While Argentina announced its offer, Peru obtained funds at a low rate

So close and yet so far. Although history and geography can unite Argentina and Peru, today they are on the opposite lines in terms of their economic prospects.

A clear indicator of this was seen this Thursday, when both countries made significant financial moves, but from different positions and with very different objectives..

In Argentina, the Economy Minister Martín Guzmán announced the guidelines for the restructuring of the large dollar debt. The proposal includes a withdrawal of US $ 3.6 billion in capital stock, equivalent to 5.4%, and US $ 37.9 billion in interest, which reaches 62%.

And it came nuanced with impact phrases such as “today, Argentina cannot pay anything” (Guzmán) and the recognition that the national state is “in a kind of virtual default“(President Alberto Fernández).

In counterpart, Peru successfully issued bonds for $ 3 billion dollars in the international market. And the Minister of Economy and Finance, María Antonieta Alva Luperdi, stressed that it did so at the lowest rate in the country’s history.

The resources will be used, supposedly, not to plug the holes of a crisis economy, but to face the challenges posed by the coronavirus today.

“The Ministry of Economy and Finance carried out a successful bond issue in international markets, obtaining financing at historical minimum rates, in order to cover the country’s spending needs,” Alva Luperdi announced on his Twitter account.

And he detailed that the operation allowed raising US $ 3,000 million through the issuance of two global bonds. The 2026 Global Bond at a rate of 2.39%, and the 2031 Global Bond at a rate of 2.78%.

“These two new references represent the lowest historical rates obtained by the Republic of Peru. These minimum levels were possible thanks to a record high demand from global investors that amounted to US $ 25,000 million,” explained the Peruvian minister.

“It is important to emphasize that in recent weeks, the international risk rating agencies Fitch and Standard & Poor’s have ratified Peru’s credit rating and its economic outlook, being the only economy in the region that has maintained its credit rating with a stable outlook in a context of international crisis and downward revisions in the region, “explained Alva Luperdi.

The approval of the risk rating agencies is another point of contrast with the situation in Argentina. This same Friday, after Guzmán’s announcements, Fitch lowered the country’s note to C, because he considers the possibility of default to be imminent.

Economies hit by the coronavirus

In its World Economic Outlook report, the Fund projected for Argentina a drop of 5.7% this year and estimated that unemployment will reach 10.9% in the country. Meanwhile, the Peruvian economy will have a decline of 4.5%, with an unemployment rate of 5.2%.

Based on IMF projections, South America -measured as a region- will register an average drop of 5% this year.

By country, the projection indicates that Argentina will decrease 5.7%; Brazil, -5.3%; Chile, -4.5%; Peru, -4.5%; Uruguay, -3%; and Paraguay, -1%.

The Fund warned of the dramatic context that the world is experiencing due to the pandemic and said that the world economy will fall 3% this year, more than in the “Great Depression” of the 1930s, and warned that 170 countries will suffer a fall in your per capita income.

Peru was on the rise

Peru’s GDP grew 3.83% year-on-year in February over the same month of 2019, one month before the coronavirus crisis erupted, the government reported on Wednesday.

“In the month of February 2020 all productive sectors experience growth,” said the National Institute of Statistics and Informatics (INEI).

Peruvian GDP in the first two months of 2020 increased 3.40% and in the annualized period March 2019-February 2020 accumulated growth of 2.38%.

The February figures placed 127 the months of constant positive evolution of the economy, highlighted the official institution.

Fishing, manufacturing, construction and mining were the main engines of growth.

The Peruvian economy is preparing to register a significant decrease in its production as of March, as a consequence of the global crisis due to the pandemic of the new coronavirus..

The result of March will only be released on May 16.

Peru has been in a state of emergency since March 16, the date on which almost all companies except the essential ones were paralyzed.

The Peruvian economy had grown 2.16% in 2019, its lowest rate in a decade, affected by declines in fishing and mining activities and trade tensions between China and the United States, according to the government.

Before COVID-19 Peru projected growth of 4.0% for 2020.

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