As a Boom Slows, Peru Grows Uneasy – by William Neuman (New York Times – August 19, 2013)

LIMA, Peru — From his office window, Henrik Kristensen, the chief executive of the company that runs Peru’s main port, can still look out at rows of newly arrived, shiny Kia automobiles from South Korea and shipping containers stacked four high, full of imported items like television sets and brand-name clothing bound for the growing number of malls that serve this country’s burgeoning middle class.

“This is Peru,” he said. “When you go to the shopping malls they’re full of people, they’re full. That’s a good indicator that people are really spending money.”

Peru’s economy grew an average of 6.4 percent a year from 2002-12 after adjusting for inflation, according to government figures, a remarkable period of sustained expansion that has made it one of the world’s star economies.

But suddenly growth has slowed here, and just beyond the view from Mr. Kristensen’s window, under Lima’s perpetually gray winter sky, the reason becomes clear.

At Dock 5B, ships are loaded with Peru’s mining riches, including copper ore, lead and zinc — the raw materials that fueled the Peruvian boom with their rising prices in recent years. But in the first six months of this year, mineral shipments through the port were down 12 percent by weight, according to APM Terminals, Mr. Kristensen’s company, which operates the facility for the Peruvian government.

The decrease resulted from a drop in demand in a struggling world economy and a slowdown in China, one of Peru’s top trading partners. Those factors have also caused mineral prices to plummet, sucking the wind from the sails of Peru’s economy.

This bust amid the boom has given vent to a national angst, with hand-wringing over the economy a mainstay of newspaper front pages and television news programs. Headlines bemoan soaring trade imbalances as the value of mining and other exports, including apparel and agricultural products, plunges at the same time imports are surging.

Miguel Castilla, the economy and finance minister, said he expected the economy to grow between 5.5 percent and 6 percent this year. While that was down from earlier predictions, it would maintain Peru’s place as one of the fastest-growing economies in Latin America. Even some of the most skeptical economists predict Peru’s economy will grow by nearly 5 percent this year, a rate that would be celebrated as a ripping success in many countries.

But in Peru, such predictions are being treated as something close to disaster.

“Growing for a decade at 6 percent, you get used to it,” said Gustavo Yamada, the dean of economics at the University of the Pacific in Lima. Mr. Yamada said he expected growth in Peru to settle into a range of about 4 percent to 5 percent in coming years.

“That creates a scenario,” he said, “of, ‘Hey, wait a minute, we were going to be the next Inca tiger, what a disappointment.’ ”

Polls show that consumer confidence has slipped this year, and a Peru Central Bank survey in June showed that investor confidence was at its lowest point in almost two years.

“We have become used to a sustained period of growth, and we have forgotten about cycles,” said Mr. Castilla, the economic minister.

Just as outside factors, like rising metals prices, fueled Peru’s boom, similar factors, like the slow recovery in the United States, Europe’s economic woes and China’s slowdown, are now causing it to cool down, he said.

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