The best time to invest in Peru with a new ETF

The best time to invest in Peru with a new ETF July 27, 2009 A few days ago we received graciously from one of our readers from Peru, an opinion survey conducted by the University of Lima between 18 and 19 July, the population Lima and Callao Region, with very interesting results that allow a snapshot of the situation in Peru today. The data did not surprise me too revealing when I noticed the drop in the discharge of Alan García as president. The discharge fell sharply from 38.3% to 31.9%. Probably social conflicts were combined with the deterioration of the economy resulting from the international financial crisis and led to tremendous drop in the presidential image. Often in my articles acknowledge the many successes of Alan García management that have resulted in an economy that has managed to grow strongly in recent years has begun to show evidence of economic development through sound policies in reference to macroeconomic stability and predictability of rules. However, the social debt is the main outstanding account of current management.

Just these two elements are seen clearly when the pollsters set out the responses on the assessment of the management of Alan García, according to social strata to which the respondent belongs to it. What we see is that people belonging to higher social strata in a 51.1% approve of Alan Garcia, while at the other extreme, the poorest, only 21.8% approve. One thing that struck me is related to the management of Luis Carranza as finance minister. Despite the economic deterioration seen in recent months due to the crisis, his approval rating has grown from a very significant way now reaching 43.6% of respondents. The range of approval as social strata ranging from 64.9% for the higher income stratum to 34.5% for the lowest social stratum. The message of these two responses clearly shows that there is questioning the government from the political. The government has failed to adequately address issues of high sensitivity for the population and has resulted in strong resistance that have reached the extreme events in the month of June.

The social conflicts of recent times have also been reflected in the vision of the respondents. Only 21.3% of respondents see the current political situation as stable. 57.3% less stable and sees a 21.2% far from stable. The level of instability of the political situation perceived by the respondents increases as is lowered into the social strata, reaching only 9.1% of low-income population is the political situation as stable. As for the outlook on the social situation, 34.5% believe that the political situation will be worse. In July 2008, 34.7% of respondents anticipate a deterioration of the political situation at the current rate does not represent a worsening of the negative view. The social unrest of the population has been felt with increasing force. Most striking is that the protests while increasing the economic situation is improving (though he has made in recent months as a result of the international financial crisis). While it has increased the level of inequality is also true that it has reduced the poverty level. In relation to the above, the survey shows that 58.3% of respondents felt that there was political manipulation of social protest and that they have not been spontaneous.

Of course, if we look at the survey strata, the poorest, most likely to have participated in these protests, 50% consider that they have been spontaneous, while at the other end of the social strata, the wealthiest think that 72.3% responded to political manipulation. The conclusion on the social protests of great importance when inferring about the level of social stability in Peru (key to the development of investment) is that the result is a bit ambiguous because on one hand, one may think the response of the upper social strata respond to citizens better informed and aware of political issues, so they are better able to identify whether there has been manipulation or not. But on the other hand, in the lower social strata are those who have participated in these protests and they are just more than anyone who is able to respond on the same motivation. Going to the perception of the situation of the economy, only 33.6% of respondents see the current situation as bad (in 2005, 57.9% felt bad the situation in 2003 did 62.3%) .

The poorest consider the current situation as poor or very poor at 34.4%, so that it can be inferred that there has been a significant improvement in the perception of the economic situation despite the increased discontent manifested. Even an improvement was detected in the optimism of respondents who only 27.9% believed that within a year the economic situation is worse, when in July 2008 36.1% of respondents had such a negative view. What the survey reveals is that the crisis has impacted unevenly on family finances. The richest layer of population only 19.1% had seen worsening economic situation, while at the other end, 45.5% family see the current situation worse than it was a year ago. These results are logical for the disparate impact of the crisis that hit most often lower income segments since they have less secure sources and informal labor. I think this survey conducted by the University of Lima reinforces several concepts about the current management of the government of Alan Garcia. It is not the matter of economic policy what people questioned but the lack of political tact and poor listening poorest population sectors.

One way or another, the general public recognizes the situation improved product of the current management. Probably, if the government decided to make a greater effort to improve the situation of the poor, the benefits far outweigh achieve the economic costs would demand them. Social calm bring this decision, would have benefits in terms of improvement in the economic context for investment, which would add to political advantage (for a presidential image enhancement) and also represent a stimulus for domestic consumption (given consume a high proportion of the lower segments). Moreover, Peru's fiscal capacity to increase allocations for the benefit of the poor. Will these elements into account Alan Garcia? It is a good time to invest in Peru through a new ETF launched recently, Peru ETF (NYSE: UPR) Horacio Pozzo When the financial market is very upset, it is best to play it safe, experts say. And in the Latin American market are reliable and cost effective options. When China wakes, you will need to go shopping. Paola Pecora and his team of analysts cuentab you where here.