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Peru Economic Boom Time

Written By Christian DeHaemer

Posted January 13, 2010

On December 17, 1996, a small group of heavily armed thugs calling themselves the Tupac Amaru Revolutionary Movement (MRTA) blew a hole in a garden wall and stormed a diplomatic reception at the Japanese Embassy in Lima, Peru. The group seized over 400 people.

The Peruvian Stock Exchange plummeted and was forced to close three hours early.

They didn’t know it at the time… but this episode would signal the end to the Shining Path (Sendero Luminoso) guerrilla war, the authoritarian regime of President Alberto Kenya Fujimori, and mark the birth of the Peruvian struggle to become a modern capitalist democracy.

Three Prongs of Death

One hundred and twenty-six days after the hostage crisis began, President Fujimori gave the Peruvian Armed Forces the go-ahead to attack the fortified embassy. Commandos attacked in three simultaneous moves: from tunnels, up ladders over walls, and through a hole caused by explosives in a wall.

In a piece of magnificent luck or execution, the commandos managed to save all but one of the hostages and took only two casualties. Furthermore, when the dust settled and the fires were put out, all of the Tupac Amaru Revolutionaries were dead.

At the time, the Peruvians and much of the world though it was a great success. President Fujimori ran rhetorical victory laps for the international media.

Some time later, the news broke that commandos had greeted the surrendering Tupac Amaru members with a spray of bullets to the back of the head.

This, plus other allegations of bribes and corruption, forced the President to flee to Japan.

Just recently, back in Peru, he was sentenced to 25 years for using death squads to murder leaders of the notorious Shining Path revolutionaries.

Fast-Forward 14 Years

Many things have changed in Peru in the last 14 years. In fact, it has been one of the best performing markets of the last decade.

If you had bought the Peru Lima General Market in July of 2000 for 1,322, you could have sold in July of 2007 for 24,222 — a gain of 1,732%.

peru stock market chart

In contrast, if you bought the S&P500 in 2000 at 1,500, you’d be down about 29%. It is now trading at 1,136.

Peru on the Launch Pad

Riding the wave of commodities and a peaceful representative government, Peru had one of the world’s fastest growth rates last year at 9.8%.

The country has vast reserves of minerals. It is the world’s largest producer of silver; third largest of copper, zinc and tin. It is the fifth largest producer of gold.

Peru is also blessed in that it sits at a crossroad between two of the world’s fastest growing economies: China and Brazil.

There are many people who believe a new highway which is being built across the Andes will add more than 1% to GDP. It will connect the enormous appetite of China with Brazil’s overflowing agriculture centers, and replace the Panama Canal as the main passage for trade between those countries.

Couple that fact with new oil and gas projects, and you have a country on the verge of a surge forward.

Out of Recession

Like the rest of the world, Peru wasn’t immune from the global recession in 2008. But the country has been one of the first to recover.

Bloomberg suggests that the country came out of recession in the last quarter of 2009: Exports jumped 23.8% in November; imports climbed 21%.

Peru is one of few countries that have managed to reduce unemployment rate. A recent report by the International Labor Organization states that unemployment in Peru fell from 8.6% in 2008 to 8.5% in the third quarter of 2009.

The currency, the sol, is also in an upswing. It advanced 8.5% last year and secured its place as the sixth best performing currency against the dollar among 26 emerging markets, tracked by Bloomberg.

Another leading indicator — bank loans — hit a record high of $19.6 billion in November. Mortgage loans and consumer credit were also hitting new highs.

The Peruvian economy and political structure have come a long way in the past decade… to the point where the country is expanding into green energy resources.

Right now my associate, famed global investor and linguist Sam Hopkins, is in Lima. He is meeting with hotel execs and wind energy association heads this week to bring you from-the-ground information on this emerging market.

He commented in Monday’s Wealth Daily:

"The truth is that Peru’s location is incredible in terms of both international and internal economics. Peru has a system of microclimates that can jar a person’s system with precipitous drops in temperature and altitude, while benefiting businesses that want a variety of natural resources within easy reach."

I don’t know what Sam will uncover. But I do know that Peru has the wind at its back and has left the terrors of its past behind it.

There is a big boom that’s just getting started, and Sam Hopkins is the guy to ferret out the winners.

Find out how you can profit from this crossroad opportunity.


Christian DeHaemer

Editor, Wealth Daily