The Secret Ingredient Of Peru's Turnaround

The refusal to give up amid dire political and financial conditions - call it old fashioned Optimism - helped Peruvians turn into a growing economic force.

Traditional Andean dance in Cusco
Traditional Andean dance in Cusco
Carlos Escaffi

LIMA – Everyone has heard about Murphy’s Law about bum luck. Sum it this way: “A slice of toast will always fall onto your expensive carpet — on the buttered side!”

Then there is the one about our life decisions, that the effort devoted to a decision is in inverse proportion to its importance. It’s a law that would explain how the most important decisions in our lives receive less thought than trivial ones. It seems we subject the minutiae of a “trivial” choice to veritable scrutiny relative to the cavalier treatment we give strategic decisions despite their complexity — because of a certainty on our part on the “need” to implement big decisions.

This led to me to wonder, what is the use of worrying about imponderable situations or of adding more plans to what we’re already doing? Why do we need to know about tomorrow when our present is uncertain? What good is thinking ahead or crying for someone who is still alive? Why complain when you are not doing anything to change the situation tormenting you?

Thick skin

My interest is in promoting a state of consciousness that allows us to be happy and enjoy the situations in which we find ourselves. Here’s where I’m going with this: A Gallup poll published last last year showed Peru to be the fifth-happiest country in South America, and third in terms of viewing itself as having a prosperous economy that has improved over the past. There’s a simple explanation for this: optimism.

Optimism has had an increasingly forceful presence in Peru since the 1980s, and it’s the same sort of collective mindset that prevented the country from going bankrupt during that period, especially between 1987 and 1992 when inflation reached the dizzy rate of 7,649.6%. Optimism was a companion of a toughened generation of Peruvians, who at the most critical juncture were forced to sell whatever they could in a “black market revolution” that helped prevent Peru’s outright collapse.

Some readers may also recall how in those years, amid one of the country’s most infamous periods, this optimism even prevailed during the dreadful nights when utter darkness would spread panic on the streets of Lima.

This philosophical doctrine called optimism contributed in great part to the country’s growth and economic prosperity. It ensured recognition of sectors such as dining, tourism and probably more, and helped the Peruvian economy maintain annual 5% growth. It helped drive dynamic trading activity that rose 5.9% by the end of 2013, thanks mainly to growth in car sales and wholesale and retail sales.

All of us are constantly exposed to innumerable situations and dark moments during which we simply fail to see the light. At those times, when we feel dire conditions have taken us hostage, we should aim to react as Peru has over the years — seeking new horizons instead of simply abandoning ship.

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Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum


SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.

It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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