Peru’s Sol Falls Most in 21 Months on Chavez Ally’s Poll Surge

Peru’s sol fell the most in 21 months and bonds and stocks declined after opposition presidential candidate Ollanta Humala surged into first place in polls less than two weeks before the April 10 elections.

The sol posted the biggest drop since June 2009, weakening 0.9 percent to 2.8125 per U.S. dollar at today’s close, from 2.7885 on March 25.

Humala, an ally of Venezuela’s Hugo Chavez who narrowly lost the 2006 election, had 21 percent support in a poll published yesterday by Lima-based researcher Ipsos Apoyo, up from 17 percent a week earlier. Humala’s rise caused the sol to slump 1.7 percent in the past two weeks, the worst performance among 25 emerging-market currencies tracked by Bloomberg.

“Markets are going to be extremely volatile over the next two weeks,” said Benito Berber, an emerging-market currency strategist at Nomura Securities Inc. in New York. “A lot of people in the market expect Humala will lose in the end but local investors are a bit more worried.”

Humala, who lost a 2006 runoff to President Alan Garcia by 5 percentage points, seeks to increase state control over the economy, including Peru’s ports and natural gas reserves. His rise in polls has led investors to sell the Andean nation’s bonds.

The yield on Peru’s benchmark sol-denominated bond due in 2020 rose 5 basis points, or 0.05 percentage point, to a two- year high of 6.67 percent on concern Humala’s proposals may harm growth prospects and foreign investment in the $153 billion economy, according to Citigroup Inc.’s local unit. The bond’s price fell 0.36 centimo to 108.13 centimos per sol.

Stem Decline

The Lima Stock Exchange’s main index fell 5.2 percent, the biggest drop since June 2009. The slump is the biggest of the 90 primary indices tracked by Bloomberg.

Peru’s central bank sought to stem today’s decline in the currency by issuing sol-indexed certificates of deposit for the first time since October 2009. The central bank sold 300 million soles ($107 million) of adjustable three-month certificates yielding 0.25 percent, after offering to sell as much as 800 million soles, it said on its website.

Humala’s plan to impose a mining windfall tax will stunt investment in Peru’s mining industry and jeopardize future revenue for the government, according to Carlos Galvez, Chief Financial Officer of Cia. De Minas Buenaventura, the country’s largest precious metals producer.

The central bank expects Peru to receive $30.1 billion of investment in mining, energy and infrastructure projects between 2011 and 2012.

“A Humala presidency will most likely mean gradual fiscal deterioration,” Berber said.

Runoff Vote

According to the Ipsos Apoyo poll, former President Alejandro Toledo, who had been the frontrunner in polls since the start of the year, fell to 20 percent support from 23 percent a week ago. Support for Congresswoman Keiko Fujimori was unchanged at 19 percent.

A runoff vote between the two leading candidates will be held June 5 if no candidate wins more than 50 percent in the first round of balloting.

Humala may face Fujimori in the runoff unless Toledo makes a comeback before the first vote, Barclays Plc. said in an e- mailed note to investors today.

“Such a scenario could cause anxiety in the markets,” given Humala and Fujimori’s relatively high rejection rates, Barclays analysts Alejandro Arreaza, Alejandro Grisanti and Roberto Melzi wrote.

Poll

Ipsos Apoyo’s poll showed support for Pedro Pablo Kuczynski, a former Finance Minister and ex-chairman of First Boston International, rose 1 percentage point from a week ago to 15 percent. Former Lima Mayor Luis Castaneda was unchanged at 14 percent, the researcher said.

The pollster contacted 1,986 people in 24 of Peru’s 25 regions from March 19 to 25. The poll had a margin of error of 2.2 percentage points.

Humala would lose a runoff vote with Fujimori, Toledo and Castaneda, and would tie with Kuczynski, the poll shows.

“The second round is a different ballgame,” Alfredo Torres, general manager of Ipsos Apoyo, said in an interview with America Television yesterday. “New strategies and alliances emerge so the numbers could change a lot.”

According to a poll published yesterday by researcher CPI, Humala had 21 percent support and Toledo and Fujimori each had 19 percent.

John Quigley - Bloomberg

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net

To contact the editors responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net; David Papadopoulos at papadopoulos@bloomberg.net

Lima's Municipal Theatre to reopen with Juan Diego Florez concert

Peruvian tenor Juan Diego Florez will appear at the Teatro Municipal of Lima when the 91-year-old theater reopens its doors to the public in June 2011 after a US$27.5 million renovation.

The Municipality of Lima has recently approved an additional 7.9 million soles (US$2.8 million) for the final phase of refurbishment works at the theater, which was partially destroyed by a voracious fire in 1998.

The teather was symbolically reopened in October 2010 by Peruvian President Alan Garcia and former Mayor Luis Castañeda.

Art and architecture experts, as well as the best Peruvian artisans, have lovingly executed the restoration, using pictures and design drawings from the original 1920 house, even decorating 350 ornaments in gold leaf.

Now equipped with state-of-the-art acoustics, visual and safety technology, the theater is poised to become one of the most important stages in Latin America.

The building was inaugurated in 1920 under the name of "Teatro Forero." It was later bought by the Metropolitan Municipality of Lima in 1929 and renamed "Teatro Municipal."

The Municipal Theatre is located in the Historic Centre of Lima, on Jiron Ica 377 at the intersection with Calle Rufino Torrico.

Today in Peru

Huayno Peruano Navideño, compuesto por Juan Diego Florez

Chavez Ally Humala Says He’ll Renegotiate Peru Energy Deals

Peruvian presidential candidate Ollanta Humala, a one-time ally of Venezuela’s Hugo Chavez whose late surge in the polls is leading investors to dump the nation’s bonds, said he’d renegotiate energy and mining contracts with foreign companies if he wins next month’s vote.

Humala, who narrowly lost the previous runoff in 2006 to President Alan Garcia, said he favors renegotiating deals with companies such as Hunt Oil Co.’s $4 billion Peru LNG plant and the $1.6 billion Camisea gas fields project to ensure Peru’s industry is supplied ahead of fuel exports.

“We must recover sovereignty over Peru’s natural resources because the multinationals now own our gas and prefer to sell it abroad,” Humala said March 23 in an interview at his hotel while campaigning in the city of Trujillo, 480 kilometers (300 miles) northwest of Lima. “There must be a mining windfall tax as the current model isn’t sustainable.”

Peru’s currency and bonds dropped this week after polls showed the 48-year-old Humala closing in on frontrunner Alejandro Toledo, forcing investors to reassess the threat of a nationalist government taking the reins of South America’s sixth-largest economy. Humala trailed Toledo, a former president, by less than two percentage points in a poll by Lima- based Datum Internacional published today in Peru 21 newspaper.

Stock Exchange Loss

The Lima General Stock Index fell 1.5 percent to 22,218.87 at 2:39 p.m. New York time. Peru’s currency weakened 0.2 percent to 2.7885 soles per U.S. dollar and the yield on its benchmark August 2020 bond increased 12 basis points to 6.720, a nine- month high.

Humala, a former army lieutenant colonel, led 50 soldiers a decade ago who seized and occupied for a week one of Southern Copper Corp.’s mines. He’s surged in the polls ahead of the first round of voting April 10 amid pledges to impose a mining windfall tax and ramp up state control of the country’s natural resources.

The value of mining exports from Peru, the world’s second- largest copper producer and No. 1 in silver, rose 27 percent to $21 billion last year as metals prices surged. A windfall tax may discourage about $40 billion in future investments by companies including Anglo American Plc, Xstrata Plc and Cia. de Minas Buenaventura SA, Peru’s National Society of Mining, Petroleum & Energy has said.

Raising Taxes

“Raising taxes will mean a series of mining projects won’t happen,” Buenaventura’s Chief Financial Officer Carlos Galvez said today in a telephone interview. “It would provide the government with a few years of financing for social projects and eventually run out for lack of investment.”

Mining companies in Peru, which account for 60 percent of tax income, currently pay up to a 3 percent royalty. Peru’s foreign debt is rated investment grade by Moody’s, Standard & Poors and Fitch Ratings.

“A nationalist government would change the rules of the game and possibly even the terms of existing contracts,” said Enrique Alvarez, head of Latin America fixed-income research at IDEAglobal in New York. “By interfering, you would have a very negative signal sent out to additional foreign investors in these industries.”

Humala is most popular outside the capital. While campaigning in Trujillo, street vendors and grease-smeared mechanics tussled to greet and hug the candidate while chanting his name.

Lost Runoff

Humala, who lost the 2006 runoff to Garcia by 5 percentage points, seized Southern Copper’s Toquepala mine in 2000 to protest the corruption that beset the government of then- President Alberto Fujimori, who later fled into exile. Humala was pardoned by interim President Valentin Paniagua, who replaced Fujimori, and was sent by Toledo to Paris and Seoul as a military attache.

Humala earned a master’s degree in social studies from Lima’s Catholic University and failed to finish a doctorate in military studies that he began at the Sorbonne in Paris.

During this year’s campaign, he started donning a suit and has downplayed his friendship with Chavez, saying he won’t emulate in Peru the Venezuelan leader’s policy of expropriating companies. Humala said he hasn’t visited Caracas since 2006.

“We need a strong state, but we will respect investment and private property,” Humala said. “We’re not going to copy foreign models.”

Humala will find it harder to win a second round runoff, according to Datum, whose poll showed him losing in an eventual showdown with any of four candidates including Toledo and former Finance Minister and banker Pedro Pablo Kuczynski.

Datum’s poll published today surveyed 1,214 people from March 19 to 23 and had a margin of error of 2.8 percentage points.

“PERU LNG has had successful and transparent relations with all of the four administrations that have been chosen by Peruvians in the elections of the past decade,” Peru LNG general manager Igor Salazar said today in an e-mailed response to questions. “We are confident that the next administration will honor the LNG contracts and continue the support of the PERU LNG project.”

Alex Emery - Bloomberg

To contact the reporter on this story: Alex Emery in Lima at aemery1@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net.

OAS recognizes Peru's gastronomy with Cultural Patrimony of the Americas Award

The Organization of American States (OAS) today recognized Peruvian gastronomy by bestowing it the first “Cultural Patrimony of the Americas” award in a special ceremony held today in Washington as part of the launching of the Inter-American Year of Culture in the Americas.

OAS Secretary General Jose Miguel Insulza gave this important award to Foreign Trade and Tourism Minister Eduardo Ferreyros.

Peru is the first country in the region to receive such distinction, which has been created by the OAS in order to spread the cultural contribution of the Latin American countries to the world and strengthen their position in the international arena from a dynamic perspective in constant evolution.

Before this event, Vice Minister of Heritage and Cultural Industries in the Ministry of Culture of Peru talked on “The importance of cultural policies in the current national context: Peru’s Culture Ministry as development factor”.

The ceremony was held at the OAS headquarters in Washington D.C., and was attended by senior government officials from Peru and the U.S., as well as former American ambassadors in Lima, among other guests. (Andina)

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Lima, Peru: The 'City of Kings' reigns again

Lima or ‘The City of Kings’, once a place to leave as quickly as possible, reigns again showing off its many colonial and pre-conquistador glories, according to an article in UK online newspaper The Telegraph.

“Lima must have one of the most fabulous sunsets in the world. It helps, of course, that the city faces due west across the Pacific, so the setting sun can flood into the beaches and pick out the last surfers elegantly essaying a few lines,” the report says.

Up above on the cliffs, paragliders spiral past the smoked-black windows of the nearby hotels, many of which have infinity pools on their rooftops.

It all seems very Californian. The crowds promenading along the seafront eating ice cream and taking in the spectacle have a prosperous feel.

The article also highlights Lima's boom in recent years. "Even the taxi drivers no longer have anything to complain about," it states.

Peru, like neighboring nations Chile and Brazil, has largely missed out on the worldwide recession, helped by strong mineral exports and a surprisingly conservative banking system.

The report also recounts how the Shining Path years – when the country was terrorised by Maoist revolutionaries – seem to be a distant memory. (Andina)

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Peru mining investment up 50% in January

Official figures revealed Sunday that investment in Peru's mining sector rose by 50 percent year on year in January to US$327.5 million.

According to the country's Ministry of Energy and Mines (MEM), the growth resulted in the creation of 153,977 additional jobs only in January, 18962 more than a year earlier.

The ministry said that during the first month of the year mining investment focused on twenty Peruvian regions, with amounts varying depending on the progress of the projects.

Cusco came first in attracting mining investments during the month, with US$73.8 million or 22.5 percent of the total.

Following behind were Cajamarca, with US$51.4 million; Ancash, with US$37.7 million; Arequipa, with US$27.7 million; Pasco, with US$26.2 million and La Libertad, with US$ 19.7 million. (Andina)

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Peru GDP expected to grow 7% in 2011

Peru's economy seems to have reached a trend of sustained growth, and its gross domestic product is expected to grow seven percent in 2011, Central Reserve Bank of Peru President Julio Velarde said Friday.

Peru's GDP has been one of the fastest growing in Latin America, Velarde said while speaking at the New York Stock Exchange. The manufacturing and construction sectors likely will drive economic growth this year, he said.

"Domestic demand has been a factor behind growth," Velarde said, noting that electricity production in Peru grew more than 10 percent in the first two months of 2011.

Sound fiscal policies have improved the country's fiscal position, he said. Still, Peru needs some reforms, including increasing the flexibility of the labor market and improving the quality of education, the central banker said.

Although inflation in Peru has been among the lowest in Latin America, it is increasing, he said, adding that there is some concern about commodity prices.

The central bank aims to keep inflation within a range of 1.0 percent to 3.0 percent, reported Dow Jones.

On Thursday, Peru's central bank raised its reference interest rate by 25 basis points to 3.75 percent. It reiterated that its interest-rate increase was of a "preventive" nature, coming against a backdrop of rising international prices for food and energy.

Velarde said Friday that the Peruvian sol has been one of the less-volatile currencies in the region. (Andina)

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Peru’s non-traditional exports to grow over 25% this year boosted by Peru Brand

Peru’s non-traditional exports would grow more than 25 percent this year boosted by the launching of he new Peru Brand logo, which will contribute to improve teh quality of Peruvian shipments, said Peru's Ministry of Foreign Trade and Tourism (Mincetur).

“The goal is now that the entire world regards Peru as a country that grows, exports and offers an incomparable tourist experience, can include us in its main destination portfolio in these three areas,” said Peru’s Minister of Foreign Trade and Tourism, Eduardo Ferreyros.

The minister stated that the technical team of Peru Image Promotion at Peru's Export and Tourism Promotion Board (Promperu) will advise all the companies that want to use Peru Brand on its products, in order to facilitarte export procedures.

“The procedures to authorize an export company to use the Peru Brand would take one week and a half as a maximum period,” Ferreyros said.

The first products with the Peru Brand logo could be exported in June, he said. (Andina)

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American Food Festival: American chef visits Lima to catch the best of Peruvian cuisine

US renowned chef Dan Mc Gee is visiting several restaurants in Lima to catch the best of the Peruvian cuisine as he acknowledges that the country's gastronomy has experienced a rapid growth worldwide.

Mc Gee said that Peruvian cuisine is varied and diverse; but the most recognized dish abroad, especially in North America, is “cebiche”.

He added he hopes to visit many restaurants in Lima to know more about Peruvian cuisine and its most famous dishes and to get secret recipes to try at home.

“When I think about Peruvian food, cebiche is the first thing that comes to my mind. I think it's great and I hope I have the time to see some of these restaurants (which prepare cebiche)", he said to Andina.

Mc Gee, who is the head chef of Chicago Swisshotel, is visiting Peru to lead the traditional American Food Festival to take place in the “Locanda” restaurant, a subsidiary of the Swisshotel in Lima. (Andina)

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Peru's January gold, silver, zinc output falls; copper up

Production of Peru's precious metals and zinc declined in January, while copper production rose, the government said.

The Ministry of Mines and Energy said Thursday that output of gold totaled 13,202 Kgs, down 17.4% compared to the same month a year earlier.

Output of gold fell at Barrick Gold Corp.'s Barrick Misquichilca unit; at Minera Yanacocha, and at other mines, it said.

Silver production in Peru, the world's largest producer of that precious metal, fell 1.1% in January to 296,421 kilograms, compared to the year before period. That was due to lower output at various mines.

According to a Dow Jones Newswire article, copper production increased 0.8% to 102,744 metric tons in January, as a number of mines increased output. Zinc production was 121,424 tons in January, down 2.9% from the year earlier period.

Among some of the other minerals, the government said molybdenum output rose 16.7% in January to 1,412 tons. Lead output declined 23.6% to 18,073 tons in January. Iron output rose 22% to 540,326 tons, while tin output fell 24.7% in January to 2,285 tons. (Andina)

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Peru able to maintain annual economic growth of nearly 8% beyond 2013

Peru is able to maintain annual economic growth of around 8 percent beyond 2013 as it has plenty of room to expand at a rapid pace, Peru’s Ministry of Economy and Finance (MEF) reported Wednesday.

“Peru’s growth potential is estimated at 6.5 percent to 7 percent per year. But if things go well, the country is able to maintain economic growth of up to 7.5 and nearly eight percent beyond 2013,” Benavides stated.

In fact, he said, the International Monetary Fund (FMI) forecasts that our economy will increase at a remarkable pace and places Peru in the selected group of countries predicted to grow by more than 6 percent in 2011-2013.

According to Benavides, figures and real-world experience showed that countries investing 25 percent more of their gross domestic product (GDP) have guaranteed their growth for the coming years.

“Along with the economy, consumption and private investment will also continue to maintain their dynamic growth trend this year,” Benavides told Andina news agency. (Andina)

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