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PERU: ECONOMIC OUTLOOK February 2012 The information contained in - - PowerPoint PPT Presentation

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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

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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.

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PERU: ECONOMIC OUTLOOK

  • I. THE PERUVIAN ECONOMY
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PERU: ECONOMIC OUTLOOK

The Peruvian economy in a regional context.

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

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PERU: ECONOMIC OUTLOOK

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

(%)

Services 40.5 Manufacturing 18.0 Agriculture 6.5 Construction 5.6 Mining and Oil 15.6 Electricity and water 1.9 Fishing 0.8 Commerce 11.1

PERU: COMPOSITION OF PRODUCTION, 2007

(% of Gross Value Added)

Source: INEI

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PERU: ECONOMIC OUTLOOK

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
  • penness:

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

20 40 60 80 100 Egypt India Poland Brazil Vietnam Pakistan Turkey Argentina Hungary South Africa Taiwan Venezuela Czech Rep. Mexico Colombia Malaysia Thailand Philippines Hong Kong Peru Russia Singapore South Korea Chile China Indonesia Saudi Arabia

WIGGLE ROOM INDEX 2012

(Room to ease fiscal and monetary policy - Maximum flexibility = 100)

Source: The Economist

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PERU: ECONOMIC OUTLOOK

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.

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PERU: ECONOMIC OUTLOOK

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.

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PERU: ECONOMIC OUTLOOK

  • Continuity in economic policy in the last 20 years.
  • The current president of the Central Bank served under the previous administration
  • f 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)

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PERU: ECONOMIC OUTLOOK

Current political scenario.

30 35 40 45 50 55 60 65 J A J OJ A J OJ A J OJ A J OJ A J OJ A J OJ A J OJ A J OJ A J OJ 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 57 Average 2011: 55 points Source: APOYO Consultoría

CONSUMER CONFIDENCE IN LIMA 1/

(Points)

1/ As of January 2012. Optimistic range Pessimistic range 59 32 63 52 55 54 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 APOYO 1/ In Peru urban areas. 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

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PERU: ECONOMIC OUTLOOK

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. Source: BCR, APOYO Consultoría

BASE SCENARIO - MACROECONOMIC INDICATORS 1/

(% annual change)

OR

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PERU: ECONOMIC OUTLOOK

  • II. INVESTMENT FRAMEWORK AND

OPPORTUNITIES

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PERU: ECONOMIC OUTLOOK

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

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

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PERU: ECONOMIC OUTLOOK

  • 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.

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PERU: ECONOMIC OUTLOOK

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
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PERU: ECONOMIC OUTLOOK

World-class companies already operating in Peru.

Infrastructure Others Mining

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PERU: ECONOMIC OUTLOOK

60 80 100 120 140 160 180 200 220 240 260 280 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 Colombia 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$)

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PERU: ECONOMIC OUTLOOK

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 agencies 1/ 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

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 18 10 14 27 45 67 76 15 17 16 15 14 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/

(%)

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PERU: ECONOMIC OUTLOOK

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
  • f public debt and investment grade.
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PERU: ECONOMIC OUTLOOK

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 Consultoría 1/ 2011 onwards is forecast. 2014 Forecast

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 Consultoría 1/ 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) 1,600 1584.8

Source: BCR, APOYO Consultoría 1/ Forecast.

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PERU: ECONOMIC OUTLOOK

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. Source: BCR, APOYO Consultoría

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PERU: ECONOMIC OUTLOOK

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 Consultoría 1/ 2012 and onwards are forecast.

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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.