Air France resumed operations in Peru with five Lima-Paris weekly flights

The first Air France flight of all five weekly direct flights from Paris to Peru arrived Tuesday afternoon to Lima.

Thus, the Air France KLM Group offers twelve weekly flights from Lima to Europe and the world.

The first delegation of officials from the French airline was led by Director of Air France KLM routes to the Americas Henri Hie, who expressed his satisfaction for having arrived in Lima on a nonstop flight. He added that resuming operations in Peru will further strengthen Franco-Peruvian trade relations and friendship.

Hie and his entourage were welcomed at the Jorge Chavez International Airport by Minister of Foreign Trade and Tourism Eduardo Ferreyros, French Ambassador to Peru Cecile Pozzo di Borgo and Promperu Director of Tourism Promotion Rocio Merino.

Also, by LAP General Manager Juan Jose Salmon, Corpac Airports Manager, Juan Carlos Crovetto, Air France-KLM Director for Andean and Central America area Domingo de Cola and AIR FRANCE KLM General Manager for Peru Frances Stone.

In an emotional welcoming ceremony, the pilots of the modern Air France Boeing 777-200ER showed the flags of France and Peru from the cockpit.

Hie formally announced the upcoming visit to Peru of Air France KLM Chairman and CEO, Jean-Cyril Spinetta and Pierre-Henri Gourgeon, respectively, on July 1, who are meet with President Alan Garcia at the Government Palace. (Andina)

Today in Peru

Trans-Pacific free trade talks begin in Vietnam, eye draft consensus

Nine countries engaged in talks for the Trans-Pacific Partnership free trade pact began a five-day meeting Monday in Vietnam, aiming to build consensus for a draft deal, with particular emphasis on the disputed issues of labor and environment.

Representatives of the nine nations, including Peru, had initially aimed to conclude negotiations before the summit of the 21-member Asia-Pacific Economic Cooperation forum in Honolulu in November. Due to a lack of progress in the talks, however, they now only seek to come to a broad agreement by the date, the Japanese news agency Kyodo reported.

The countries, which also include Chile, Brunei, Malaysia, New Zealand, the United States, Singapore and Vietnam, are in accord over the immediate lifting of tariffs for 90 percent of the goods to be affected, but remain divided over the remaining 10 percent of key items such as sugar and dairy products, sources involved in the negotiations said.

Ahead of the main consultations by the countries' chief negotiators, representatives had been meeting in Ho Chi Minh City since Wednesday under the various working committees.

Japan, which had earlier planned to decide in June whether to join the TPP negotiations, has put off the decision due to the March 11 earthquake and tsunami disaster.

The meeting in Vietnam will be followed by others in the United States in September and in Peru in October. (Andina)

Today in Peru

Peru’s economy jumped 7.35% in April

Today in Peru

Peruvian economy rose by 7.35 percent in April 2011, marking the 20th consecutive month of growth of the Gross Domestic Product (GDP), Peru’s National Statistics Institute (INEI) reported Wednesday.

Thus, the country’s GDP grew 8.3 percent in the first fourth months this year, meanwhile between May 2010 and April 2011 (the last 12 months) it reached 9.23 percent.

The chief of INEI, Anibal Sanchez, said that the growth of production in the fourth month of the year resulted in increased internal and external demand.

Between January and April, the agricultural and livestock activity registered a 2.83 percent increased, boosted by the livestock sub-sector (6.63 percent) and agricultural sub-sector (0.35 percent).

In April, fishing rose by 93.75 percent, driven by maritime fishing (102.4 percent) and despite the decrease of continental fishing (-11.20 percent). (Andina)

Today in Peru

Colombia, Peru Stock Exchanges Postpone Merger Following Ollanta’s Victory

Today in Peru

Bolsa de Valores (VALORES) de Colombia SA, the operator of the country’s principal stock exchange, and Bolsa de Valores de Lima SA (BVLAC1) said they will delay their merger until they present details to Peru’s new government.

The BVC and BVL, as the exchanges are known, said in a joint statement yesterday that postponing the operation allows them to provide information on the project to President-elect Ollanta Humala’s administration “before it is finalized” and the merger plan will not be altered.

Investors pulled out of Peru’s financial markets the day after Humala beat Congresswoman Keiko Fujimori, daughter of jailed former President Alberto Fujimori. The benchmark stock index plunged a record 12 percent on June 6 on concern Humala, a one-time ally of Venezuelan President Hugo Chavez, would fulfill pledges he made early in the presidential campaign to boost government control of the economy.

The BVC and BVL exchanges said the decision does not impact the integration of stock trading between Colombia, Peru and Chile, known as MILA, which began trading on May 30.

Kurt Burneo, economic adviser to Humala, said in an interview June 8 the MILA integration was done “too quickly” and the new government may renegotiate parts of the arrangement if benefits aren’t fairly shared. There is “asymmetry in the distribution of benefits” between the countries, he said.

Bogota-based BVC said in January it was acquiring 64 percent of the BVL for an undisclosed amount and the transaction would be completed later this year. The combination would create the fourth-biggest market in Latin America after Brazil, Mexico and Chile. The merged exchange aims to boost liquidity, enable portfolio diversification and create new securities.

“The BVL and BVC reiterate their interest in continuing the process of merging the two entities and confirm their confidence that the integration of the exchanges will contribute in a significant way to the development of capital markets in Peru and Colombia and in this way to the economic growth of both countries,” the statement said.

Colombia’s IGBC Index fell 1.1 percent, the most in a month, to 14,248.27 yesterday, while the Colcap Index declined 1.2 percent to 1,730. The Lima General Index dropped for a second day, sliding 0.3 percent to 20,597.58. The MSCI All Peru Capped Index fell 0.4 percent to 2,610.49.

Helen Murphy - Bloomberg

To contact the reporter on this story: Helen Murphy in Bogota at hmurphy1@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.

Today in Peru

Peru Unexpectedly Keeps Rate at 4.25% as Growth, Inflation Slow on Humala

Today in Peru

Peru’s sol-denominated bonds rose the most in 11 weeks after the central bank unexpectedly kept its benchmark rate unchanged for the first time in six months on a slowdown in growth ahead of the this month’s presidential elections.

The yield on the nation’s benchmark 7.84 percent sol- denominated bond due August 2020 fell two basis points, or 0.02 percentage point, to 6.54 percent, according to prices compiled by Bloomberg. The bond’s price rose 0.15 centimo to 108.90 centimos per sol.

“There is some re-pricing because people were expecting a hike,” said Roberto Melzi, a Latin America strategist at Barclays Capital Inc., said in an phone interview from in New York. “There’s still is a lot of risk premium priced in that’s related to the elections.”

The seven-member board, led by bank President Julio Velarde, kept the benchmark rate unchanged at 4.25 percent yesterday, surprising 12 of 17 economists surveyed by Bloomberg who expected a quarter-point increase. Five economists forecast a pause.

Economic growth in Peru slowed ahead of a victory in the June 5 presidential race by Ollanta Humala, a one-time ally of Venezuela’s Hugo Chavez. Finance Minister Ismael Benavides in a interview this week said policy makers had leeway to keep rates on hold as investors await “clear signals” from Humala on how he’ll manage South America’s sixth-biggest economy.

Since breaching the top of the central bank’s target range of 1 percent to 3 percent for the first time since mid-2009 in April, the annual inflation rate fell to 3.07 percent last month from 3.34 percent in April. An easing of government spending growth and increases in the benchmark rate has helped tame inflation, Benavides said. Prices in May fell 0.02 percent.

Investor Uncertainty

“There’s uncertainty about how quickly investment will pick up so it’s better to wait and see,” said Alonso Segura, head of investment strategy and research at Banco de Credito del Peru, the nation’s biggest bank. 

Policy makers “still need to raise once or twice more but they’re close to the end of the cycle,” he said.

After posting annual gross domestic product growth of 8.8 percent for 2010 and year-on-year growth of 10.2 percent in January, the government last month cut its 2011 growth forecast for to 6.5 percent from 7.5 percent.

Policy makers said in announcing their rate decision that it “reflects the moderation in the pace of growth in consumer prices and some indictors of activity,” according to a statement on the central bank’s website. 

“Future adjustments in the benchmark rate will depend on new information about inflation.”

Stock Selloff

Peru’s benchmark stock index plunged a record 12 percent on June 6 on concern the president-elect might make good on campaign pledges to increase government control of the economy and unilaterally boost mining royalties.

Since the market’s plunge in the first day of trading following the election, the Lima general index has staged a three-day rally, recovering most of its record plunge, while Peru’s bonds, and sol currency rebounded.

The bank’s rate “decision was likely influenced by the fact that Ollanta Humala clinched the presidential elections, as this event has generated a sour mood in the market and could have a negative impact on activity in coming quarters,” Citigroup Global Markets Inc. Latin America economist Camilo Gonzalez wrote in a research note e-mailed to investors.

Market View

Humala, leader of Peru’s Nationalist Party, shifted his stance during the campaign to defending policies that made Peru the fastest growing Latin American economy over the past decade and distanced himself from his one-time ally, Venezuelan leader Hugo Chavez.

The 48-year-old president-elect will follow the Brazilian government’s “successful” socio-economic policies to sustain region-beating growth and cut poverty with higher social spending, he told reporters in Brasilia this week.

In an interview with CNN’s Spanish-language channel on June 7, Humala said he is considering asking Velarde to remain in his post once his five-year term expires.

The new government is committed to maintaining existing macroeconomic, monetary and fiscal policies, said former central bank President Oscar Dancourt, an aide to Humala who Bank of America said may be a candidate to take over at the central bank.

Wait-and-See

Still, investors remain wary of Humala, whose original government platform called for changing the constitution to give the state a stronger role in the economy, including its ports and pension system.

Humala needs to send signals about ministerial appointments and future policies to reassure companies, many of which have placed investment projects on hold, said Pedro Olaechea, president of the National Society of Industries.

“Some companies have decided to continue but others are waiting for signs on whether to keep investing or not,” Olaechea said in an interview in Lima yesterday. “It doesn’t make sense to raise rates because of the fall in economic activity.”

Companies curtailed spending and hired fewer staff in April while the sale of cars slowed, wrote Francisco Grippa, an economist at Lima-based BBVA Banco Continental, in a note to clients yesterday.

“Private spending has eased amid a more uncertain environment tied to the change of government,” he said.

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.

Today in Peru

Peru May Raise Key Rate to 4.5% to Help New Leader Humala Check Inflation

Today in Peru

Peru’s central bank will probably raise its benchmark lending rate for a sixth straight month to head off inflationary pressures four days after Ollanta Humala won the country’s presidential election.

The seven-member board will raise the benchmark rate by a quarter point to 4.50 percent, according to 13 of 17 economists surveyed by Bloomberg. Four economists forecast a pause. The board will announce its decision today at about 6 p.m. New York time.

Higher food costs pushed inflation outside the central bank’s target range of 1 percent to 3 percent for the first time since mid-2009 in April. While the annual rate slowed last month, a rate increase would show policy makers haven’t taken their eye off inflation in the heated aftermath of the former army lieutenant-colonel’s electoral victory June 5, Bank of America- Merrill Lynch said in a report this week.

“Investment is growing more slowly than it was, but it’s still growing,” said Carola Sandy, a Latin America economist at Credit Suisse Group AG. “It’s not obvious that the economy is slowing down enough. So far, the story that we’re getting from the Humala camp is relatively supportive of the economy.”

Finance Minister Ismael Benavides said in a June 7 interview that another rate increase isn’t necessary because inflationary pressures are receding as investors await “clear signals” from Humala on how he’ll manage the economy.

Humala Cabinet, Policies

Peru’s benchmark stock index plunged a record 12 percent on June 6 on concern the president-elect might make good on campaign pledges to increase government control of the economy and unilaterally boost mining royalties. In trading on June 7, stocks, bonds, and Peru’s sol currency rebounded as investors took advantage of the selloff.

Humala, leader of Peru’s Nationalist party, shifted his stance during the campaign to defending policies that made Peru the fastest growing Latin American economy over the past decade and distanced himself from his one-time ally, Venezuelan leader Hugo Chavez.

In an interview with CNN’s Spanish-language channel on June 7, Humala said he is considering asking central bank President Julio Velarde to remain in his post once his five-year term expires.

The new government is committed to maintaining existing macroeconomic, monetary and fiscal policies, said former central bank President Oscar Dancourt, an advisor to Humala who Bank of America said may be a candidate to take over at the central bank.

Still investors remain wary of Humala, whose original government platform called for changing the constitution to give the state a stronger role in the economy, including its ports and pension fund system.

Growth, Investment, Prices

Peru is in the midst of an “unsustainably strong expansion” Morgan Stanley economists Gray Newman and Daniel Volberg wrote in a June 6 report. Economic indicators including electricity output, which rose 7.2 percent in April, show domestic demand still risks fuelling inflation.

Peru’s economy, which expanded 8.8 percent in 2010, slowed in the first quarter as companies curtailed spending before the election. The government last month cut its 2011 growth forecast to 6.5 percent from 7.5 percent.

Consumer prices in May fell 0.02 percent from April and annual inflation slowed to 3.07 percent from 3.34 percent. An easing of government spending growth and increases in the benchmark rate have helped tame inflation, Benavides said June 7.

The president-elect needs to send signals about ministerial appointments and future policies to reassure companies, many of which have placed investment projects on hold, said Pedro Olaechea, president of the National Society of Industries.

“Some companies have decided to continue but others are waiting for signs on whether to keep investing or not,” Olaechea said in an interview in Lima yesterday. “It doesn’t make sense to raise rates because of the fall in economic activity.”

Central bank policy makers will keep the benchmark rate on hold until the outlook for growth is clearer, Barclays Capital Inc. said in a June 6 note to clients.

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.

Peru’s President-Elect Humala Understands Need for Stability, Aide Says

Today in Peru

Peru’s President-elect Ollanta Humala understands the importance of economic and fiscal stability to the country and needs a few more days to choose his Cabinet, economic policy aide Oscar Dancourt said.

“I think he knows very well the importance of maintaining macroeconomic stability, monetary and fiscal policy,” said Dancourt, who Bank of America-Merrill Lynch reported may be a candidate for central bank chief, in an interview. "He knows well the importance of the need to have an autonomous central bank."

Humala, 48, edged out his rival, Congresswoman Keiko Fujimori, in the presidential election June 5, sparking a sell- off of Peru’s stocks, bonds and currency the following day. Investors are betting his choice of ministers will reveal whether he has moved away from his past support of Venezuelan President Hugo Chavez’s policies and pledges to boost government control of the economy.

Finance Minister Ismael Benavides yesterday urged Humala to send “clear signals” to the market about his economic policies to reassure investors and offered to accompany members of Humala’s team to meet overseas investors before the government’s term ends July 28.

“It’s not necessary,” Dancourt, central bank chief under former President Alejandro Toledo, said when asked about the offer. “What we need now is to concentrate on the transfer from one government to the next, work on the different areas of national policy and not only on the economic sector.”

‘Interventionist’ Stance

Humala said in an interview with CNN’s Spanish-language channel yesterday that he will meet with current bank chief Julio Velarde to decide whether he will keep his job. Bank of America said in its report yesterday that Dancourt poses more risk due to his “interventionist” stance in favor of capital controls and taxing inflows.

The report said Humala’s Cabinet may include former deputy finance minister Kurt Burneo or economic consultant Raul Salazar as finance minister.

The nation’s stocks, bonds, and currency rose today for a second day as investors took advantage of the sell-off. The Lima General Index climbed 3 percent to 20,468.56 at 11:03 a.m. New York time after plunging 12 percent on June 6.

The sol was little changed at 2.7853 per dollar.

Dancourt dismissed Benavides’s pledge to boost liquidity in the financial system if there is a “substantial” withdrawal of funds and said the finance minister should have been more “prudent” in calming the market ahead of the election. He criticized the government’s proposal to raise the limit on private pension funds’ investment overseas to 50 percent from 30 percent shouldn’t be approved by congress.

“I don’t think the bill was prudent,” he said. “You have to be careful about the effect these sort of things have on the exchange rate and the economy. I don’t think it should be approved.”

Helen Murphy - Bloomberg

To contact the reporter on this story: Helen Murphy in Lima at hmurphy1@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

Peru Bonds Gain as Credit Suisse Says Humala Sell-Off a Buying Opportunity

Peruvian dollar bonds gained as Credit Suisse AG and RBS Securities Inc. recommended the notes after the debt tumbled yesterday following the election of ex- military rebel Ollanta Humala.

The extra yield investors demand to own Peruvian bonds instead of U.S. Treasuries declined 17 basis points, or 0.17 percentage point, to 197 at 5:51 p.m. in New York, according to JPMorgan Chase & Co. The yield gap soared 23 basis points yesterday, the biggest one-day jump since May 2010, on concern that Humala will fulfill pledges he made early in the presidential campaign to boost government control of natural resources and increase mining royalties.

Humala, 48, who defeated congresswoman Keiko Fujimori, 36, in the June 5 run-off vote, sought late in the campaign to distance himself from those comments, saying he would emulate the pro-market policies of former Brazilian President Luiz Inacio Lula da Silva. Peru’s economy expanded more than 7 percent in each of the past 13 months and it has been the fastest growing in Latin America over the past decade.

“You have to put things into the context of where Peru fundamentals are,” Pablo Cisilino, who helps manage $24.5 billion in emerging market debt at Stone Harbor Investment Partners in New York, said in an interview.

“Even if Humala started doing some less market friendly policies, there’s not going to be an immediate deterioration of the credit.”

Peruvian stocks also rebounded today, with the benchmark index climbing 7 percent after a record 12 percent tumble yesterday that prompted exchange officials to end trading early. The sol strengthened 0.1 percent to 2.7865 per U.S. dollar, after falling 0.9 percent yesterday, the most in almost two years.

Borrowing Costs

The yield on Peru’s benchmark dollar bonds due in March 2037 fell 12 basis points to 5.806 percent today, after jumping 19 basis points yesterday, the most since November 2008.

’’It’s clear that there’s a willingness to buy here on weakness,’’ said Siobhan Morden, an emerging markets debt strategist with RBS Securities in Stamford, Connecticut. ’’If you believe that Peru will not lose its investment-grade rating, eventually it will retrace back for a full recovery.’’

The South American country’s credit fundamentals are “so unbelievably strong” that there’s room for further upgrades to the dollar debt, which Moody’s Investors Service rates Baa3, the lowest investment grade, Patrick Esteruelas, a senior analyst at the ratings company said yesterday.

“A lot has to go wrong to jeopardize Peru’s investment- grade rating,” he said by phone from New York.

Peru is rated BBB- by Standard and Poor’s and Fitch Ratings, also the lowest investment grades.

Debt Insurance

The cost to protect Peru’s debt from non-payment with credit-default swaps for five years fell 13 basis points today to 154 in New York, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. Yesterday, the swaps jumped 20 basis points.

Before Humala began advancing in pre-election polls, the cost for debt insurance was in line with other investment-grade countries in the region including Brazil, Panama and Colombia.

The price of the swaps will decline to 110, close to the level before the presidential election in mid-March, said Diego Donadio, a Latin American strategist at BNP Paribas in Sao Paulo.

“We believe that Humala will not be that disruptive for markets,” he said by phone. “The economic advisers, the names that are being rumored that’ll assume the ministry of finance, the central bank are market friendly and moderate names.”

Central Bank

Humala may decide to keep Julio Velarde as head of the country’s central bank, Bank of America-Merrill Lynch said in a report today. Another candidate to replace Velarde, former bank President Oscar Dancourt, poses more risk due to his “interventionist” stance favoring capital controls and taxing inflows, Bank of America said.

Changes at the central bank may take place in September, the bank said. A divided Congress and Peru’s fiscal sustainability law will make it difficult for Humala, a one-time ally of Venezuela’s Hugo Chavez, to institute any “radical” changes at the outset of his government, according to Bank of America.

Humala said on June 5 he would seek broad backing for his policies and form a government comprised of the most-qualified people independent of their political affiliation. To reinforce his ties with Latin America’s biggest economy, Humala plans to travel to Brasilia and meet with Lula’s successor, Dilma Rousseff, before taking office July 28, Marco Aurelio Garcia, a foreign policy adviser to the Brazilian leader, told reporters yesterday.

Silver, Copper and Zinc

“The new president is likely to end up opting for policy prudence and he is taking over an economy that is in very good shape,” Credit Suisse analysts said in a report to clients.

Peru is the world’s biggest silver producer, and third in copper and zinc. Mining investment helped bring in $7.3 billion in foreign direct investment last year.

As an army lieutenant colonel in 2000, Humala led 50 soldiers who seized and occupied for a week one of Southern Cooper Corp.’s mines to protest corruption in Fujimori’s government. His brother, Antauro Humala, is in jail for killing four policemen during the takeover of a highland town in 2005.

“There’s a clear willingness to provide Peru the benefit of the doubt,” Morden said in a telephone interview. “It’s a view itself on the credit, not on the person.”

Ben Bain and Belinda Cao - Bloomberg

To contact the reporters on this story: Benjamin Bain in New York at bbain2@bloomberg.net; Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

Peru’s Dollar Bonds Sink as Ex-Chavez Ally Humala Claims Election Victory

Peru’s stocks tumbled the most in two years and dollar bonds fell after former army rebel Ollanta Humala claimed victory in the country’s presidential runoff yesterday and sparked concern that he will seek greater state control of the economy.

Peru’s benchmark Lima General Index of stocks sank the most since October 2008, retreating 8.7 percent to 19,378.78 at 9:38 a.m. New York time. Yields on dollar-denominated bonds due 2037 rose 17 basis points, or 0.17 percentage point, to 5.91 percent, according to data compiled by Bloomberg.

Humala, 48, leader of the Nationalist Party and a one-time ally of Venezuelan President Hugo Chavez, had 51.3 percent of votes compared to 48.7 percent for Congresswoman Keiko Fujimori with 88 percent of votes counted. Polls last week showed the candidates were tied. While Humala shifted during the campaign to defending policies that made Peru the fastest growing Latin American economy over the past decade, investors remain concerned he will raise mining royalties and impose greater state control over natural resources.

“The economy isn’t going to be better off if they are start making things difficult for foreign investors,” said Kieran Curtis, who helps manage $3.5 billion at Aviva Investors in London, including Peruvian dollar bonds. “Investors are going to want to get rid of policy uncertainty before putting any money to work.”

The cost to protect Peru’s debt from non-payment with credit-default swaps jumped 20 basis points to 168, the highest since April 27, according to data provider CMA in London. The sol weakened 0.3 percent last week to 2.7631 per U.S. dollar.

Campaign Rhetoric

To broaden his appeal to Peru’s growing middle class, Humala abandoned rhetoric against foreign mining and natural resource companies used during the 2006 campaign, when he lost the presidency to Alan Garcia by five percentage points. Humala shelved his 198-page campaign platform to back away from an earlier pledge to rewrite the constitution and unilaterally raise royalty fees on mining and gas production.

Peru is the world’s top silver producer, third in copper and zinc and sixth in gold. Export revenue from mineral exports rose by 27 percent to a record $21 billion on surging prices.

Southern Copper Corp. (SCCO), Peru’s biggest producer of the metal, fell 8.6 percent in U.S. trading to $31.73.

Hochschild Mining Plc (HOC), a producer of silver in Peru, fell to its lowest in four months in London trading, declining 8.7 percent to 498.8 pence.

Spread to Treasuries

The yield spread on Peru dollar notes relative to U.S. Treasuries climbed 11 basis points to 203, according to JPMorgan Chase & Co.

Fujimori, the daughter of former President Alberto Fujimori, told supporters last night she is awaiting final results and will “be the first” to recognize a defeat to Humala. Humala said Keiko Fujimori turned a blind eye to the corruption and human rights abuses of her father when she served as first lady during his government from 1990 to 2000.

“While Humala moderated his tone throughout the campaign and certainly compared to the 2006 election, investors are likely to react negatively as uncertainty is still high,” Societe Generale SA strategists led by Benoit Anne in London wrote in a research report.

Humala has pledged to extend the country’s mining boom to the nation’s poor.

“The people have been waiting a long time for change,” Humala told thousands of supporters at a midnight rally in downtown Lima. “It’s not possible to say that the country is progressing when 12 million people are living in extreme poverty without electricity or running water.”

New Government

Last night, as supporters chanted “Keep the Gas in Peru,” Humala said he would seek broad backing for his policies and form a government comprised of the most-qualified people independent of their political affiliation.

“The natural resource companies will be the first ones sold by risk-averse investors,” said Richard Segal, a fixed- income strategist at Jefferies International Ltd. in London. “If he appoints a cabinet quickly and seeks to govern from the center, the damage to market sentiment could be limited.”

Foreign investors moved money into Peru last year as metal prices surged and the economy grew at the second-fastest pace in 16 years, prompting the central bank to raise borrowing costs to contain inflation.

“Investors may pull out of the local currency soberanos bonds as foreigners piled in quickly between May and November of last year,” said Joe Kogan, head of emerging markets strategy at Scotia Capital Markets Inc. in New York. “They haven’t left and they are waiting to see what happens.”

In the two weeks after Humala topped the field in the first Round April 10, sol-denominated bond yields rose to a two-year high and the currency fell to a 10-month low.

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: David Papadopoulos at papadopoulos@bloomberg.net