Home Commodities Drastic increases in commodity prices pummel Peruvian working class

Drastic increases in commodity prices pummel Peruvian working class

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The sharp increases in the prices of food, fertilizers, fuel, and public transportation, combined with the uncertainty of the exchange rate and unemployment remaining high, are having a devastating effect on Peru’s urban and rural working class, on students, and on the poor more generally.

Long line of people waiting to get into bank in Lima [Photo by Victor Idrogo/World Bank]

The higher cost of urea fertilizer, a result of the war in Ukraine, increases the cost of food from farms, and a resulting fall in production drives up prices in retail markets. It is estimated that, if the war in Ukraine continues, the price of fertilizer could increase by 40 percent by the end of 2023.

The Ukraine war is also affecting the price of energy. In Repsol gas stations, the main fuel supplier in Peru, the pre-pandemic price of 90 octane gasoline on December 31, 2018, was 4.85 nuevo (new) soles per gallon. On September 4 this year, it was quoted at 19.95, an increase of 307 percent, equivalent to an astonishing 45.4 percent annually.

As a result of gasoline price hikes, public transportation fares in Lima, the capital, rose on July 16 from 2.50 to 3.50 nuevo soles, a 40 percent increase.

Last month the private public transportation companies in Arequipa, the second most populous city in Peru, which transport 800,000 passengers, announced that they would raise the base fare from one sol to 1.40 soles, an increase of 40 percent from one day to the next.

The daily Peru21 reported that in Arequipa an average family of four spends a minimum of 168 soles per month on public transportation. With the new increase it would rise to 235 soles, 22 percent of the minimum monthly living wage (SMV) of 1,025 soles (US$265.27).

To get an idea of the true dimensions of the precarious economic situation Peruvian workers face, for every dollar that a worker in New York state earning minimum wage receives, his Peruvian counterpart is paid only 11.5 cents.

Though in August there was a small decrease from July, the inflation rate as to consumer prices remained high. The monthly report in August of the Central Reserve Bank of Peru (BCRP) placed inflation in the previous 12 months at 8.41 percent, well above the bank’s 1 percent to 3 percent target. This was slightly lower than the 8.5 percent rate in the U.S., and the 10.07 percent rate in Brazil, the Latin American country with the highest rate.

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