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Peru is one of the countries with lowest financing needs for 2012 due to its strong fiscal position and low amortizations, according to global rating agency Fitch Ratings.
According to the report titled: “2012 Latin America Financing Needs: Stable Despite the Unfavorable External Environment,” Peru’s financing needs are below one percent of its Gross Domestic Product (GDP).
Peru is followed by Chile with two percent of its GDP and Uruguay with a little over two percent of its GDP.
Countries whose government financing needs are below the Latin American median of 4.2% of GDP include Chile, the Dominican Republic, El Salvador, Panama, Peru and Uruguay.
Moreover, Ftich Ratings added that both Peru and Chile “have significant fiscal flexibility to implement counter-cyclical fiscal policies and to respond to pressures from rising social demands”.
On Tuesday, Finance Minister Luis Miguel Castilla said Peru's gross domestic product likely expanded by close to 7.0% last year, up from a previous forecast of 6.8% growth. (Andina - South America News)
Peru is looking to host next year’s World Economic Forum on Latin America, which will be of utmost importance for the country and the region, Peruvian Foreign Trade Minister Rafael Roncagliolo said Saturday.
Roncagliolo told Andina news agency that Peru will make this proposal to Klaus Schwab, executive chairman of said organization, who is participating in the annual meeting taking place in Davos, Switzerland.
“The World Economic Forum has grown a lot and now they are doing regional forums, besides the one being held in Davos. Therefore, we want to propose that a World Economic Forum event takes place in Peru next year, which would be the on Latin America for Latin America.”
The chancellor added that meetings like that have already been carried out in Brazil and Colombia. Also, Mexico will host a new forum next April, which is why the idea is to take that meeting to Peru for 2013.
“It would be a World Economic Forum session in Lima on Latin America. It would be very important for the region,” minister Roncagliolo stressed. (Andina)
Peru sold $1.1 billion of bonds in the country’s first overseas offering since 2010.
The Andean nation sold $500 million more of its 5.625 percent dollar bonds due in 2050 to yield 5.37 percent, or 225 basis points more than similar-maturity U.S. Treasuries, according to a person familiar with the transaction. It also issued $600 million more of its sol-denominated debt due 2031 to yield 6.875 percent, said the person, who asked not to be identified because he’s not allowed to speak publicly.
The sale comes eight months after Peru first shelved plans to tap international markets because the country’s presidential elections and turmoil in European financial markets curbed investor demand. Brazil, Colombia and Mexico have also sold bonds overseas this month as growing demand for emerging-market securities pushed down borrowing costs.
“Latin America continues to be in a very positive investment light,” Enrique Alvarez, head of fixed-income research at IdeaGlobal, said by phone from New York. “As matters worsen in Europe, that accelerates the trend of investors looking for what are perceived to be higher yields in safer sovereigns.”
Peru sold $1 billion of notes due in 2050 in November 2010. The yield on the securities rose four basis points, or 0.04 percentage point, to 5.34 percent at 3:47 p.m. in Lima, leaving it up 22 basis points in the past month.
‘Additional Supply’
Yields rose on longer-maturity Peruvian bonds “mostly because of the additional supply” from today’s issue, said Daniel Chodos, a New York-based strategist with Credit Suisse AG, in an e-mail.
The sol weakened 0.1 percent to 2.6940 per U.S. dollar, from 2.6920 yesterday, according to Deutsche Bank AG’s local unit.
Fitch Ratings raised Peru’s foreign-debt rating to BBB, the second-lowest investment grade, from BBB- on Nov. 10, citing moves by President Ollanta Humala to negotiate an increase in mining royalties and maintain economic policies that fueled a decade of region-beating economic growth.
Rising public and private investment will spur 5.5 percent growth in Peru this year, the fastest in the region, after a 6.8 percent expansion last year, central bank President Julio Velarde said Dec. 16.
Humala’s Cabinet
South America’s sixth-largest economy has grown an average 6.4 percent annually in the past decade as rising demand for the country’s copper, gold and natural gas reserves lured foreign investment.
Humala, a former army officer who took office July 28, revamped his cabinet last month as he seeks to speed up the resolution of social conflicts slowing investment in new mines. Peru is the world’s number three copper and zinc producer and sixth in gold.
“It would have been unthinkable six or seven years ago that Peru would be able to sell 40-year bonds,” said Aldo Ferrini, the head of investments at AFP Integra, the country’s second-largest private pension fund. “It shows Peru’s an issuer that respects the rules of the game and is striving to become a more developed country.”
The government probably offered 2031 sol-denominated bonds payable in dollars as it seeks to increase the proportion of public debt in local currency while averting a surge in demand for soles from investors participating in the offering, Ferrini said. Integra is among the bidders in today’s offering, he said.
“Peruvian papers are as sought after by locals as they are by foreign investors,” he said.
To contact the reporters on this story: Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net; John Quigley in Lima at jquigley8@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net
Port of Paita
Andino Investment Holding SA (AIHC1) delayed its stock trading debut in Lima for a second time as the port operator makes changes to the initial public offering’s proposed price.
A new date and price for the IPO will be set “in coming days,” Andino said in a statement posted on the Lima securities exchange’s website yesterday.
Andino planned to raise about $60 million in Peru’s first IPO in more than a year to help prepay part of an $85 million loan from Goldman Sachs Group Inc. (GS) and invest in a $250 million expansion of the northern coastal port of Paita.
The company, based in Lima, had registered to sell 15 million to 35 million shares at a reference price of 4.70 soles, according to the prospectus published on the Lima exchange’s website. Andino was scheduled to stop taking orders for the shares at 2 p.m. local time today.
The IPO would be Peru’s first since fishmeal producer Pesquera Exalmar SAA (EXALMAC1) sold $100 million of stock in November 2010, according to data compiled by Bloomberg.
Peru’s port operators will invest $3 billion in expansion projects over the next four years to handle rising metals, gas and fishing exports according to the country’s port authority.
Mining, construction and agricultural companies may sell shares for the first time this year to fund expansion projects, Francis Stenning, chief executive officer of Bolsa de Valores de Lima, which operates the exchange, said in a Dec. 20 interview.
To contact the reporter on this story: Alexander Emery in Lima at aemery1@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net
Promperu, the export and tourism promotion agency of Peru, will participate in the Magic Show Las Vegas to promote the country’s garment sector.
Magic Show Las Vegas is the biggest and comprehensive trade event for the world fashion industry, which is famous for the variety and quality of products presented there.
Each edition of the event attracts about 70,000 visitors, which includes representatives of retailers, chain outlets and boutiques.
Along with Promperu, a delegation comprising of 10 representatives of small and medium-sized enterprises (SMEs) from Peruvian garment industry would also participate in the event slated to take place in Las Vegas, Nevada, US from February 12 to 15, 2012.
The 10 enterprises are the ones covered under the project ITC Peru/Alpaca- Access to the US market for enterprises led by Women, which aims to promote garment manufacturing businesses to cater to the demands of the world market.
Promperu said it would present the world with an idea about Peru’s garment industry at the Magic Show Las Vegas, Fibre2fashion reported today. (Andina)
Corn crops in Brazil and Argentina, which produce 30 percent of the world’s exports, will lose 11 million metric tons of output after a drought caused “irreversible” damage, forecaster Agroconsult said.
Growers in Argentina will harvest 20 million metric tons of the grain in the current harvest, compared with 27 million tons estimated last month, Andre Pessoa, head of Agroconsult, said in Sao Paulo today. Brazil’s corn forecast was cut to 61 million tons from 65 million tons, he said.
Corn has jumped 12 percent in a month in Chicago trading as dryness and heat caused by the La Nina weather pattern harm crops in South America. Brazil is the third-largest producer of corn after the U.S. and China. Argentina is the second-largest exporter of the grain after the U.S.
“The situation in the countryside is very bad,” Pessoa said. “Losses in corn crops in Rio Grande do Sul and Santa Catarina are irreversible,” he said, referring to Brazil’s two southernmost states.
In Mexico, the world’s fourth-largest corn producer, growers are also expected to lose production because of a drought. The country will likely produce between 22 million and 23 million tons of the grain this year, less than the 24.5 million tons previously forecast, Agriculture Minister Francisco Mayorga said on Dec. 16.
La Nina
The recurring La Nina event may have caused more damage this season than in 2009, when South American corn production slumped after the worst drought in 70 years parched Argentine crops, the Argentine Association of Regional Consortia for Agricultural Experimentation, a farming group, said on Jan. 6.
Potential yields in Argentine corn crops that were planted early will drop 20 percent, forecaster Commodity Weather Group LLC said yesterday.
The U.S. Department of Agriculture cut its forecast for corn production in Argentina today to 26 million tons from 29 million estimated in December. It kept the forecast for Brazil’s corn crop at 61 million tons.
Soybean output in South America will also be harmed by the dry spell, Pessoa said. Agroconsult cut its forecast for soybean production in Argentina to 49 million tons from 53.5 million tons, while reducing the outlook for Brazil to 73.5 million tons from 75.2 million tons estimated last month.
Corn futures for March delivery rose 0.9 percent to $6.575 a bushel at 8:45 a.m. in Chicago. Soybean futures rose 0.3 percent to $12.06 a bushel.
To contact the reporter on this story: Lucia Kassai in Sao Paulo at lkassai@bloomberg.net
To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net
Peru will become the 26th largest economy in the world by 2050 reporting the second fastest growth among emerging economies in the next four decades, HSBC predicts.
According to its report “The World in 2050”,Peru will jump 20 places to become the 26th largest economy by 2050 helped by demographics and rising education standards.
HSBC projects Peru should average annual growth of 5.5 percent over the same period while the Philippines economy is poised to grow by an average of 7 percent annually over the next 40 years.
The Philippines will register the fastest growth among emerging countries and will leapfrog 27 places to become the 16th largest economy by 2050.
The bank expects China to overtake the United States as the world's biggest economy by 2050, and says strong growth rates in other developing countries will help drive the global economy.
"Plenty of places in the world look set to deliver very strong rates of growth. But they are not in the developed world, which faces both structural and cyclical headwinds. They are in the emerging world," the bank said in its report.
It based its forecasts on fundamentals such as current income per capita, rule of law, democracy, education levels and demographic change. (Andina)
A delegation from U.S. based Exxon Mobil will visit Peru around midweek to enquire about the country's oil potential, Aurelio Ochoa, the president of the state licensing agency for hydrocarbon exploration, Perupetro said.
Exxon Mobil, one of the main oil companies worldwide, operates in more than 40 countries. Its activities include the exploitation, production and marketing of oil products and natural gas, as well as the chemical, plastics and fertilizers manufacturing.
"This week we will welcome Exxon Mobil's vice-president of exploration, who has made an appointment in Petroperu to address the issue," Ochoa said in statements to Andina.
He commented that the visit of top executives from Exxon Mobil is the result of a promotion campaign, carried out by Petroperu in October 2011, which highlighted Peru's geological potential through a virtual office in Houston (United States).
Likewise, Ochoa pointed out that a Chinese firm, which mainly operates in Asia, has arranged an appointment with Petroperu's technicians to find out the hydrocarbon potential of the Andean country. (Andina)
Foto: Sanhattan - Centro Financiero de Santiago de Chile
Chilean interest-rate swap yields (YCSW0193) rose the most in 10 weeks after a report showed prices rose at their fastest pace in almost three years, exceeding estimates and the central bank’s inflation target.
The one-year swap rate soared 17 basis points, or 0.17 percentage point, to 4.68 percent as of 10:50 a.m. in Santiago. The two-year swap rate climbed 13 basis points to 4.56 percent.
Chilean consumer prices (CNPINSMO) jumped 0.6 percent last month, triple the median forecast of economists surveyed by Bloomberg and double the pace predicted in the inflation forwards market. Annual inflation was 4.4 percent, the highest since April 2009.
The readings mean the central bank won’t reduce borrowing costs at its next meeting, as had been forecast by 50 of the 58 investors in a central bank survey Dec. 20, said Juan Pablo Castro, an economist at Banco Santander Chile.
“There is an almost zero probability that the central bank will cut rates in January,” Castro said from Santiago. “The central bank forecast was off by 50 basis points in just one month. That’s a warning signal that the bank will be more cautious in observing whether this inflation phenomena reverses or not.”
The bank, which targets inflation of 2 percent to 4 percent over two years, has kept its key interest rate at 5.25 percent for six months after raising it five times in 2011.
Policy makers said less than three weeks ago that they expected inflation to end this year at 3.9 percent. The median estimate of 12 economists surveyed by Bloomberg was for consumer prices to climb 4 percent in the year.
Inflation Outlook
The bank forecast 2012 inflation of 2.7 percent and growth slowing to between 3.75 percent and 4.75 percent from 6.2 percent this year. That scenario still seems reasonable, said Dalibor Eterovic, chief economist at Banco Security in Santiago.
“It’s hard to think that Chile is going to decouple from the rest of the world and maintain its dynamism and inflation,” he said. “We still think a 25 basis point cut is more likely, but the risks to that forecast have risen. The higher inflation could lead the committee to consider that, while the conditions are there, they can afford to wait another month.”
Brazilian consumer prices rose 0.5 percent in December, slower than the 0.55 percent median forecast of 47 analysts.
Implied Inflation
Inflation-linked swap rates plunged. The six-month swap fell 45 basis points. Six-month break-even inflation, which measures the likely future average rate of price rises discounted by the swaps market, rose 55 basis points to 2.86 percent, the highest since July, according to prices compiled by Bloomberg. One-year break-even climbed 35 basis points to 3.13 percent, breaching 3 percent for the first time in almost two months.
The two-year nominal swap rate has climbed 31 basis points in a week since data showed manufacturing grew faster than forecast in November.
Offshore investors in the Chilean peso forwards market lowered their short position in the currency against the U.S. dollar to $5.7 billion on Jan. 3 from $6.1 billion on Dec. 30. That is a $407 million bet on the Chilean peso in the first two days of the year.
Core consumer prices, which exclude fuel and produce, increased 0.7 percent in December from November.
To contact the reporter on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net or Randall Woods in Santiago at rwoods13@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net
The free trade agreement signed between Peru and Thailand –which came into effect on December 31- will allow for the diversification of Peruvian exports in Asian markets and become an option to what is happening in Europe and the United States, said the Peruvian Exporters' Association (Adex).
The head of said institution, Juan Varilias, pointed out that even if the trade balance for Peru was negative in 163.7 million dollars between January and October 2011, there is an interesting evolution over the last years thanks to new products such as natural gas and others with value added.
Varilias went on to say that the Early Harvest Protocol signed between Peru and Thailand, which seeks to speed up liberalization of trade in goods and its additional protocols also contributes to turn Peru into a hub between eastern Asia and South America.
Eighty-eight percent of Peruvian exports to Thailand between January and October were mainly traditional products such as natural gas, zinc and copper.
Furthermore, there is an increase in the exports of non traditional products, mainly from the Fishery, Agricultural and Agribusiness sub-sectors.
Moreover, Varilias said Peru must keep working to be more competitive on an international scale, promote technological development and innovation in order to win a position in an international context.
“We have a significant availability of raw materials and natural resources which are important to promote said development,” he said. (Andina)
Dollar bonds of Latin American nations from Panama to Uruguay provided the best returns in emerging markets this year, a rally that may extend into 2012 as lower debt and higher foreign reserves limit the effects of the European debt crisis.
Panama’s notes advanced 16 percent this year with annual volatility of 4.5 through Dec. 27, giving them a risk-adjusted return of 3.5 percent, according to data compiled by Bloomberg and JPMorgan Chase & Co. Uruguay’s notes returned 20 percent with volatility of 6.3 for a 3.2 percent risk-adjusted return. Seven of the top 10 bond markets were in Latin America, while debt from Pakistan and Egypt fell the most, the data show.
Latin American nations won 12 credit-rating or outlook upgrades as Panama’s $13.5 billion infrastructure investment plan boosted growth, Colombia pledged to cut its budget gap in half and Uruguay boosted foreign reserves 27 percent in a year. Shrinking debt ratios and higher ratings make the region’s bonds less susceptible to a slowing global economy while Europe’s recession may keep Hungarian and Turkish bonds lagging behind, according to Aviva Investors and Aberdeen Asset Management Plc.
“Latin America, despite the global slowdown expectations next year, is an area of relative calm,” said Jeremy Brewin, who helps manage about $4 billion as head of emerging-market debt at Aviva in London. “It feels like a safe haven.”
Stocks Plunge
The region’s bonds gained 13 percent this year on average, outpacing the 2.1 percent advance in emerging Europe and 8.7 percent increase in Asia, according to JPMorgan’s EMBI Global Index. Latin American bond yields fell 45 basis points, or 0.45 percentage point, on average to 6.53.
Their return to volatility ratio was 2.3 percent, compared with 0.3 percent in developing European nations and 1.7 percent in Asia. The same risk-adjusted return ratio for Latin America debt was 2 percent in 2010 and 3.2 percent in 2009.
Dollar debt handed investors the highest returns with the smallest price swings among developing-country assets this year. Dollar bonds gained an average 8.2 percent with volatility of 4.8, according to data compiled by Bloomberg and JPMorgan. Emerging-market stocks (MXEF) lost 20 percent with volatility of 23, while local-currency bonds lost 1.1 percent in dollar terms with volatility of 11, according to Bloomberg, JPMorgan and MSCI Inc. data.
Debt Reduction
Latin America is the only region that has reduced government debt as a percentage of gross domestic product in the past two years as countries including Brazil cut fiscal stimulus to contain inflation after economic growth quickened. Gross debt declined on average to 50 percent of GDP from 51 percent in 2009, according to the International Monetary Fund. Eastern Europe’s debt-to-GDP rose to 46.7 percent from 45.4 percent while Asia’s climbed to 35 percent from 31 percent.
Brazil’s debt equaled 65 percent of GDP, down from 68 percent in 2009, according to the IMF, as President Dilma Rousseff cut 50 billion reais ($27 billion) from this year’s budget to help the central bank rein in the fastest inflation in six years. Hungary’s ratio rose to 80 percent from 78 percent in 2009 as slower growth reduced revenue, according to the Economy Ministry. Poland’s increased to 56 percent of GDP from 51 percent, the IMF data shows.
Latin America’s foreign-currency reserves are set to increase 18 percent this year to a record $772 billion, compared with an increase of 13 percent in Eastern Europe, including Russia, according to the IMF.
Chile Upgrade
Improved credit ratings have allowed Latin America’s debt to benefit the most from a rally in U.S. Treasuries, the benchmark for emerging-market assets, as investors shun riskier securities in Eastern Europe, according to Viktor Szabo, who helps manage about $7 billion in emerging-market debt at Aberdeen in London. Colombia won an investment grade rating from all three major rating companies this year while Chile was raised by Fitch Ratings in February to A+, the fifth-highest level.
“The tendency is for Latin America to continue to improve,” said Szabo, who has an overweight position in Latin America debt and underweight in European securities. “There will be more capital flight from Eastern Europe to Latin America.”
Paul McNamara, who oversees $7 billion at GAM Investment Management, said Eastern Europe’s higher yields will make countries such as Poland more attractive than Brazil next year as European policy makers move to contain the debt crisis.
‘Cheap’ Europe
At 4.87 percent, yields on Poland’s dollar bonds due in 2021 were 148 basis points higher than similar-maturity Brazilian notes. The gap has increased 87 basis points since April, when Poland issued the bonds. Poland is rated A- at S&P, two steps above Brazil’s BBB rating.
“You don’t get a lot of upside in Latin American credit,” McNamara said in a telephone interview from London. “It’s time to start to look at central and Eastern Europe. That’s what looks cheap. Europe will have a pretty nasty recession, but we don’t get a breakup of the euro zone.”
Panama’s dollar borrowing costs fell 107 basis points to 4.17 percent this year, compared with an average decline of 10 basis points among emerging markets, according to JPMorgan indexes.
The $44-billion economy is likely to grow 10 percent this year, the fastest pace since 2008, Finance Minister Frank De Lima said on Nov. 30, fueled in part by an expansion of the Panama Canal. Moody’s raised in August the outlook on Panama’s Baa3 credit rating to positive, citing the country’s “favorable debt dynamics.” The government plans to cut debt to 40 percent of GDP by 2014 from 43 percent this year.
Colombia’s Budget
Yields on Uruguay’s benchmark bonds due in 2022 fell 148 basis points this year and reached a record low of 3.81 percent on Dec. 21, after stronger trade with Brazil, Latin America’s largest economy, helped the government reduce debt to the equivalent of 44 percent of GDP from 50 percent in 2008.
Colombia’s bonds rose 14 percent this year, based on JPMorgan’s EMBI Global Index, following a gain of 11 percent in 2010 and 17 percent in 2009. The nation’s debt handed investors a risk-adjusted return of 2.6 percent in 2011, according to data compiled by Bloomberg.
Colombia joined Peru, Panama, Chile, Brazil and Mexico as investment-grade countries after lawmakers passed legislation that targets a central government deficit of no more than 2.3 percent of GDP in 2014, down from an estimated 4 percent this year.
Pakistan, Egypt
“This is an environment where fundamentals prevail,” said Enzo Puntillo, who oversees $1.5 billion of assets as head of emerging-market fixed income at Swiss & Global Asset Management AG in Zurich. “These countries are all higher quality converged or are converging to full investment-grade status. They are at lower risk of Europe banking contagion risk.”
Pakistan’s bonds were among the worst performers in emerging markets this year, falling 9.5 percent with volatility of 8, for a risk-adjusted return of -1.2 percent, as floods and terror attacks slowed foreign investment. Egypt’s debt was the next worst, slumping 11 percent with swings of 11 for a risk- adjusted return of -1 percent, as the popular revolt that toppled President Hosni Mubarak in February shut the country out of international bond markets.
Debt issued by Belize, a Central American country with a population of fewer than 200,000, was the biggest decliner, losing 24 percent with volatility of 16 for a risk-adjusted return of -1.5 percent.
Scarcity Value
Latin American countries including Brazil are reducing overseas debt sales as demand grows for their local bonds. Brazil’s foreign-currency debt fell to 80.9 billion reais ($43.5 billion) in November from 204 billion reais at the end of 2004, while its real-denominated bonds rose to 1.8 trillion reais from 810 billion reais, according to the Treasury.
Latin America’s foreign debt fell to 20 percent of GDP this year from 37 percent in 2004 while Asia’s dropped to 15 percent from 23 percent, according to the IMF data. Eastern Europe’s foreign debt rose to 66 percent of GDP from 50 percent.
The cutback in Latin American overseas offerings is creating a shortage of the region’s dollar bonds that’s helping drive up their prices, said Carlos Legaspy, who manages about $300 million at San Diego-based Precise Securities.
“Diminishing supply, good fundamentals, relatively good liquidity with yields not that low,” Legaspy said. “All these reasons have made it attractive for a fixed-income investor.”
To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net Nathan Gill in Quito at ngill4@bloomberg.net.
To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net
Standard & Poor's (S&P) Ratings Services presented the "Top 20 Peruvian companies" report that focuses on a selected group of entities which S&P considers to be among those with the best credit quality in the country.
According to associate director of said rating agency Diego Ocampo, the position of each of the firms making up the list reflects the country's economy. Thus, the leading firms belong to the mining, energy and telecommunications sectors, as well as retailers.
The “Top 20 Peruvian companies” report includes Alicorp, Buenaventura, Corporacion Lindley, Edegel, Edelnor, Enersur, Gloria, Luz del Sur, Barrick Misquichilca, Yanacocha, Minsur, Petroperú, Saga Falabella, Shougang Hierro Perú, Cerro Verde, Supermercados Peruanos, Telefónica del Perú, Telefónica Móviles, Backus and Johnston, and Volcan.
For the selection process, S&P identified those elements that help companies achieve strong business risk profiles, such as size, cost efficiency, management experience, among others.
Aafter having identified those companies with good business risk profiles, the agency searched for the ones with healthy financial risk profiles, evidenced by cash flow stability, conservative debt leverage, prudent financial policies, adequate liquidity and financial flexibility and good access to debt markets.
Bolivia and Peru are discussing the possible construction of a railroad between the two countries, news service EFE reported today, citing comments by President Evo Morales.
Speaking to Bolivia’s state radio, Morales said he discussed the project of building a railroad with Peru’s President Ollanta Humala in a meeting on Dec. 22.
“We talked a lot, for example, about the construction of a railroad from the border with Brazil,” Morales said in the radio interview, the Spanish news service reported.
The train line would start from the Bolivian cities of Puerto Quijarro or Puerto Suarez, near the border with Brazil, and would end in the port city of Ilo, in southern Peru, according to Morales.
Morales didn’t offer more details about the project.
Jose Enrique Arrioja - Bloomberg
To contact the editor responsible for this story: Sylvia Wier at swier@bloomberg.net
Bolivia's President Evo Morales at Machu Picchu in Cusco. ANDINA
Bolivian President Evo Morales celebrated Christmas by climbing up Huayna Picchu, the mountain overlooking the Inca citadel of Machu Picchu in Cusco, Peru.
The Bolivian leader climbed the "young mountain" in a record twenty-five minutes after visiting the UNESCO World Heritage Site and one of the New Seven Wonders of the World for the second time this weekend.
Morales arrived in the Andean city of Cusco on Thursday to spend Christmas with his two sons. On the first day, Morales met with his Peruvian counterpart Ollanta Humala on a range of trade and development issues.
The eternal guardian of the Sanctuary, Huayna Picchu or Wayna Picchu (meaning "young mountain" in Quechua) towers over the Incan city. To conquer its summit is truly an unforgettable experience. Along the route and at the top are sacred structures and eye catching terraces, built right against the slope's edge.
It is possible to begin the ascent from Machu Picchu's main square by way of a path the Incas themselves made. Today, it is well marked and in good condition. The view from Wayna Picchu is remarkable: Machu Picchu spread out in all its glory, the Vilcanota River Canyon, and the surrounding mountains. (Andina)
Peru may have its busiest year of initial public offerings in at least a decade as the government’s defense of private investment and growth bolsters investors’ sentiment, according to the head of the country’s main securities exchange.
Companies from the mining, construction and agricultural industries may sell shares for the first time in Peru next year, said Francis Stenning, chief executive officer of Bolsa de Valores de Lima.
“We expect a very active market for IPOs next year,” Stenning said yesterday in an interview from the exchange. “Peru’s expansion is putting pressure on companies to come to the market to fund their growth. We just need to clear a few things from the table.”
Peru’s President Ollanta Humala, who took office July 28, has shown his willingness to preserve policies that fueled the fastest economic growth in Latin America over the past decade by quelling protests against a $4.8 billion gold mine being developed by Newmont Mining Corp., Stenning said. The protests, in a country where mining stocks dominate the market, have added to concern that Europe’s deepening debt crisis would slow growth, he said.
IPOs planned for this year in Peru didn’t proceed because of concern generated by the presidential elections and anti- mining protests, and as Europe’s crisis threatened to crimp global demand for commodities, Stenning said.
Planned IPOs
Port operator Andino Investment Holding SA plans to raise about $70 million in January, in what would be Peru’s first IPO since fishmeal producer Pesquera Exalmar SAA (EXALMAC1) sold $100 million of stock in November last year. State-owned companies including Petroleos del Peru SA probably will proceed with the sale of minority stakes in the first half of 2012, Stenning said.
Rising public and private investment will fuel 5.5 percent growth in Peru next year, the fastest in the region, after 6.8 percent expansion this year, central bank President Julio Velarde said Dec. 16. South America’s sixth-largest economy has grown an average 6.4 percent annually in the last decade.
The Lima General Index (IGBVL) retreated 0.1 percent to 19,358.83 at 11:17 a.m. local time and has slid 17 percent this year. The gauge plunged a record 12 percent June 6 after Humala won the country’s presidential election, sparking concern he would increase state control of the economy. Stocks rose 10 percent in the two weeks after he asked Velarde to remain in his post July 17.
High-Speed Trading
Humala replaced 10 ministers in his cabinet Dec. 11 as he seeks to speed up the resolution of social conflicts slowing investment in new mines. Peru is the world’s top silver producer, number three in copper and sixth in gold.
“The president has sent a clear message that investment is not going to stop,” Stenning said. “The best way to accomplish social inclusion is with more investment and employment.”
Bolsa de Valores de Lima plans to implement a new trading platform to boost volume and allow for further integration with Latin American bourses, Stenning said. The exchange has started talks with prospective providers of a system that would permit high-speed and algorithm trading and may be modeled on a platform created by the Santiago bourse last year.
“We expect to have approved the providers, signed the contract and begun the works for implementation” next year, he said.
The project would help “homogenize” systems used in Mila, the stock market combination formed by Chile, Colombia and Peru, Stenning said, declining to give investment estimates. Mila began allowing investors to buy and sell stocks in the other two countries through their local brokers in May. In a subsequent stage, the member exchanges may form a single trading platform. Mexico is considering joining Mila.
Bolsa de Valores de Lima also plans to introduce direct market access to its current platform in the first half of next year, he said.
To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net
Peruvian Minister of Foreign Trade and Tourism Jose Luis Silva and Mexico’s Finance Secretary Bruno Ferrari.
Peruvian Minister of Foreign Trade and Tourism Jose Luis Silva announced that the Mexican Senate on Thursday approved the Free Trade Agreement (FTA) with Peru on second vote after being rejected on Wednesday, and added that it will come into effect in the first quarter of 2012.
“Yesterday, the Mexican Senate's Trade and Industrial Development Committee disapproved the FTA with Peru, but it has been reconsidered,” he told Andina news agency.
He explained that at the plenary session two votes were held; the first to amend the vote of the Committee, and the second to approve the FTA with Peru.
"55 votes were in favor, 47 against and one abstained," said Silva from Geneva (Switzerland), from where he followed the course of the vote in the Mexican Senate together with Mexico’s Finance Secretary Bruno Ferrari.
Silva added that during the plenary session, Ferrari urged the senators to vote in favor of the FTA with Peru. “Minister Ferrari recalled that Peru is a strategic partner for the development of trade and international relations of Mexico," he told Andina.
Peru’s business community reacted to Ollanta Humala’s election as president in June by dumping mining stocks, triggering the biggest plunge in Lima’s bourse in two decades. Now the one-time ally of Venezuela’s Hugo Chavez may be their best bet for defending $50 billion in mining investment.
The retired army lieutenant colonel, who once vowed to make the state a partner in all natural resource projects, declared a state of emergency on Dec. 4 to quell protests against a $4.8 billion gold mine being developed by Newmont Mining Corp. (NEM) He brought in a former military instructor Dec. 11 to lead a revamped cabinet just four months after taking office.
“Humala showed guts facing down the protesters and removing dissenting voices from his cabinet,” Patricia Teullet, general manager of exporters association Comexperu, said in a phone interview from Lima. “Before that it was like four horses dragging him in four different directions.”
Humala’s determination to maintain policies that fueled the fastest economic growth in Latin America over the past decade is reassuring, said Pedro Olaechea, president of the Lima-based National Society of Industries. Still, the crackdown on protests may backfire by strengthening anti-mining groups, splintering Humala’s party and alienating his rural base, according to the Washington-based political risk firm Eurasia Group.
Runoff, Rally
The 49-year-old Humala won a June 5 runoff over then- Congresswoman Keiko Fujimori after abandoning anti-capitalist rhetoric used during a failed 2006 presidential bid to build support beyond his rural base. He promised to boost spending on the nation’s 8 million poor, a third of the population, while sustaining investment that helped Peru grow an annual average 6.4 percent over the past decade.
Peru’s stocks rose 10 percent, and bonds also rallied, in the two weeks after he asked central bank President Julio Velarde to remain in his post and appointed a cabinet of economists and businessmen. Fitch Ratings increased Peru’s foreign debt rating to BBB from BBB- on Nov. 10, praising the way Humala negotiated tax increases on mining companies without jeopardizing investment.
The strategy unraveled last month as anti-mining protests by villagers concerned that Denver-based Newmont’s mine will deplete their water resources gained momentum. The two-week-long demonstrations exposed ruptures within the government that led to the resignation of two senior officials that voiced support for the protests. Humala at first said almost nothing about the disturbances and refused to meet with protesters.
Commitment to Orthodoxy
On Dec. 4, Humala delivered his response to the unrest and declared a state of emergency in four provinces, sending troops into Cajamarca to suppress the now-illegal marches. Seven days later he fired 10 ministers, replacing them with technocrats and businessmen led by retired lieutenant colonel Oscar Valdes, who was previously interior minister.
“Humala has shown a strong commitment to orthodox policies with no signal that he would abandon his market-friendly agenda,” Felipe Hernandez, an analyst at RBS Securities Inc. in Stamford, Connecticut, said yesterday in a note to investors.
The economic stakes are high for Peru. Mining accounts for about 18 percent of investment in the country over the past 12 months, compared with 5 percent three years ago, according to Bank of America. Mining companies plan to invest $50 billion in the next decade, the government says.
Congressional Gridlock
In the two trading days after Humala overhauled his cabinet, the Lima General Index (IGBVL) fell 2 percent, less than the 3 percent decline of the MSCI EM Latin America Index. The currency was little changed versus the Bloomberg JPMorgan Latin American Currency Index’s 1.8 percent drop. The yield on the benchmark sol-denominated bond due August 2020 rose six basis points.
The willingness to use force to subdue protests may harm Humala’s standing with Peruvians who were critical of previous governments’ use of the army to quell unrest. It could also strengthen the opposition, increasing gridlock in Congress where Humala’s Gana Peru party has only 47 of 130 seats, according to Francisco Rodriguez, an economist at Bank of America.
Former President Alejandro Toledo, who leads the third biggest bloc in Congress, withdrew his support for Humala after the cabinet shake-up, citing concerns about the government’s “militarization” when Valdes was appointed cabinet chief. The Peruvian Workers’ General Union, the nation’s biggest labor confederation, accused Humala of pandering to investors and called for a one-day strike in Cajamarca.
Past Unrest
“There’s a possibility Humala may be seen as excessively friendly to business, which may carry a high political cost,” Rodriguez said by telephone from New York on Dec. 12. “Without the support of his left and without Toledo, it will be increasingly difficult to push for reforms and maintain this centrist line.”
Investors should reduce their holdings of sol-denominated bonds because of the risk yields will climb if deepening social unrest curbs mining investment and economic growth, Barclays Capital Inc. said in a report today.
One option for Humala is to build an alliance with his former opponent Fujimori, according to Rodriguez. The daughter of former President Alberto Fujimori, who shut down Congress in 1992 to gain a stronger hand in his fight against Marxist rebels, said the cabinet shake-up was “positive” and would eliminate past “contradictions” arising from Humala’s unrealistic goal of trying to build consensus.
Political upheaval and social unrest isn’t unusual in Peru. Former President Alan Garcia changed finance ministers four times during his 2006-2011 presidency.
‘Best Hope’
He also left to Humala more than 200 unresolved social conflicts, many of them land disputes between peasants and mining companies, according to a monthly bulletin of unrest prepared by the government’s Ombudsman office.
Humala himself in 2000 led 50 soldiers who seized and occupied for a week a mine owned by Phoenix-based Southern Copper Corp. (SCCO) to protest corruption in Fujimori’s government. That’s also given him some unused capital with his base that even the latest crisis is unlikely to extinguish, said Alvaro Vargas Llosa, a senior fellow at the Independent Institute research organization in Washington.
“Most of the business xclass in Peru supports the president at this point as they understand he’s their best hope of achieving a modicum of social peace in which to invest,” said Vargas Llosa in a phone interview. “He’s the only one who has some credibility with the protestors.”
To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net;
To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net
Lima Mayor Susana Villaran
Lima, Peru’s capital city, plans to sell debt in international markets for the first time by issuing $500 million worth of bonds denominated in soles over the next two years, Mayor Susana Villaran said.
The sale would help finance $1.8 billion in infrastructure projects in the city of 7.5 million people, such as the expansion of a Pacific Ocean beach park called Costa Verde and the building of a highway to better connect commercial and residential areas, Villaran said in an interview at Bloomberg’s headquarters in New York.
“The big picture is how to renew Lima,” Villaran said. “Lima produces almost 50 percent of the national gross domestic product and we have a lack of infrastructure.”
Lima aims to sell bonds maturing in 10 years to 20 years, city Chief Financial Officer Jose Miguel Castro said in the same interview. He and Villaran are in New York to discuss the capital’s financing plans with officials from JPMorgan Chase & Co., UBS AG, Deutsche Bank AG and Morgan Stanley. They are also meeting with potential investors.
“They know Peru, know its potential and are interested in Lima, though it’s still unusual for capital markets to finance bonds issued by municipal governments” in emerging markets, Villaran said. “Lima will be a pioneer in a certain way.”
Fitch Ratings started coverage of Lima’s foreign and local currency debt Sept. 21, assigning a BBB- rating, the lowest investment grade. Fitch rates Peru’s federal-government debt one step higher, at BBB.
Existing Bonds
Lima sold 20 million soles ($7.43 million) of a 7.19 percent bond due 2013 in July 2008, and an additional 40 million soles of the domestic-market notes a year later. Prices for the securities aren’t available. The municipality’s total debt is less than $200 million, Castro said.
Moscow, rated BBB by Standard & Poor’s and Fitch, sold 407 million euros ($543 million) of 10-year bonds to yield 5.064 percent in 2006. The yield on the notes has since declined 23 basis points, or 0.23 percentage point, to 4.83 percent, according to data compiled by Bloomberg.
The city of Buenos Aires sold $475 million of five-year bonds in March 2010. The yield on the 12.5 percent notes has declined 115 basis points to 11.35 percent. The city is rated B2 by Moody’s Investors Service, five levels below investment grade.
Fabiola Moura - Bloomberg
To contact the reporter on this story: Fabiola Moura in New York at fdemoura@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net; Helder Marinho at hmarinho@bloomberg.net
Canadian-based Macusani Yellowcake reported Monday a higher-grade mineralization at the Chilcuno Chico anomaly on the Kihitian property, located in the province of Carabaya, in Puno, southern Peru.
As aanouncing additional assay results from the ongoing drilling program at the Chilcuno Chico anomaly, it said these results continue to extend both the A zone and deeper Manto B zone.
"We are very pleased with the assay results as they continue to add to the resource base across the zones identified in our current model," President and CEO, Peter Hooper, stated.
The best result was a 9 m intersection from 210 to 219 m that returned a weighted average of 1,238 ppm U3O8 (or 2.476 lbs/ton). This intersection included a higher-grade zone of 2.0 m that averaged 5,296 ppm U3O8 (or 10.592 lbs/ton).
These results are from boreholes drilled towards the south and south west, the company added.
To date drilling within the Chilcuno Chico target inside the Kihitian concession delineates an area of roughly 700m x 400m.
The company is currently operating three drill rigs on the Kihitian property including a recently mobilized rig on the Quebrada Blanca anomaly 2 km NW of Chilcuno Chico.
Macusani Yellowcake is a Canadian uranium exploration and development company focussed on the exploration of its properties on the Macusani Plateau in south-eastern Peru.
It owns a 99.5% interest in concessions which cover over 24,000 hectares (240 km2) and are situated near significant infrastructure.
The company has 107 million 775,714 shares outstanding, and is listed on the TSX Venture Exchange under the symbol YEL and the Frankfurt Exchange under the symbol QG1. (Andina)
Chile, Colombia, Mexico and Peru, members of the Pacific Alliance, have a deadline of six months to sign the Pacific Alliance treaty, taking another step towards becoming an engine of development in Latin America.
During the Second Summit of the Pacific Alliance held Sunday at the Siglo XXI Convention Center in the Mexican city of Merida, the four nations agreed on a number of measures to advance progressively towards the free circulation of goods, services, capitals and people.
A deadline of six months was set for the rulers of Mexico, Felipe Calderon, Chile, Sebastián Piñera, Colombia, Juan Manuel Santos, and Peru, Ollanta Humala, represented by Foreign Minister Rafael Roncagliolo, to sign the treaty establishing the Pacific Alliance.
The summit will be held next June in Chile, where heads of state must sign the framework agreement for the founding of the Alliance, which aims to be at the forefront of development in Latin America and become the main economic partner in the region worldwide.
In the Mérida Declaration, the leaders also instructed their ministers of trade and foreign affairs to start negotiations on Electronic Trade in conjunction with the Free Trade Agreements in force between the countries in the Alliance.
They will also start work on technical obstacles to trade in regard to transparency, regulatory and technical cooperation and good regulatory practices in 2012.
Other objectives include the establishment of a system of certification of electronic origin; the start of work for the implementation of the Authorized Economic Operation and subsequent mutual recognition for the local implementation of Single Desks and the definition of the mechanism for their subsequent inter-operability.
Also, the start of negotiations in 2012 in regard to the universe of goods tariffs and the mechanism for the accumulation of origin, bearing in mind existing sensitivities in both processes, in order to begin their implementation in 2013.
Moreover, the countries agreed to implement sanitary and phytosanitary measures to facilitate trade between countries in 2012, establish and operate a Pacific Alliance visa within a period of three months to facilitate the movement of business persons.
They also aim to advance towards the reduction or exemption of costs of migratory services and rights, initiatives such as vacation and work programs for young travelers, facilitate the movement of passengers in airports and consular cooperation issues.
The four nations are to begin negotiations to establish a platform of academic and student mobility and intensify political dialogue and agreement on the basis of the democratic principles, values and convictions that link them.
Representatives from the four countries will hold a virtual summit on 5 March 2012. (Andina - South America News)
Peru’s central bank probably will keep its benchmark interest rate unchanged at 4.25 percent next week as growth moderates and inflation is seen slowing from a two-year high, bank President Julio Velarde said.
“We don’t see any reason in principle to change the monetary policy stance,” Velarde said in an interview in Cuzco, Peru. “Inflation expectations are well anchored” within the central bank’s target range, he said.
Consumer prices climbed faster than economists expected last month on rising food and fuel costs, indicating that the central bank has little room to relax monetary policy to mitigate the impact of slower global growth. The annual inflation rate rose to 4.64 percent, the highest since April 2009 and up from 4.2 percent in October. The central bank targets inflation of 1 percent to 3 percent.
Food prices rose as the La Nina weather pattern affected yields of local crops and after imported soybean, corn and wheat prices surged in the first half of 2011, Velarde said. The bank doesn’t expect a rise in grain prices next year.
The central bank increased its benchmark rate five times between January and May, pushing it to a two-year high, to contain inflation expectations. The bank has kept rates on hold since June as the economy slows. The board next meets Dec. 7.
“The pause was initially due to concern about the political context affecting demand and also because of the international situation,” Velarde said. “Looking ahead, we don’t see any demand-related pressures nor any of these pressures from foods” that would cause inflation to accelerate, he said.
Global Question
Private investment spurred by surging metal prices led to an average 7.2 percent growth in Peru in the last five years. Growth slowed for a fifth straight quarter in the July-through- September period as flagging demand for the country’s exports and global market turmoil damped investment.
The economy expanded an annual 6.5 percent in the third quarter, compared with expansion of 7.9 percent in the first half of the year, the national statistics agency said Nov. 28.
“We don’t see a significant slowdown yet,” Velarde said. Growth will slow next year “more because of international uncertainty” he said.
The suspension of the $4.8 billion Minas Conga copper and gold project following anti-mining protests won’t harm growth unless other mine investments are also halted, Velarde said.
Cia. de Minas Buenaventura SAA (BVN) and partner Newmont Mining Corp. agreed Nov. 29 to a government request to suspend work on the project following environmental protests by communities concerned the mine will curtail water supply.
The yield on the nation’s 7.84 percent sol-denominated bond due August 2020 fell two basis points, or 0.02 percentage point, to 5.66 percent at 2:40 p.m. Lima time, according to prices compiled by Bloomberg.
Alex Emery and John Quigley - Bloomberg
To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net.
To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.
Distinguished professor of Technological Innovation and Entrepreneurship of the Massachusetts Institute of Technology (MIT), Scott Stern. Photo: ANDINA/Luis Iparraguirre
Peru's growth experienced over recent years allows the country to invest in high-level education and technology transfer, key factors that stimulate economic expansion, the distinguished professor of Technological Innovation and Entrepreneurship and Strategic Management at Massachusetts Institute of Technology (MIT) Scott Stern said Thursday.
"Peru has been blessed with a decade of striking economic growth, which let the country to raise the standard of living and reduce poverty levels; however, there is still much work to do. It's necessary to further invest in education," he said in statements to Andina.
The professor remarked that Peru's investment in education is below the levels of its neighbors in the region and far below the levels of Southeast Asia and India.
He added that the Andean nation should develop an innovation agenda to consolidate economic growth.
Moreover, Stern noted it is not only necessary to invest in resources but that investment should be made properly and with priorities. (Andina)
Trade between Peru and China would reach 15 billion in 2012, 15.38 percent higher than the 13 billion expected in 2011, the Minister of Foreign Trade and Tourism, José Luis Silva, said Monday.
"We expect to reach US$15 billion next year, but everything depends on movements of the external market," he said after participating in the 5th China-Latin America Business Summit, being held in Lima.
Trade between Peru and China surpassed 10 billion in 2010 and this year would grow 32 percent.
This increase is largely fueled by the Free Trade Agreement (FTA) signed between the two countries and which entered into force in March 2010 and an increase in the mineral prices.
However, this trade rise depends on the effects of the global international crisis.
Silva said China has become Peru's main trading partner, displacing the United States, and that trade balance is positive for the country in 100 million dollars.
He explained that Peru's main exports to China are minerals and fish products, but it seeks to increase exports of other products such as agro-industrial and apparel.
"We are developing other products in agriculture and apparel that we hope will continue growing. The forestry sector has enormous potential and we can invest in forests," he said.
The 5th China-Latin America Business Summit is sponsored by the China Council for the Promotion of International Trade and the Peruvian Foreign Ministry. At least 1,000 Chinese and Latin American officials and businessmen are participating.
China and Peru signed an agreement on promotion and mutual investment protection in 1994, and a memorandum of understanding on trade and economic relations in 2007.
Current Chinese investments in Peru are worth about 2.2 billion dollars, with the most capital invested in the mining, hydrocarbon and fishing sectors. (Andina)
Peru’s National Confederation of Private Business Associations (Confiep) announced investment projects worth 56 billion dollars which execution will allow the development of southern Peru.
The president of Confiep’s Regional Committee Ricardo Briceño noted that it is necessary to take proactive actions to facilitate the execution of these investments, which will benefit every Peruvian.
“This area totals 27 percent of the Peruvian territory and gathers 17 percent of the population, but only produces 15 percent of the Gross Domestic Product (GDP). In other words, it is one of the poorest regions in the country,” he said.
Based on a research carried out by the Peruvian Institute of Economy (IPE), Briceño highlighted that these investments will have a significant impact in the development of southern Peru, creating 1.9 million direct and indirect job opportunities just if we consider the mining investments worth 30 billion dollars.
“This means that we could give jobs to every Peruvian who joins Peru’s labor force for the next 11 years,” he said. (Andina)
Christine Lagarde IMF Managing Director
International Monetary Fund Managing Director Christine Lagarde will be making her first official Latin American tour when she visits Peru, Mexico and Brazil between late November and early December, according to spokesperson David Hawley.
“Ms Lagarde has recently returned from an extensive period of travel that she is continuing, and this time she'll be travelling to Latin America. So, she will be in the region from November 28 to December 2”, Hawley said Thursday during press conference.
The IMF chief who took office last July will make her first stop at Peru on November 28, then will travel to Mexico, from November 29-30, and finally head to Brazil, December 1 and 2, mercopress reported.
“Ms Lagarde will meet the authorities in all three countries and non-official audiences”, added the IMF spokesperson.
The former French Finance minister only recently ended a visit to Asia that included Russia, Japan, China and Hawaii, where she attended the Asia-Pacific forum.
This will be the first visit of an IMF Managing Director to Latin America since taking the post from her fellow French born Dominique Strauss-Khan. (Andina)
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