What is the PEN (Peruvian Sol)
PEN (Peruvian Sol) is the national currency of Peru, which is subdivided into 100 centimos and represented with the symbol S/. The Central Reserve Bank of Peru manages and issues the Peruvian sol in banknote denominations of 10, 20, 50, 100 and 200 soles. Coins circulate in denominations of 5, 10, 20 and 50 céntimos, and 1, 2 and five soles.
BREAKING DOWN PEN (Peruvian Sol)
The current Peruvian Sol (PEN) began circulation in 1991 with the name Nuevo sol. However, the name sol is the reuse of the name of an earlier currency used between 1863 and 1985. During this time, the country experienced hyperinflation causing the replacement of the sol with the inti, in use between 1985 and 1991. In 1991, continued inflation caused the Nuevo sol to replace the inti. In 2015 the Peruvian Congress changed the name of the currency, dropping the name Nuevo. Peruvian inflation was the result of decades of financial mismanagement, over-borrowing, and the whipsawing of opposing economic policies.
In an attempt to grow Peru out of poverty during the 1960s, democratically elected Fernando Belaúnde undertook a system of economic liberalization, with an emphasis on exports. Political gridlock stymied his efforts and the threat of Cuba-inspired political uprisings. In 1968, General Juan Francisco Velasco Alvarado seized power and took a more radical approach to economic policy.
Alvarado nationalized many aspects of the economy, then instituted a series of tariffs. The tariffs were to protect industry through a strategy of substituting domestic production for imported products. The reformers worked to boost the economy, but Alvarado also spent freely and racked up sovereign debt. Alvarado was deposed by General Francisco Morales-Bermúdez Cerruti, who promised an eventual return to democratic rule.
In 1980, after democratic elections, former President Belaúnde was re-elected, and he set out to reverse more than a decade of protectionism with free-trade agreements and other liberal policies. The once, state-protected industries collapsed, crashing the economy and further worsening Peru’s debt picture.
Economic Drivers for the Peruvian Sol
The Republic of Peru sits on the Pacific coast of South America. The country announced independence from Spain in 1821. After independence, Peru led an existence which saw it in and out of wars, and the beginnings of national debt as it worked to build a railroad. This fighting would continue into the 21st century as Peru sided with one group or another to battle neighbors or the enemy of its allies.
Peru’s economy has fared much better in the 21st century and has grown enough to be considered an upper-middle income country by the World Bank. The country has one of the best track records in recent years on poverty reduction, and growth in foreign direct investment (FDI) has increased demand for the Peruvian sol.
Peru's main exports include the metals gold, copper, and zinc. The United States and China are significant trading partners. According to the 2017 World Bank data, Peru experiences a 2.5% annual gross domestic product (GDP) growth, with a yearly inflation deflator of 3.9-percent.