Peru s performance begins to perk up

Peru: Peru s performance begins to perk up

Castro, Victor

The Asian, Russian and Brazilian financial crises resulted in a deep recession from 1998-1999 in Peru. The government’s social expenditure plan for 1999, aimed at rejuvenating the economy, was not carried out due to changes in government policies. The main reason was the need to compromise with IMF (International Monetary Fund) economic parameters.

But from the beginning of the fourth quarter last year; the fishing and mining industries began to increase production and export levels. On top of that, some paper mills signed contracts for regular monthly exports of paper grades, in particular medium papers.

Peru’s GDP growth rate reached 3% in 1999, despite forecasts of a 6% increase. Inflation was 3:9%, the lowest level since 1961. This was mainly due to low demand since unemployment continues to be high.

For this year, the government has signed an extension agreement with the IMF to boost economic growth by 4%, achieve an inflation rate of 3.5% and devaluation levels of 6%. Domestic demand for paper goods is still only moderate, though. Many mills are not making profits and have been forced to close down. The main event last year was Kimberly-Clark’s (K-C) acquisition of a 55% stake in Papelera Suizo Peruana, the country’s largest tissue producer. K-C has become the new tissue leader in Peru. The #2 producer, Papelera Paracas, changed hands twice. The first buyer was Alianza Commercial and more recently, Tecnologia Papelera took over the mill. This company is again looking for a buyer for the mill, which is shut down. Papelera EI Cisne is also closed, leaving the tissue market open to K-C, Protisa (owned by CMPC of Chile), and MPC. Quimpac is yet to branch out into tissue. Manufactura de Papeles y Cartones (MPC Trupal) acquired 66% of Empresa Agraria Chiquitoy, a sugar cane field of 3,500 ha. The move will allow the company to secure bagasse fiber for its Trupal paper and board mill, which is the largest unit in Peru.

The privatized Quimpac and MPC Trupal have started to carry out improvements at their mills, but the question remains whether the companies will be able to raise the working capital and investment funds that are needed.

Victor Castro

Population: 25,200,000.

Total land area (km2): 1,285,216.

Total forest (km2): 486,959.

Commercial forest (km2): 233,555.

Per capita consumption of P&B (kg): 13.5.

Number of P&B mills: 17.

Number of pulp mills: 5.

Paper & board capacity: 327,000 tons.

Pulp capacity: 255,000 tons:

Capital investment in pulp and paper industry in 1999: $1 million.

Copyright Miller Freeman Inc. Jul 2000

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