peru: economic outlook · peru: economic outlook the peruvian economy in a regional context. 0 200...

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PERU: ECONOMIC OUTLOOK

PERU: ECONOMIC OUTLOOK February 2012

The information contained in this document must be considered incomplete because it is merely a basis for an oral presentation.

It must also be considered as a reference and cannot be interpreted as a recommendation for specific investment decisions.

1


I. THE PERUVIAN ECONOMY

2


The Peruvian economy in a regional context.

0 200 400 600 800 1,000

Bolivia

Ecuador

Peru

Chile

Colombia

Venezuela

Argentina

Mexico

Brazil

1,000 1,500 2,000

GDP 2011(US$ Billion)

Source: IMF, APOYO Consultoría

174

22

44

46

47

54

57

84

0.0 20.0 40.0 60.0 80.0

Mexico

Latam

Bolivia

Brazil

Chile

Colombia

Peru

GDP GROWTH 2000-2011 1/(Real % change)

1/ 2011 is estimated. Source: IMF, APOYO Consultoría

3


Structure of the Peruvian economy.

Private investment

20.6

Private consumption

64.1

Public consumption

9.2

Source: BCR, APOYO Consultoría

Public investment

6.1

PERU: DOMESTIC DEMAND STRUCTURE, 2010(%)

Services40.5

Manufacturing18.0

Agriculture6.5

Construction5.6

Mining and Oil15.6

Electricity and water1.9

Fishing0.8

Commerce11.1

PERU: COMPOSITION OF PRODUCTION, 2007(% of Gross Value Added)

Source: INEI

4


Sound macroeconomic policy.

• Peru ranks 8th among 27 emerging economies in adequacy of monetary and fiscal flexibility, according to The Economist.

• Inflation targeting: the average inflation in the last 10 years has been 2.5%.

• Fiscal discipline: ratio of public debt to GDP decreased from 45% to 20% in the last 10 years.

• Trade openness: average effective tariff rate of approx. 2% and FTAs with economies that represent 60% of world GDP.

0 20 40 60 80 100

EgyptIndia

PolandBrazil

VietnamPakistan

TurkeyArgentina

HungarySouth Africa

TaiwanVenezuela

Czech Rep.Mexico

ColombiaMalaysiaThailand

PhilippinesHong Kong

PeruRussia

SingaporeSouth Korea

ChileChina

IndonesiaSaudi Arabia

WIGGLE ROOM INDEX 2012(Room to ease fiscal and monetary policy -

Maximum flexibility = 100)

Source: The Economist

5


0

100

200

300

400

500

600

700

800

900

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

PERU: COUNTRY RISK 1/(Points)

1/ EMBIG+ spread. Source: JPMorgan, BCR

Politics: as always, very complicated.

End-2000: Fujimori resigns from presidency.

2006: Election of Alan García in ballotage against Ollanta Humala.

2008: International financial crisis.

2011: Election of Ollanta Humala.

2002: Election of Lula in Brazil.

2001: Election of Alejandro Toledo. Alan García makes it into the 2nd round.

6


Despite shifting political situation, economic policy has been consistent. (1)

• Features of the Peruvian political environment:

• Lack of strong political parties with national reach.

• Lack of continuity in Congress: majorities change significantly with each election.

• Political landscape is fragmented on the regional level: regional political movements do not have a national scope.

7


• Continuity in economic policy in the last 20 years.

• The current president of the Central Bank served under the previous administration of Alan Garcia and was reappointed by Ollanta Humala.

• The current Minister of Finance was vice-minister of Finance under the previous administration.

• Other key institutions: competition agency, tax collection, regulators of public utilities maintain a technical profile and independence.

Despite shifting political situation, economic policy has been consistent. (2)

8


Current political scenario.

30

35

40

45

50

55

60

65

J A J O J A J O J A J O J A J O J A J O J A J O J A J O J A J O J A J O J

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

57Average 2011: 55 points

Source: APOYO Consultoría

CONSUMER CONFIDENCE IN LIMA 1/(Points)

1/ As of January 2012.

Optimistic range

Pessimistic range

59

32

63

5255 54

0

10

20

30

40

50

60

70

Aug 2001 Jan 2002 Aug 2006 Jan 2007 Aug 2011 Jan 2012

Toledo García Humala

First month

Fifth month

PRESIDENTIAL APPROVAL IN THE FIRST AND FIFTH MONTHS OF EACH ADMINISTRATION 1/

(%)

Source: Ipsos APOYO1/ In Peru urban areas.

0

10

20

30

40

50

60

70

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV

Accelerate

Reduce

2004 2005 2006 2007 2008 2009 2010 2011

REGARDING INVESTMENT PROJECTS, WHICH MEASURES WILL YOUR COMPANY TAKE IN THE NEXT SEMESTER?

(%)

Source: surveys conducted on APOYOConsultoría's clients

9


2012 Forecasts – Base scenario

2010 2011 2012

I. Real Sector (% change)

GDP 8.8 7.0 5.3

Private consumption 6.0 6.3 5.3

Private investment 22.1 11.9 4.0

Public investment 26.5 -16.9 30.0

Exports 2.5 7.6 4.0

Dependent employment 2/ 4.2 5.4 4.0

II. Macroeconomic balances

Fiscal balance (% of GDP) -0.5 1.6 0.2

Trade balance (US$ Millions) 5,873 6,750 7,849

Net international reserves (US$ Millions) 44,105 48,816 51,500

III. Monetary variables

Inflation, CPI (%) 2.1 4.7 3.0

Exchange rate, eof (S/. per dollar) 2.81 2.70 2.65

1/ Forecast from 2011 onwards. Forecasts made in December.

2/ Employment in companies with over 10 employees.


BASE SCENARIO - MACROECONOMIC INDICATORS 1/

(% annual change)

2010 2011 2012

I. Real Sector (% change)

GDP 8.8 7.0 5.3

Private consumption 6.0 6.3 5.3

Private investment 22.1 11.9 4.0

Public investment 26.5 -16.9 30.0

Exports 2.5 7.6 4.0

Dependent employment 2/ 4.2 5.3 4.0

II. Macroeconomic balances

Fiscal balance (% of GDP) -0.5 2.0 0.2

Trade balance (US$ Millons) 5,873 6,750 7,849

Net international reserves (US$ Millons) 44,105 50,000 51,500

III. Monetary variables

Inflation, CPI (%) 2.1 4.9 3.0

Exchange rate, eof (S/. per dollar) 2.81 2.70 2.65

1/ Foreca st from 2011 onwa rds. Foreca sts ma de in December.

2/ Employment in compa nies wi th over 10 employees.

Source: BCR, AP OYO Consul tor ía

BASE SCENARIO - MACROECONOMIC INDICATORS 1/

(% annual change)

10


II. INVESTMENT FRAMEWORK AND OPPORTUNITIES

11


Peru is among the 20 most attractive economies for foreign direct investment.

0

10

20

30

40

50

60

70

80

90

TOP HOST ECONOMIES FOR FDI IN 2011 - 2013 1/(Total of responses)

1/ Number of times the country is mentioned as a top FDI priority by respondent TNCs. Source: UNCTAD


• Local and foreign investment are subject to the same treatment.

• Tax stability contracts.

• Investment in public service infrastructure can be deducted from taxable income.

• No restrictions to profits remittances, dividends, and financial resources.

• Income tax rate: 30%.

• Value added tax rate: 19%.

Framework for private investment.


Investment in Peru – recent large scale projects.

Concessions •Southern Pier at Callao Port •2008-2010 •US$360 million

Private-public partnerships • Interoceánica sur (Peru-Brazil highway) • 2006-2012 • US$2,000 million

Private investment • Pampa Melchorita liquefied natural gas plant • 2007-2010 •US$3,000 million


World-class companies already operating in Peru.

Infrastructure Others Mining

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60

80

100

120

140

160

180

200

220

240

260

280

1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014Colombia Chile Peru

1/ 2011 is estimated. 2012 and on are forecast.

Source: IMF, APOYO Consultoría

REAL GDP PER CAPITA: PERU, COLOMBIA, AND CHILE 1/(1980 = 100)

Investment opportunities: the catch up effect.

Country 2011 2015 1/ % chg.

Brazil 11,270 14,130 25.4

Chile 12,820 14,970 16.8

Colombia 6,810 9,240 35.7

Mexico 10,240 12,370 20.8

Peru 5,510 7,780 41.2

Ecuador 4,740 6,000 26.6

Bolivia 2,250 2,930 30.2

1/ Forecast.

Source: Latinfocus, IM F, APOYO Consultoría

PER CAPITA GDP

(US$)

16


Investment opportunities: catch up in various products and services.

0.0

20.0

40.0

60.0

80.0

CHI BRA COL PER VEN MEX ARG

FINANCIAL INTERMEDIATION RATIO 1/(%)

Source: CEIC, regulatory agencies1/ Banks' loan volume / GDP. In 2010.

0.0

4.0

8.0

12.0

16.0

20.0

Chile Mexico Colombia Brazil Peru Argentina

MORTGAGE LOANS IN LATAM- 2008(% of GDP)

Source: Morris

0

5

10

15

20

25

Argentina Chile Ecuador Colombia Peru Venezuela

Source: Araper, CEIC, media, public statistic institutions of each country

NEW VEHICLE SALES, 2011(Per 1 000 people)

71

56

39

1810

14

27

45

6776

15 17 16 15 14

0

20

40

60

80

100

Argentina Brazil Ecuador Peru Bolivia

Modern channel Traditional channel Others

1/ 2010 for Argentina, Brazil and Bolivia; 1S2011 for Ecuador and 3Q2011 for Peru.

Source: Kantar Worldpanel, APOYO Consultoría

CONSUMER GOODS RETAIL BY CHANNEL, 2010 1/(%)

17


Investment opportunities: infrastructure gap.

Sector Gap 2008 %

Transportation 13,961 37.0

Water & sewage 6,306 16.7

Electricity 8,326 22.0

Natural gas 3,721 9.9

Telecom. 5,446 14.4

Total 37,760 100.0

Source: IPE

INFRASTRUCTURE INVESTMENT GAP, 2008

(US$ millions)

• Current legislation promotes private investment in infrastructure: private-public partnerships, concession processes.

• Fiscal resources are available: public savings amount to US$5,600 million.

• Access to external financing: low levels of public debt and investment grade.

18


The coming years: macroeconomic and financial stability.

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

1990 1995 2000 2005 2010

TRADE BALANCE 1/(% of GDP)

Source: BCR, APOYO Consultoría1/ 2011 onwards is forecast.

2014

Forecast

0

10,000

20,000

30,000

40,000

50,000

60,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2014

NET INTERNATIONAL RESERVES 1/( US$ Billions)

1/ 2012 onwards is forecast. Source: BCR, APOYO Consultoría.

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

1985 1990 1995 2000 2005 2010 2011 2012 2013 2014

PERU: EXTERNAL PUBLIC DEBT 1/(% of GDP)

Source: BCR, MEF, APOYO Consultoría1/ 2011 onwards is forecast.

16.7

3.3 2.8 2.7

0.0

5.0

10.0

15.0

20.0

25.0

1985-1992 1993-1997 1998-2001 2002-2011 2012-2014 1/

INFLATION RATE 1/(% average)

1,6001584.8

Source: BCR, APOYO Consultoría1/ Forecast.

19


The coming years: the Peruvian economy can sustain annual growth rates of 5.5%-6.5%.

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Sustainable GDP GDP

GDP AND SUSTAINABLE GDP 1/(Annual % chg.)

1/ Sustainable GDP is estimated. GDP from 2012 onwards is forecast.


20


The coming years: growth in income and poverty reduction.

POVERTY RATE(% of total population)

54.3

29.0

22.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

55.0

60.0

2002 2004 2006 2008 2010 2012 2014 2016

1/ 2012 and onwards are forecast. Source: INEI, APOYO Consultoría

2,177

5,859

8,330

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

9,000

2002 2004 2006 2008 2010 2012 2014 2016

PER CAPITA GDP 1/(US$)

Source: BCR, APOYO Consultoría1/ 2012 and onwards are forecast.

21


PERU: ECONOMIC OUTLOOK February 2012

The information contained in this document must be considered incomplete because it is merely a basis for an oral presentation.

It must also be considered as a reference and cannot be interpreted as a recommendation for specific investment decisions.

peru: economic outlook · peru: economic outlook the peruvian economy in a regional context. 0 200...

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