To answer that question and how it relates to China, consider Liu Bin. Liu, a 32-year-old from Beijing, sells Shenzhen-made combine harvesters and power tillers in the Peruvian countryside for around US$8,000 a pop. An ex-PLA soldier, he speaks softly behind wire-frame glasses and chain smokes 好日子 cigarettes from the cartons he brought with him for his trip to Peru. He showed me glossy brochures of Shenzhen Shenlang Enterprise Co, Ltd’s product line and told me sales have never been better in Peru, despite the global crisis.

“In the countryside, many people don’t even know there is a financial crisis going on. They’re just concerned with their own daily life,” he told me. Peru is the company’s biggest market in South America.

I thought about Liu reading through the wave of upbeat predictions on Peru’s economy that have surfaced recently. First, from a senior World Bank official recently quoted by Reuters:

“I think the one (Latin American economy) that will escape recession is Peru,” said Marcelo Giugale, the World Bank’s director for Poverty Reduction and Economic Management in Latin America and the Caribbean.

For other countries across the region, including Brazil and Chile, Giugale said growth rates were likely to be “so close to zero that whether it’s positive or negative will be touch and go.”

A Morgan Stanley report released last week said Peru’s economy, while by no means thriving, would still best other economies in the region. Via Bloomberg:

Peru’s economy probably will be the only one of the seven economies tracked by Morgan Stanley in the region to expand. It may grow 0.9 percent, the bank said.

Finally, The Economist has gone ahead and labeled Peru’s economy outright “Recession Proof.”

Peru’s growth has exceeded that of most other countries in the region during the last seven years, driven by high global minerals prices and expanding output from the natural-resources sector, including from the huge Camisea natural-gas field. In 2008 only Uruguay’s spectacular rate of growth of 11% eclipsed that of Peru. Yet all economies have been slowing since the latter months of last year in response to deteriorating external conditions, a tightening of credit, and more cautious consumers and investors. Many will slip into recession this year. Peru will not be one of them.

So, why is everyone so bullish on Peru? Prices and demand for its minerals – 80% of Peru’s exports – have fallen off precipitously in the last year. Domestic consumption is down; unemployment up. What gives? The Economist offers an explanation:

Nonetheless, with sound public finances and a still-substantial cushion of international reserves, the Peruvian authorities are in a strong position to provide a significant counter-cyclical boost to the sharply decelerating economy. An aggressive fiscal stimulus plan will cushion the blow of an expected contraction of private investment and slowing private demand growth. Most of the government spending will go to infrastructure projects, the building of low-cost housing and other social programmes. Also, the central bank has been easing monetary policy, and began a cycle of interest-rate cuts in February.

Sound familiar to another world economy readers of this blog may be familiar with? Indeed, the bedrock of Beijing’s plan to achieve its all-important 8% GDP growth this year is largely composed of similar strategies for dealing with the crisis (ie. infrastructure and social program spending, monetary lever-pulling, etc). Both countries came into this year with a good amount of money in their reserve arsenals following years of open foreign investment policies and booming export growth. Both countries have been GDP all-stars of their respective regions; so much so that, a mere one year ago, slowing galloping inflation was the first priority of both Beijing and Lima.

China, as Peru’s second-largest buyer of minerals (the backbone of Peru’s economy), will play a big part in how badly the South American country gets hit by the crisis. Though prices of copper and iron have fallen, as has the current demand for them in China, this has also seemed to whet the appetite of Chinese firms looking for overseas investments. Last month, for instance, while most mining companies around the world were scaling back their investment projects and cutting costs, Chinese mining company Shougang Hierro Peru announced a US$1 billion expansion plan for their iron-ore procession plant in southern Peru.

I’m hesitant to label any country’s economy “recession proof” in the current climate, but China’s undiminished interest in Peru – from selling tractors to mining copper – can only bode well for the Andean country’s chances this year.

Image: bitquill.net