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June 07, 2011

Peru's stock market jitters in perspective


On election day, former army officer Ollanta Humala invited the media to watch him eat breakfast. Local TV tried to browbeat him into downing some of the cuy, or guinea-pig, that sits in the bottom-right corner of the picture. He refused. 

Just hours after he narrowly won Sunday's race, analysts and investors were again trying to browbeat him - this time into naming his economic cabinet.

The pressure only increased on Monday, when the local market was open just one minute and twenty-five seconds before plummeting stocks triggered an automatic halt to trading. By the end of the day, the market had plunged almost 13 percent - the largest single-day drop in Peru's history. 

Like many news organizations, I got caught up in the dip because it seemed to capture the mood of investors - particularly those in the mining sector. But a question from a former colleague had me wondering if Peru's market is a good indicator of anything. 

Peru's stock market has a capitalization of $122 million - or about 7 percent of the nation's GDP. By comparison, the capitalization of the New York Stock Exchange is at about 114 percent of U.S. GDP. In Mexico, the stock market is 38 percent of GDP.

In short, Peru's stock market is tiny. Still, it's a barometer for how investors feel and the first signal of what might happen to foreign direct investment in this commodity-rich country.

On Tuesday, Peru's main index was up 7 percent.

Does it matter? I'm still not sure. 

But, so far, Humala's keeping his mouth shut.


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Thank you so much for this! I haven't been this moved by a blog for a long time!I am waiting for your next post too.
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jim wyss

Inside South America is written by Jim Wyss, the South America bureau chief for the Miami Herald and McClatchy Newspapers.

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