Vladimir Putin, President of Russia, announced -last Wednesday- a “military operation” that involved the invasion of this power in Ukraine. This armed conflict that has resulted in the death of 137 people during the first day of the Russian invasion, will it have an impact on the pockets of Peruvians?
Jorge Carrillo Acostaan expert in personal finance and professor at the Pacífico Business School, identified five specific effects that this war event generates in the family economy and how to deal with it:
1.- AFP funds: The economist explained that war conflicts -in general- cause uncertainty, a situation that affects the performance of the stock markets. “We have seen it (yesterday) in the NY Stock Exchange (Wall Street) that has fallen and has generated a rebound in the local stock market. This situation mainly harms the AFP pension funds, which are going to have a lower return,” detailed.
The AFPs -as recalled- invest in different financial instruments such as government bonds, shares on the Lima Stock Exchange, private company bonds, infrastructure projects, among others. They also invest in international markets.
The BVL ended yesterday’s session with most of its indicators in negative territory, given that the S&P/BVL Peru General Index, the most representative of the Lima market, fell by -1.22%.
2.- Dollar: it would be expected, he added, that the war would push the exchange rate up.
Precisely on the first day of the Russian invasion, the dollar ended the day trading at S/ 3,801 while in the main exchange houses, it was sold at S/ 3,830. In addition, there was demand (for dollars) from companies and AFPs , which made its lowest level yesterday to be S/ 3.78.
So far in 2022, the greenback accumulates a decline of 4.76% compared to the last price of 2021, at S / 3,991.
3.- Exports: if the conflict widens -he projected- the countries (especially rich ones) will have to increase their budget in war weapons, which may cause them to invest less, which will have an impact on Peruvian exports, especially non-traditional ones.
“If this situation will have an impact on the generation of jobs, as it is labor intensive, especially non-traditional exports”.
4.- Imports: the Russia-Ukraine conflict might make imported products more expensive. “We import a lot from China. For fear of a war breaking out, this country may begin to no longer import so much but to produce for themselves, to protect itself. This decision might generate a shortage of important products and -therefore- increase their price.”.
5.- Combustible: Another impact on the pocket of Peruvians is related to the price of oil, which following the war exceeded US$100. This situation will generate a rise in the price of fuel, which would have a direct consequence on the price of food. .
To do? In this sense, he recommended having less exposure to the dollar since it might start to climb. As well as taking conservative positions in terms of investment; streamline travel, as well as eliminate non-essential expenses.
Jorge Luis Ojedaan expert in personal finance and a professor at the EPE Business School at UPC, identified five other impacts of the Russia-Ukraine situation:
1.- Dollar: Like Carrillo, he considered that there would be an increase in the exchange rate.
“Regarding how much it will go up, it will depend on the events that take place in the next few hours and on the responses of other countries. like USA or Europe”.
2.- Stock Markets: He specified that -as a result of the conflict- mixed results might be recorded since some financial assets may be interesting for investors.
“For example, gold which is generally a haven asset and might start to rise, depending on how the conflict unfolds.” On the eve, the price of gold rose more than 3%.
3.- Copper: He added that other minerals such as copper, which Peru produces, can also increase their value, which can be advantageous for the Peruvian economy since it can push to strengthen mining exports.
4.-Business relationship: He recalled that although there is a commercial relationship with Russia, it is not similar to the one that Peru has with the United States and European countries, so that -possibly- foreign trade and commercial relations will not be affected.
What does Peru buy and generally comes from Russia? According to the economistJuan Carlos Odar, among what was imported the most in 2021 is ammonium nitrate without agricultural or mining use (99.9%), fertilizers with nitrates and phosphates (99.5%) and ammonium nitrate for agricultural use (96%). also him we buy wheat (3.9% of total imports).
5.- Wheat: the increase in the price of wheat -which yesterday climbed to its highest level in more than nine years- might be reflected -he mentioned- in the price of bread and other inputs used in the basic family basket.
In that sense, he advised -if there is a surplus- not to invest it in very risky assets in circumstances such as the current one. “Be very cautious until you see how this conflict ends”, he referred.
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