May 2007
INVESTMENT OPPORTUNITIES IN INVESTMENT OPPORTUNITIES IN PERU
PERU OFFERS:
Maintaining the basic macroeconomic equilibriums Inflation between 1,5% and
3,8% in the last 7 years. Fiscal Surplus of 2%
forecasted for 2006.
An economy, working within the globalization processand with access to regionalcommercial blocks.
Stable and favorable investment climate.Investment policies based on international principles.
GDP Growth of 8% for 2006 andexpected to be close to 8% for the next years.
CAN, APEC, Mercosur,
European Union and the United
States of America with annual
commercial exchange greater
than US$ 38 600 MM.
Legal Stability
Agreements.
32 International Investment Agreements.
Investment plays an important role in the country’s Economic Growth and signals a promising future
Source: Central Reserve Bank of Peru, National Institute of Statistic and Information and SUNAT:
2004 2005 20064,8 6,4 8,039,1 13,9 20,15,7 12,2 13,02,7 4,5 7,3
40,9 35,3 36,919,6 29,6 35,4
4,7 8,4 14,713,6 14,3 27,8
4,7 7,9 16,617,5 25,5 41,3
52,3 29,4 168,3
Pensions Funds (var%)
IGBVL General Index of the Stock Exchange Market of Lima (var %)
Tax Collection (var %)
Credit System of the Private Finnancial Sector
Exports (var % en US$)Imports of capital goods (var % in US $)GDP of the construction sector (var %)
Private Investment (var %)Public Investment (var %)Employment in companies with over 10 employees (var %)
GDP (var%)
Sustainable economic growth with annual forecasted rate greater than 8%
0
2
4
6
8
80 82 84 86 88 90 92 94 96 98 00 02 04 06
Source: International Monetary Fund and the Central Reserve Bank of Peru.*Forecasted by Central Reserve Bank of Peru (9th February 2007), Ministry of Economy and Finance and the National Institute of Statistic and Information.
Developed
World
GD
P G
row
th(A
nn
ua
l va
riatio
n %
)
6,4
5,2
3,9
5,2
Peru8,03
Source: Central Reserve Bank of Peru.
* Forecasted
6 955 7 026 7 7149 090
12 809
17 336
23 750
1%
18%
37%35%41%
10%2 000
7 000
12 000
17 000
22 000
2000 2001 2002 2003 2004 2005 2006
0
0,1
0,2
0,3
0,4
0,5
0,6
0,7
Exports in millons US$" % Exports Growth (base 2000)"
Private Investment
Private Investment grew
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
01 02 03 04 05 06
Private Investment
Private Investment grew 20,1% in 2006*
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
01 02 03 04 05 06
Annual Exports growth greater than 30% Accompanied by private investment growth
(average annual % variation)
Increase in the imports of capital Goods
( Millions of US$)
Rise in the commercial exchange
(Millions of US$)
Source: Central Reserve Bank of Peru.
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Total Exports (US $ mill.) Total Imports (US $ mill.)
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Capital goods for the Industry
Transport Equipment
Others
Source Central Reserve Bank of Peru.
* Forecasted by the Ministry of Economics and Finance
Source: SUNAT
Peru is progressively reducing its fiscal deficit
(% of GDP)
0,5
By increasing its central government tax revenues
-3,3
-2,5 -2,3
-1,7
-1,1
-3,5
-3,0
-2,5
-2,0
-1,5
-1,0
-0,5
0,0
-0,4
2,5
0.0
2000 2001 2002 200320042005 2006 2007*
8 038
6 9687 501 7 696 7 821
8 915
10 247
12 123
13 134
31,1%
1,6%7,7% 2,6%
14,0%
14,9%18,3%
-13,3%
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
1998 1999 2000 2001 2002 2003 2004 2005 2006
-0,2
-0,15
-0,1
-0,05
0
0,05
0,1
0,15
0,2
0,25
0,3
0,35
Central Government Tax Revenues (in US$ MM)
% Annual change in the Central Government Tax Revenues
1,0
1,5
2,0
2,5
Exchange rate in Latin America(Index J anuary 2001=100)
Source: Bloomberg and Central Reserve Bank of Peru.
85
105
125
145
165
185
205
E-0
1
A-0
2
A-0
3
N-0
4
M-0
6
N-0
6
Peru
Brasil
Chile
Colombia
Mexico
Var
iaci
ón
an
ual
(Po
rcen
taje
)
Inflation in Latin America
... in a framework of macroeconomic stability...
Peru
Argentina
Brasil
Chile
Mexico
Peru
Argentina
Brasil
Chile
Mexico
Source: Central Reserve Bank of Peru, Chile, Mexico and Argentina.Until October 2006
-5
0
5
10
15
20
25
30
20
00
20
01
20
02
20
03
20
04
20
05
Source: Central Reserve Bank of Peru.
With increasing Net International Reserves that represent more than 12
months of imports
JP
Mo
rga
n I
nd
ex
EM
BI+
**
The careful and responsible management of our economic program has allowed us to keep our
country risk index among the lowest in the region.
Source: Bloomberg
Updated 17 April, 2007
Ne
t In
tern
ati
on
al
Re
se
rve
s
(Mili
ons
of d
olla
rs
8 180 8 6139 598 10 194
12 68114 097
17 275
5,3%
11,4%6,2%
24,4% 11,2%
22,5%
02 0004 0006 0008 000
10 00012 00014 00016 00018 000
2000 2001 2002 2003 2004 2005 2006
00,050,10,150,20,250,30,350,40,450,5
Net International Reserves (in US$ Millions)"
Annual Variation
100200300400500600700
Abr-0
7Fe
b-07
Dic-06
Nov-0
6Se
p-06
Ago-0
6Ju
n-06
Abr-0
6Fe
b-06
Ene-0
6No
v-05
Oct-0
5Ag
o-05
Jun-0
5Ma
y-05
Mar-0
5En
e-05
Nov-0
4Oc
t-04
Ago-0
4Ju
l-04
May-0
4
EMBI+ Peru Latinamerica
Just one step away from the Investment Grade
Source: Bloomberg
Peru close to the investmentgrade
S&P/Fitch
Moody's Characterstic
InvestmentGrade
AAA Aaa Risk freeAA+ Aa1AA Aa2 Superior
AA- Aa3A+ A1A A2 High capacity of
repaymentA- A3BBB+ Baa1BBB Baa2
Moderate capacity of repayment
BBB- Baa3BB+ Ba1BB Ba2 Some capacity of
repaymentBB- Ba3B+ B1B B2
High uncertainty in the capacity of repayment
B- B3CCC+ Caa1CCC Caa2
Highly vulnerable to default
CCC- Caa3
DefaultCaD
AAA Aaa Risk freeAA+ Aa1AA Aa2 Superior
AA- Aa3A+ A1A A2 High capacity of
repaymentA- A3BBB+ Baa1BBB Baa2
Moderate capacity of repayment
BBB- Baa3BB+ Ba1BB Ba2 Some capacity of
repaymentBB- Ba3B+ B1B B2
High uncertainty in the capacity of repayment
B- B3CCC+ Caa1CCC Caa2
Highly vulnerable to default
CCC- Caa3
DefaultCaD
Latin American Ranking
Countries S&P Fitch Moody's
Mexico BBB BBB Baa1Chile A A A2
Brazil BB+ BB+ Ba2Peru BB+ BB+ Ba3
Colombia BB+ BB Ba2Venezuela BB- BB- B2Argentina B+ B B3Bolivia B- B- B3Ecuador CCC+ B- Caa2
Peru offers a favorable legal framework for foreign investment ...
Legal Framework: Constitutional provisions, “Law for the Promotion of Foreign Investment”, Legislative Decree N° 662, “Framework Law for Private Investment Growth”, Legislative Decree N° 757, “Law for the Promotion of Private Investment in Infrastructure and Public Service Works”, Approved by Supreme Decree N° 059-96-PCM
Non discriminatory treatment.
Irrestrictive access to most economic sectors.
No performance requirements.
Free transfer of capital.
Free competition.
Guarantee for Private Property
Freedom to purchase stocks from locals.
Freedom to access internal and external credit.
Freedom to pay royalties.
Network of investments agreements and member of ICSID and MIGA
With a legal system that guarantees basic rules and statutes that will not change
During ten years.In case of concession, the term is subject to the term of contract (60 years maximum)The only requirement: minimum investment of US$ 5 Million (US$ 10 Million in mining and hydrocarbon sectors)
• Recruitment regimes• Regimes for the promotion of
exports • Income Tax Regime.
• National treatment• Free availability and remittance of
foreign currency*• Income tax rules applicable to
dividends.
For national and foreign investments
and his receiving company
*With capitals coming from abroad
With a stable tax regime, which main taxes are:
Note: * Burden goods: fuels, luxury goods, liquors and cigarettes
Legislative Decree No. 973 (12.03.07) standardizes the treatment for all economic activities regarding the advance recovery of the value added tax (VAT). It will come into force and effect the first business day of the month following the 90 calendar days that may take for this Decree’s regulations to be prepared and published. It is established that tax payers who purchase capital assets but do not start operations, within the framework of investment contracts subscribed with the State, will be able to recover the VAT paid in said purchases.
Dividends
Royalties
Interests
Varies up to 125% in a few products
Value Added Tax (VAT)
Excise Tax (*)
19%
Financial Transactions Tax 0.08% throughout 2007
Applicable RateTax
Income
4,1%
30%
4,99%
30%
Agriculture and aquaculture 15%Corporate profit
TARIFF LEVELS AD-VALOREM +
SURCHARGESTARIFF LINES
%
0 3 028 43,29%
12 2 843 40,65%
17 48 0,69%
20 759 10,85%
25 316 4,52%
Total 6 994 100.00%
SIMPLE AVERAGE APPLIED TARIFF RATE 8.29
and a reduced tariff structure and low tariff dispersion…
Source: SUNAT
Free market access to: Andean Community of Nations Chile MERCOSUR Mexico United States European Union Thailand
Peru has concluded the negotiations for the
Trade Promotion Agreement (TPA) with
the United States
Trade Promotion Agreement with Singapore under negotiations
Peru has the largest Chinese population in South America
The Chinese came to Peru in the second half of the 19th century. Nowadays 15% of the country's total population has some Chinese ancestry.
The Chinese influence in Peru is still very noticeable, especially in the culinary field.
Factors promoting trade and investment
1. Need of inputs to keep growth rates.
2. It requires supply sources with added value because of the lack of water and energy.
3. Availability of funds.
4. Its high volumes of production justify the development of added value proudcts.
1. Great source of inputs.
2. Source of water and energy, besides the ability to transform raw material.
3. Need of investments to develop infrastructure.
4. Demand of value added products.
China Peru
Bilateral trade (US$ million)
732 7791.063
1.321
2.002
2.924
3.639
0
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
2000 2001 2002 2003 2004 2005 2006
Source: SUNAT
Bilateral trade (US$ million)
2.271
1.368
0
500
1.000
1.500
2.000
2.500
2000 2001 2002 2003 2004 2005 2006
Peru exports to China
China exports to Peru
Source: SUNAT
Flour, powder and "pellets" of fish. Copper, zinc, molybdenum, lead
and concentrates. Preparations and conserves of
mollusks Raw Oils of oil
Domestic appliances Machines for the processing of
information Motorcycles Parts and accessories of machinery Devices of telecommunication Units of Memory Textiles Tires for cars and trucks Video cameras
Principal exports from Peru to China
Principal imports from China
Bilateral trade – principal products
COMPANIA MINERA ANTAMINA S.A
CONSORCIO MINERO S A CORMIN TEAM EXPORT S.A.C. SOUTHERN PERU COPPER
CORPORATION BHP BILLITON TINTAYA S.A. AYS S.A. SHOUGANG HIERRO PERU S.A.A. VOLCAN COMPANIA MINERA
S.A.A. CIA MINERA RAURA S A CORPORACION PESQUERA INCA
S A
SAGA FALABELLA S A LG ELECTRONICS PERU S.A. DELTRON INTERNATIONAL S A SONY SUCURSAL DEL PERU IMPORTACIONES HIRAOKA S.A.C. NEXTEL DEL PERU S.A. TECH DATA PERU S.A.C. PROCTER & GAMBLE PERU S.R.L. TIENDAS POR DEPARTAMENTO
RIPLEY S.A. TIM PERU SAC
Main exporting firms Main importing firms
Bilateral trade – exporters & importers
Commerce Finance Fishing Hydrocarbon Mining Services Tourism
Shougang Corporation Chen Kuo Ksiung China National Import and Export
Commodities Inspection Corp HSBC Latin America Holdings Limited Hsiang Sheng Huo Qixin Su Lin Zhang
Sectors Principal Investors
Investment up to 2006: US$250.000.000
Strong figures
Strategic location
Peru
Excellent opportunities