Consequences of the Financial Crisis on the in Peru´S Economy

Topics: Economics, Investment, Economy Pages: 17 (5649 words) Published: December 28, 2009
Consequences of the financial crisis on the in Peru´s Economy Claudia H.Gonzales School of Management, Wuhan University of Technology, Wuhan, P.R.China, 430070

Peru has shown signs of a slowdown in employment. This situation has increased the number of unemployment rate in Perú. In this scenario it is possible that employment opportunities to grow this 2009? This paper try to show how the crisis can affect the economy and what will be the consequences in the future.

Keywords financial crisis, export, products, slowdown, employment 1 Introduction In the year 2008 the world began to feel the crippling effects of the financial crisis that began in the United States in the summer of 2007. In the face of this crisis there were unusually aggressive actions by governments and central banks to support financial markets, financial institutions and their economies. But despite these efforts the outlook for the global economic growth is the worst since the 1930s. The economy of the United States is at the center of this global financial disaster. The American housing market meltdown, the credit crunch, the collapse of the “shadow banking sector,” as reflected in derivatives trading, hedge funds and equity markets, have already triggered a year long American recession and a loss of 2.6 million payroll jobs in 2008. Central banks around the world, including the U.S. Federal Reserve, the Bank of Canada, the European Central Bank (ECB) and the Bank of England have sharply reduced interest rates to support their economies, as most are clearly in recession. In the United States, its central bank the Federal Reserve cut its target for overnight interest rates to a range of 0% to 0.25% on December 15th. Japan’s central bank interest rate is also effectively zero. The European Central Bank rate is at 2% and the Bank of England has a 1.5% policy rate. The Bank of Canada lowered its overnight policy rate to 1% on January 20th. At 1%, Canada’s central bank rate is only slightly higher than the effective zero rates in the U.S. and Japan. But even with these low or zero central bank interest rates virtually everywhere, private interest rates are still quite high and credit availability is still too tight. There is clear evidence that very low interest rates are not working to expand economic activity. In the current recessionary environment, banks are obviously worried about lending to each other, and of course, are worried about lending to consumers and firms. Bankers also worry that recessions are a bad time to be pushing loans. Interest rates that count, such as, inter-bank lending rates, mortgage lending rates, bank commercial lending rates, are all unusually high especially considering that inflation is also very close to zero. Even though prime bank lending rates are low, the conditions for loans at those rates have increased. Thus, loan rates look low but banks are lending at much higher rates above their nominal prime rates.

2 . The history of the Peru´s economy
Through the nineteenth century and into the mid-twentieth century, the great majority of the Peruvian


population depended on agriculture and lived in the countryside. By 1876 Lima was the only Peruvian city with over 100,000 people--only 4 percent of the population. Much of the impetus for economic growth came from primary exports. In common with the rest of Latin America up to the 1930s, Peru maintained an open economic system with little government intervention and few restrictions on either imports or foreign investment. Such investment became highly important in the twentieth century, especially in the extraction of raw materials for export. For many Latin American countries, the impact of falling export prices and curtailed external credit in the Great Depression of the 1930s led to fundamental changes in economic policies. Many governments began to raise protection against imports in order to stimulate domestic industry and to take more active...

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