productive sectors). Loza sez:

"The perspective is that growth in the Bolivian economy will continue, we are talking of rates around 4% and therefore Bolivia will not suffer a recession as in other regional countries."

Bolivia also has an economy with inflation reeled in to just 2.1% (again, thanks largely to wise economic policy) and international currency reserves at all-time highs. Not only that, but Bolivia's exchange rate has, in the words of Loza:

"...has avoided unnecessary exchange volatility. Our exchange rate, which is not fixed but a regimen of administered exchange, has shown a moderated, stable and non-volatile behaviour."

Yet again, this is why you never hear about the Bolivian economy in English language media. It's going far too well, y'see. And all this stability and strength has its roots in one, single policy decision from the government of Evo Morales: Nationalize hydrocarbons. And another smart thing that Evo has done is to leave the financial experts to run the finances and not stick his nose in, as the guy knows what he's good at and what he's not good at.

I'm evermore convinced that Evo scares the hell out of the blue-eyed whiteys more than Hugo could ever manage. He's not changing the rules but doing something far, far more dangerous and subversive: He's beating them at their own game.

That weak Bolivian economy again

(H/T to reader JR)

On this link you'll find the second quarter results of GCC, the Mexican cement company that has the biggest market share in Bolivia. It also does business in the USA and Mexico. So let's check the scoreboard to find out how GCC has been doing.

NET SALES (millions of dollars)
		2Q 09		2Q 08		2Q 09 vs 2Q 08			6M 09		6M 08		6M 09 vs 6M 08
Consolidated		175.6		217.8		-19.4%			306.9		369.6		-17.0%
United States		102.9		123.0		-16.3%			165.3		199.2		-17.0%
Mexico		46.2		75.0		-38.4%			89.5		133.5		-33.0%
Bolivia		26.5		19.8		33.8%			52.1		36.9		41.2%

Yes, that does say what you think it says. In dollar terms in the second quarter, sales are down 16.3% in dollar terms in the United States of America. Sales are down 38.4% in Mexico. But sales are up 33.8% in Bolivia. And if we use the Mexican peso (the currency that GCC reports) sales were up 76%, due to the fact that the Bolivian currency is strong...and that's due to the fact that the whole freakin' economy is whupping the rest of South America's tush bigtime. Here are the reasons for the sales figures as given by GCC:

FINANCIAL RESULTS

Net Sales in the second quarter of 2009 rose 3.6% with respect to the year ago period, totaling $2,358.6 million pesos. This was the result of a 6.4% increase in the United States and 76.0% in Bolivia.

In the United States, sales in pesos rose 6.4% compared to the second quarter of 2008 as a result of a more favorable pricing environment in concrete and the depreciation of the peso against the dollar. There was a decline in the residential and public infrastructure sectors, and a slight improvement in the commercial sector.

In Mexico, sales totaled $616.0 million pesos in the second quarter of 2009, a lower figure than in the same quarter of last year. Public infrastructure showed some strengthening, while activity in the residential and commercial sectors declined. The pricing environment in cement and concrete was more favorable.

GCC’s proportional sales in Bolivia rose 76.0% during the second quarter of 2009 compared to the year ago period. This strong growth was due to greater demand in the DIY and commercial-industrial sectors, as well as the depreciation of the peso against the Bolivian peso.

So the next time somebody starts on about that bad economy in Bolivia, tell 'em to STFU, yeah?