Peruvian sol: why is it the most stable currency in Latin America?

In recent years, the Peruvian sol has proven to be the most stable currency compared to others in Latin America. While devaluations and fluctuations are recorded in the rest of the countries in the region, the sol maintains an appreciation against the dollar and a strengthening trend. What are the reasons for your good moment and what projections do you have? To answer these questions, we spoke with two specialists about it.

Peruvian sol: why does it remain stable?

The impacts of the COVID-19 crisis have caused negative economic events, such as the resurgence of inflation that affects various Latin American countries. In response, interest rates have increased regionally and globally to control rising prices and some currencies in the region experienced strong downward pressure. However, the Peruvian sol has only suffered a slight devaluation and remains the most stable currency.

For the economist Omar Azañedo, the good management of monetary policy carried out by the Central Reserve Bank, in the midst of the political crisis and the little economic growth that the country has, are the main reasons for maintaining the prestige of the Nuevo Sol in the international market.

This opinion is shared by Jorge Carrillo, a finance expert and professor at the Pacífico Business School, who also maintained that other factors are controlling inflation and preventing the exchange rate from having sudden movements.

“The architect is the Central Reserve Bank, which under its monetary policy has made the Nuevo Sol the most stable in the region. We should take advantage of this situation by saving in Soles, having our debts in this same currency and trusting its prestige”he specified for La República.

Peruvian sun: what is its trend for next year?

If we maintain an independent BCRP, a responsible monetary policy that moves towards moderate inflation and a small fiscal deficit is achieved, the sol will continue to be a stable currency, according to Omar Azañedo.

“Our exchange rate has been declining, but it has not yet reached pre-pandemic levels. We need a strong sun to give the message to investors that they can trust our financial system and an appropriate monetary policy. If this happens, companies can generate sales, profits and profits that will not be so far from the dollar”he explained to this newspaper.

Finally, Jorge Carrillo pointed out that there are other countries, such as Bolivia and Argentina, where – as there are restrictions on acquiring dollars – the sun is presented as a stable alternative.

“Bolivia values ​​the sun a lot and there is a project in Congress to save in soles, while in Argentina there is a shortage of dollars. So, citizens end up buying soles and saving that money. On the other hand, if inflation is controlled and not there is an abrupt exchange rate, the sun will remain a strong currency,” he asserted.

Exchange rate: what are the projections towards 2024?

Mario Guerrero, from the Department of Economic Studies at Scotiabank, told the Andina agency that in recent years there has been unusual volatility in the exchange rate due to internal and external issues such as the political crisis, the strengthening of the dollar due to the uncertainty caused by the Russia’s invasion of Ukraine and expectations regarding interest rate increases due to higher global inflation in 2022.

“What we expect for 2024 is that the evolution of the Peruvian currency reflects the balance of external fundamentals, copper prices in particular, the international trend of the dollar, the differential between interest rates in dollars and soles, and the will of the BCR. to avoid a lot of volatility”he added.

Let us remember that the Minister of Economy and Finance (MEF), Alex Contreras, declared to the media, during his participation in Sustainable Peru, that fiscal sustainability and good monetary management of the BCR make people trust in the value of the sun Peruvian and that guarantees its stability.

“Peru has the most stable currency in the region. Behind that number, which may even be anecdotal to the exchange rate, are the solid macroeconomic fundamentals that support prudent and responsible management. In addition, around 40% of our debt “It is in soles, which makes not only citizens of the border trust, but also international investors who continue to bet on the country when they buy bonds in sole currencies, which reflects confidence in the value of the currency, which will be maintained.” , he said.