area: 1.3 million km2 third country in extension in south america (five times the size of the uk)
DESCRIPTION
Area: 1.3 million km2 Third country in extension in South America (five times the size of the UK) Population: 27 million inhabitants Capital : Lima (8 million inhabitants ) Currency : Nuevo Sol 3 Natural Regions: Coast, Highlands y Jungle Forest GDP 2001: US$ 54 billions - PowerPoint PPT PresentationTRANSCRIPT
REPUBLIC OF PERU
• Area: 1.3 million km2
• Third country in extension in South
America (five times the size of the UK)
• Population: 27 million inhabitants
• Capital : Lima (8 million inhabitants)
• Currency : Nuevo Sol
• 3 Natural Regions: Coast, Highlands y
Jungle Forest
• GDP 2001: US$ 54 billions
• GDP per capita: US$ 2,500
REPUBLIC OF PERU
1. Economic fundamentals
• Peru’s estimated 2002 growth is poised to outpace the US, Europe and most of Latin America
• Strong economic fundamentals have allowed Peru to weather the regional crisis well
• Peru is undertaking measures to sustain economic growth by promoting private investment, and fostering regional and sectoral diversification
• Tax reform and the strengthening of the collection system are already boosting fiscal revenues
• The renewal of the Andean Trade Preference and Drug Eradication Act (ATPDEA) by the US will further enhance Peru’s export base
REPUBLIC OF PERU
Objectives of the economic program
• To achieve high and sustained economic growth
• To reduce unemployment and poverty
• To maintain low inflation rates
• To maintain high level of international reserves that provides
a safeguard against external shocks
REPUBLIC OF PERU
-1.3-2.5 -3.1
0.1
-0.3
-2.2
-0.2
2.7 2.82.1
4.2 3.9 3.4
1.6
7.6
4.3 3.6 3.8 3.8
7.3
1.4
-4-202468
10
J F M A M J J A S O N D J F M A M J J A S
Peru’s economy has been growing consistently for the past 14 months…
Monthly GDP Growth(%, yoy)
0.3
1.5
0.3 0.2
2.5
0.7
-1.2
3.7
-2
-1
0
1
2
3
4
USA Europe Latin America Peru
2001 2002E
Despite persistent volatility in the region, Peru’s growth is recovering fast (%, yoy)
Toledo AdministrationTransition Government
Source: INEI (above) and Consensus Economics Inc. (below)
REPUBLIC OF PERU
…and the recovery is no longer being driven by mining alone
Source: MEF
GDP Growth by Sector (%, yoy) 2001 2002Q1 2002Q2 2002Q3
GDP 0.2 3.0 5.3 4.9
Agriculture -0.6 7.4 5.6 1.4
Fishing -13.3 -22.1 2.2 4.4
Mining and Hydrocarbons 11.2 23.7 18.3 3.8
Manufacturing -1.1 -0.8 4.3 5.6
Primary -2.9 -3.6 -2.3 -1.7
Non-Primary -0.6 0.0 6.4 7.6
Construction -6.0 10.3 7.4 11.5
Retail 0.0 -0.1 4.0 3.0
Other Services 0.4 1.6 4.3 4.1
Primary Sectors 1.9 9.4 7.2 1.8
Non-Primary Sectors -0.2 1.6 4.7 5.6
REPUBLIC OF PERU
The economic recovery is helping to reduce unemployment
Unemployment Rate(%)
Source: MEF
9.1
9.5
8.9
10.0
9.7
9.49.2
7.9
10.8
11.1
9.9
11.0
9.7
9.0
8.2
9.0
8.4
8.1
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
Lima Unemployment Rate
Three Month Moving Average
REPUBLIC OF PERU
Private investment is no longer falling and is expected to recover in the upcoming quarters
• Private investment grew 4.5% year on year in the third quarter, after falling for 8 consecutive quarters on the same basis; correspondingly, credit to the private sector is also recovering
• The incentives in place are expected to increase private investment by 1% in the whole of 2002 and 4.5% in 2003
-15.3
-2.0-5.6
1.04.5
6.7
-3.1 -4.6
4.1 4.5
-20
-15
-10
-5
0
5
10
1999 2000 2001 2002E 2003P
Private Investment Credit to Private Sector
Private Investment and Credit to the Private Sector(%, yoy)
Source: Banco Central de Reserva
REPUBLIC OF PERU
Higher mining and non-traditional exports are pushing the trade balance into surplus…
Source: Banco Central de Reserva5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
1997 1998 1999 2000 2001 2002E
Exports Imports
Imports and Exports Evolution(US$ BN)
REPUBLIC OF PERUP
ub
lic S
ec
tor-
Co
ns
olid
ate
d E
co
no
mic
R
es
ult
s o
f(A
s a
% o
f G
DP
)
Fiscal policy is aimed at reducing fiscal deficit
Source: Central Reserve Bank (2002)
-3,0-3,2
-2,3 -2,3-1,9
-4,0
-3,0
-2,0
-1,0
0,0
1,0
1999 2000 2001 2002 2003
REPUBLIC OF PERU
… the ongoing efforts to boost tax collection are yielding impressive results
• The tax measures implemented earlier this year seek to widen the tax base, and curb evasion by strengthening the tax collection agency (SUNAT)
• As a result of tax reform, revenues are expected to increase by 1% of GDP on an annual basis
12.2
-3.4
14.4
3.57.1
24.2
-19.3
-13
-1-4.4
9.8
-5.6
14.412.4
14.5
-20
-15-10
-50
510
15
Jul-01
Aug-0
1
Sep-0
1
Oct-
01
Nov-0
1
Dec-0
1
Jan-0
2
Feb-0
2
Mar-
02
Apr-
02
May-0
2
Jun-0
2
Jul-02
Aug-0
2
Sep-0
2
Oct-
02
Internal Tax Collection (% change, yoy)
Source: MEF
REPUBLIC OF PERU
Long-term flows cover all of the current account deficit
0
500
1000
1500
2000
2500
3000
3500
4000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002E
CA Deficit
FDI* + Long-Term Loans
Current Account Deficit and Long-Term Flows(US$ MM)
*FDI figures include privatization revenuesSource: Banco Central de Reserva del Peru
REPUBLIC OF PERU
-1012
3456
Jan-99 May-99 Sep-99 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02
Inflation has declined drastically in recent years and will end 2002 below the 2.5% target
Inflation Evolution(%, yoy)
Source: Banco Central de Reserva (above) and Government Official Data (Below)
1.5 2.5 2.65.0 6.0
7.6 8.0
15.7
0
5
10
15
20
Panama(Ba1/BB)
Peru(Ba3/BB-)
Chile(Baa1/A-)
Mexico(Baa2/BBB-)
Colombia(Ba2/BB)
Jamaica(Ba3/B+)
Dom Rep(Ba2/BB-)
Russia(Ba3/B+)
Inflation - Comparative Analysis (% yoy, 2002E)
REPUBLIC OF PERU
The Nuevo Sol has retained its value best amongst its regional peers
90
100
110
120
130
140
150
160
170
180
D-01 J-02 F-02 M-02 A-02 M-02 J-02 J-02 A-02 S-02 O-02
Brazil Colombia Chile Peru Mexico
Latin Currencies(Jan 1st =100)
Source: Bloomberg
REPUBLIC OF PERU
Prudent monetary policy has managed to reduce interest rates while keeping prices and FX stable
0
5
10
15
20
25
J-99 A-99 J-99 O-99 J-00 A-00 J-00 O-00 J-01 A-01 J-01 O-01 J-02 A-02 J-02 O-02
Nuevos Soles Interbank Lending Rate
(%)
Source: Banco Central de Reserva
REPUBLIC OF PERU
7
8
9
10
11
Peru’s external liquidity position continues to strengthen, while FX reserves are growing
Net International Reserves(US$ BN)
16.3
10.7 10.18.6
4.82.5 1.6 1.1
0
4
8
12
16
20
Peru*(Ba3/BB-)
Chile(Baa1/A-)
Colombia(Ba2/BB)
Russia(Ba3/B+)
Jamaica(Ba3/B+)
Mexico(Baa2/BBB-)
Panama(Ba1/BB)
Dom Rep(Ba2/BB-)
Months of Import Coverage - Comparative Analysis (Months, 2002E)
*as of Oct. 31Source: Banco Central de Reserva (above) and JPMorgan (Below)
REPUBLIC OF PERU
Financial sector indicators continue to strengthen
Source: Superintendencia de Banca y Seguros
80
100
120
140
Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 3Q02
2
4
6
8
10
Asset Quality(%) % of Past-Due Loans
Reserve Coverage
0.00
0.35
0.70
1.05
1.40
1997 1998 1999 2000 2001 Jan-Sep 02
30
40
50
60
70
Banking Sector Profitability(%) Net Interest Income / Interest Income
Return on Assets
(%)
(%)
REPUBLIC OF PERU
Emerging Markets Country Risk (EMBI)
25/11/2002Source: Reuters
(in basic points)
500
7 000
6 500
6 000
1 000
México
2 000
1 000
6 498
617
1 614
962
322
686
1 658
1 063
Argentina
Perú
Brazil
Venezuela
Colombia
EcuadorLatin America
REPUBLIC OF PERU
The decentralization process underway seeks to develop the manufacturing base outside of Lima
Lima54%
Rest of
Peru46%
• Lima currently concentrates
– 54% of GDP generation
– 62% of registered companies
– 46% of the labor force
• Decentralization Law put limits on the size of the deficit and indebtedness of regions
• Legislation in place ensures that decentralization will not thwart fiscal discipline of the central government
Regional Contribution to GDP% of GDP
Source: INEI
REPUBLIC OF PERU
Succesful Sovereign Bonds Issue(Nov 2002)
• Amount issued : US$ 500m
• Maturity : 5 years
• Maturity date : Jan. 2008
• Coupon rate : 9.125%
• Rate of return : 9.35%
• Price : 99.073%
REPUBLIC OF PERU
Peru has a flexible and manageable financing plan for 2003
Source: MEF
Millions of US Dollars 2002E 2003PUses 2340 2525
Amortizations 1060 1450
Fiscal Deficit 1280 1075
Sources 2340 2525
External 2045 1800
Multilateral and bonds 1670 1350
Projects 375 450
Internal 295 725
Local Market Bonds 270 385
Other* 25 340
* Includes use of privatization proceeds
REPUBLIC OF PERU
Peru’s public external debt to GDP ratio has been cut by nearly half since 1993
30
40
50
60
70
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002E
Public External Debt to GDP(%)
Source: Central Reserve Bank of Peru250
300
350
400
450
500
1995 1996 1997 1998 1999 2000 2001 2002E
External Debt to Exports (%)
REPUBLIC OF PERU
Peru’s dependence on market financing is relatively low
Multilateral27%
Bilateral2%
Bank Loans17%
US$ Bonds34%
Multilateral22%
Bilateral9%
Other8%
Eurobonds53%
Bilateral40%
Multilateral33%
MexicoUS$BN
ColombiaUS$BN US$BN
Peru
Bilateral6%
Other17% Multilateral
23%
BrazilUS$BN
Total = $23.1 Total = $19.8
Total = $97.7 Total = $77.9
Other Bonds16%
Export Credits4%
Brady Bonds14%
Global Bonds7%
CommercialBank Loans 1%Supplier 5%
Brady Bonds8%
Brady Bonds15%
Global Bonds39%
Source: JPMorgan
REPUBLIC OF PERU
The macroeconomic framework 2002-2005 points to a consolidation of the economic recovery
Source: MEF
Macroeconomic Framework 2002E 2003P 2004P 2005P
GDP growth rate 3.7 4.0 5.0 5.5
Investment (% of GDP)
Public 3.0 3.1 3.3 3.3
Private 14.7 15.0 16.4 16.9
Inflation Target 2.5 2.5 2.5 2.5
Exports of Goods and Services (%-change, yoy) 5.6 6.4 6.8 9.0
Consolidated Fiscal Deficit (% of GDP) -2.3 -1.9 -1.4 -1.0
REPUBLIC OF PERU
The countries of
MERCOSUR, specially
Brasil and Argentina
2. Strategic regional
positionPERU holds the key so that
Asian partners of APEC can
trade with:
REPUBLIC OF PERU
.. And the Andean Community
of Nations that include
Venezuela, Colombia,
Ecuador and Bolivia...
PERU is the only country in
the Andean Community that
belongs to APEC; the Andean
Community is a market of
more than 100 million
inhabitants with a combined
GDP of US$ 250 billions.
REPUBLIC OF PERU
3. Clear framework for foreign investment
Stable and predictable investment environment
Basic principle
Same treatment for domestic and foreign
investors
Restricted activities
None
Performance requisites None
REPUBLIC OF PERU
Legal framework for investment
Constitutional principles Equal treatment for domestic and foreign investors Expropiations are prohibited, unless it is for national interest or national
security
Foreign Investment Law Access to the best exchange rate for profit remission Free remissión of profits and royalties
Stability contracts For concessions and investments spannning more than 10 years Protects the investors in case of policy changes
REPUBLIC OF PERU
Legal stability
• For foreign investors:
– Equal treatment as with domestic investors
– Free disposal of foreign exchange
• For companies
– Hiring policies mechanisns
– Export promotion mechanisms
– Corporate income tax
REPUBLIC OF PERU
• Argentina• Germany• Australia• Bolivia• China• Korea• Canada• Chile• Colombia• Denmark• Ecuador
• El Salvador • Spain• Finland• Netherlands• Great Britain• Italy• Malaysia • Norway• Paraguay• Portugal
• Rumania• Sweden• Switzerland• Thailand• Venezuela
• MIGA• OPIC• ICSID
Perú is member of the following institutions:
Bilateral Investment treaties with:
REPUBLIC OF PERU
• BHP • Firth Ind.• NZ Dairy Products• Mount Isa Mines• Newcrest
• Noranda • Teck Corp.• Cominco• Hydro Quebec• Quebecor• Barrick• Newmont• Cyprus Minerals• Bell South• Nextel• Citibank• Bank Boston
• Duke Energy• PSEG• Entergy• Aguaytia Energy• Cargill• Nabisco• Procter & Gamble• Kimberly Clark• Group Mexico• Group Portales• Group Bimbo• Zeta Gas
• Luchetti• Falabella• Ripley• Mantos Blancos• Empresas Pizarreño• Empresas IANSA• Costa S.A.
• Telefónica de España• Banco Bilbao Vizcaya• Endesa Desarrollo S.A.• Grupo Santander• Repsol - YPF
• Orient Express• Royal and Sun Alliance• CDC Partners• Exotic Farm Fruits
• Shougang Corp.• Marubeni• Matsushita• Mitsui• Honda Motor• Daewoo Corp.• Mitsubishi• SK
• Nestle.• Asea Brown Boveri• Aventis• Saint Gobain• Sodexho• Schneider Electric• Pechyney• Degrémont• Holbah II Ltd.• Shell• Stet Mobile• Adrien
Many companies are now investing in Peru