The current account balance is composed of four factors: trade balance, services, factor income, and current transfers. Specifically, higher Peruvian exports, which achieved a record US$74.7 billion in 2024, drove a trade surplus.
Banco de Credito del Peru's (BCP) Economic Studies Department Manager Carlos Prieto explained that the U.S. dollar exchange rate had been quoted below S/3.70 in nominal terms in recent days, a level lower than the S/3.77 at which 2024 closed.
Similarly, he highlighted that, in real terms and considering the effect of inflation, Peru's real multilateral exchange rate is at its most appreciated level in the last 25 years.
What does the real multilateral exchange rate mean? Besides the nominal exchange rate, which in recent days has ranged between S/3.66 and S/3.67 per U.S. dollar, the inflation levels of Peru's main trading partners have been taken into account as well.
"In Peru, this indicator is among the lowest, not only among emerging countries but also among developed nations," Prieto explained.
The BCP officer pointed out that China, one of Peru's main trading partners, is facing a risk of deflation because inflation in that country is already too low.
"In addition to inflation, where Peru once again stands out in global comparisons, it is also well known that our exchange rate volatility is lower than that of our main trading partners," Prieto emphasized.
"Last year, significant currency appreciations were observed, particularly in Chile, Brazil, and Colombia. This combination of factors, of our lower depreciation during periods of high volatility and our lower inflation, has led to our real multilateral exchange rate being near its most appreciated levels in the last 25 years," he explained.
Prieto also mentioned that, with the gold price nearing US$3,000 per ounce and copper prices remaining above US$4 per pound, Peru recorded another trade surplus record of approximately US$24 billion, as well as a current account surplus of just over two percentage points of GDP, in contrast to deficits in neighboring countries.
"Generally, when external accounts are this strong, the exchange rate appreciates, including both the nominal and real exchange rates. This partly explains why we are seeing an exchange rate below S/3.70," he explained.
The manager pointed out that another seasonal transitory factor was adding downward pressure on the U.S. dollar in Peru: the corporate income tax regularization period in March.
"Last year, the Peruvian economy and mining companies benefited from favorable export price quotes. Likely, in the coming weeks, there will be a significant and favorable income tax regularization, which will prompt economic agents, especially exporting companies, to sell U.S. dollars in exchange for soles and use those soles to pay the income tax regularization," he said.
The officer explained that this greater supply of U.S. dollars led to an appreciation of the sol, and he did not rule out the possibility of the exchange rate appreciating further, possibly reaching between S/3.60 and S/3.65, though this would be a temporary effect.
"After this transitory phase, we maintain our projection for the exchange rate to close this year at S/3.75, a level very similar to the end of 2024," he stated.
Moreover, Prieto noted that the exchange rate's closing level for this year would also depend on local factors, such as the political situation, which could be influenced by the polling trends leading up to the April 2026 general elections.
"Our baseline scenario is to maintain an exchange rate projection around S/3.75, which could become slightly more depreciated depending on the electoral polls, but that remains uncertain," he said.
(END) DOP/MDV/CNA/JMP/MVB