Mercifully, at the time of publication at least, no-one in Peru had been diagnosed with the coronavirus. But, as the first case in Latin America was announced in Brazil last week, it seemed just a matter of time before the pandemic hits.
But the virus has already affected the country in other ways. The downturn in the Chinese economy has had an impact on the price of minerals, notably copper. The economies most exposed to the Chinese downturn are Chile and Peru, respectively the world’s number one and two producers of copper.
Other Latin American countries will also be hit by declining demand in China for agricultural commodities, especially Argentina and Brazil.
Goldman Sachs calculates that a 10% decline in the copper price will knock a full percentage point off Peru’s growth rate. Of course, if the situation in China normalises swiftly, the impact will be less severe.
According to figures from the Central Bank, copper prices at the first week of February were already nearly 10% below their rate twelve months previously, and over 6% down on the end of last year.
The exchange rate of the sol for the dollar has taken a dive over February, starting the month at US$1=3.31 and finishing it at US$3.46.
Meanwhile, a decline in the copper price underlines the importance for Peru of diversifying its economy both in terms of production and markets.
So far as copper is concerned, a report in La República last week underlined the decreasing proportion of the metal refined locally. The only smelter in operation at the moment is Southern Peru’s plant at Ilo. All the rest of Peru’s production is exported in bulk and refined in purchasing countries. Multinational mining companies, such as the Chinese, prefer to add value in the countries of destination, not those that supply mineral.