LIMA, Jan 30 (Reuters) - Peru's sol has emerged as the most stable currency in Latin America, despite political upheaval that has seen five presidents in as many years and deadly protests.
The rationale behind this stability lies in the substantial accumulation of dollars by Peru, a country rich in copper, which has generated significant trade surpluses reaching a record $24 billion last year.
This accumulation has bolstered Peru's foreign currency reserves to approximately $83 billion - equivalent to around 30% of the nation's GDP - fostering positive investor sentiment and providing ample resources for the government to support the sol.
According to Economy Minister Jose Arista, With such a significant supply of dollars in circulation, the exchange rate remains stable. No other country in the region boasts a similar situation.
Data indicates only a slight depreciation of the sol against the dollar in the past year and a 5.5% decrease since the beginning of the millennium, making it the most resilient currency in the region. The current exchange rate stands at 3.72 soles to the U.S. dollar.
Arista predicted, The exchange rate will fluctuate between 3.72 and 3.78 soles in the near future.
Over the last decade, Peru has consistently increased its positive trade balance, which has tripled over the last five years due to robust mineral exports and elevated global metal prices.
Furthermore, Peru maintains a modest annual inflation rate of around 2%, the lowest in Latin America. The benchmark interest rate is set at 4.75%, ranking among the region's lowest rates.
Arista emphasized, The sol has displayed the least volatility among Latin American currencies for the past two decades. This stability instills confidence in potential investors from neighboring nations.
Despite a slight depreciation of just over 1% against the dollar at the end of last year, the sol outperformed its regional counterparts amid a strong global dollar.
Arista highlighted that the sol's stability has prompted its adoption as a preferred currency in some neighboring South American countries. In countries like Bolivia, where dollar reserves are scarce, the sol is embraced as a dependable currency, even earning the nickname "scholar."
Arista noted, Given the fluctuating exchange rates and uncertainties in their local economies, Bolivians seek solace in a more stable currency like the Peruvian sol. Similarly, in Brazil, individuals near the Peruvian border also favor its use.