Today in Peru

Peru Stocks: Buenaventura, Minsur, Rio Alto, Southern Copper

2012-01-25T14:12:00.000-08:00

Lima Stock Exchange

The following companies had unusual price changes in Peru trading. Stock symbols are in parentheses and share prices are as of 4:10 p.m. in Lima.

The Lima General Index (IGBVL) rose for the seventh session in eight, gaining 0.6 percent to 21,410.67. The MSCI All Peru Capped Index (MXPECAPD) climbed 1.8 percent to 2,754.42.

Copper, gold and tin miners surged after U.S. stocks and metals gained, said Eduardo Fernandini, a trader at Lima-based Kallpa Securities SAB.

Cia. de Minas Buenaventura SAA (BVN PE), the country’s biggest precious-metals miner, jumped 7.1 percent to $41.11. Minera IRL Ltd. (MIRL) , a U.K. minerals explorer with a gold mine in Peru, rose 4.7 percent to $1.12. Rio Alto Mining Ltd. (RIO) , a gold producer, gained 3.8 percent to $3.79. Southern Copper Corp. (PCU\C) (SCCO PE), the country’s biggest producer of the metal, advanced 2.8 percent to $36.20. Minsur SA (MINSURI1) (MINSURI1 PE), the world’s fourth-largest tin producer, rose for a third day, adding 2.1 percent to 2.85 soles.

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

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

Peru's November GDP expanded 4.95%

2012-01-17T06:32:00.000-08:00

Peru's gross domestic product (GDP) expanded 4.95% in November 2011, compared with the same month a year earlier, the government said.

The National Institute for Statistics and Information, or INEI, said Monday that Peru's economy has now expanded for 27 straight months.

In a statement the agency pointed to strong domestic demand as the reason for November's economic expansion.

The country's economy grew 6.5% in the first eleven months of 2011; while in the December 2010 to November 2011 period, GDP expanded by 7.13%, the agency added.

In November, the agriculture sector rose by 2.65%, while fishing sector activity expanded by 1.29% over the same month a year earlier.

Transportation and communications sector activity rose by 9.29%, while retail sector activity increased by 7.02% year on year.

The electricity and water sector expanded by 6.89% in November, while mining and hydrocarbons declined by 1.02%.

Meanwhile, growth in the construction sector, one of the drivers of Peru's economic growth, continued to ease in November, with the sector expanding by 3.23%, INEI said. (Andina)

Joran Van Der Sloot Is Sentenced to 28 Years for Murder of Peruvian Woman

2012-01-13T18:13:00.000-08:00

Joran van der Sloot, the Dutchman who pleaded guilty to killing 21-year-old Peruvian student Stephany Flores, was sentenced in Lima to 28 years in prison.

The court today sentenced Van der Sloot, who pleaded guilty on Jan. 11 to strangling Flores with both hands in a hotel room after he met her in a Lima casino in May 2010, according to the televised hearing today. Prosecutors had requested a 30-year prison sentence. The court also ordered Van der Sloot to pay the Flores family damages of 200,000 soles ($74,239).

Van der Sloot, 24, was extradited from Chile where he was arrested after he fled Peru. He has said he killed Flores after she saw material on his laptop about the unsolved disappearance of Natalee Holloway, prosecutors said.

Holloway, an American teenager, disappeared in May 2005 just before she was to fly home to Alabama from a vacation on the Caribbean island of Aruba. She was last seen with Van der Sloot and two other men, authorities said.

Van der Sloot said in a 2008 video he disposed of the body of Holloway on Aruba. He later denied he had anything to do with the disappearance of the 18-year-old. Dutch prosecutors dropped a case against him.

The Dutchman has been charged in the U.S. with wire fraud and extortion for allegedly soliciting money in 2010 on promises he would reveal the location of Holloway’s remains in Aruba and circumstances of her death.

Following today’s hearing, Van der Sloot told the court he reserved the right to appeal the ruling.

To contact the reporter on this story: Jurjen van de Pol in Amsterdam at jvandepol@bloomberg.net.

To contact the editor responsible for this story: James Ludden at jludden@bloomberg.net.

Duran Ventures announces positive results at Aguila project

2012-01-10T19:54:00.000-08:00

Canadian exploration company Duran Ventures announced positive results of copper and molybdenum mineralization at Aguila project, located in the department of Ancash, after completing the preliminary work of metallurgical testing in its property.

Said company stated that G&T Metallurgical Services Ltd. completed the preliminary program of laboratory flotation testing on Aguila drill core composite samples.

The locked cycle flotation test on the intrusive composite indicated that 93 percent of the copper and 91% of the molybdenum in the feed was recovered into a final copper concentrate containing 28 percent copper.

This concentrate also contained 1.5 percent molybdenum, and 82 g/tonne silver, according to report entitled "Preliminary assessment of the two composite samples from the Aguila deposit KM3161" dated December 21, 2011 and prepared by G&T Metallurgical Services Ltd.

"The initial metallurgical work has been successful. Mineralogy and locked cycle flotation test results indicate that the copper and molybdenum essentially occur as primary sulphides that can be readily recovered to a commercial concentrate by standard flotation techniques," as quoted in such report.

The metallurgical test program included batch rougher and open circuit cleaner flotation tests on each composite, as well as locked cycle flotation tests.

Likewise, the locked cycle flotation test on the sedimentary composite indicated that 83 percent of the copper and 82% of the molybdenum in the feed was recovered into a final copper concentrate containing 24 percent copper.

This concentrate also contained 1.7 percent molybdenum, and 110 g/tonne silver.

Further metallurgical work is recommended by G&T and will follow in accord with the development of the project.

"The high recoveries and the lack of any deleterious elements indicate that the process flow sheet should be conventional and straightforward," consulting firm G&T reported.

The Aguila project is located in the department of Ancash, as well as the Antamina copper and zinc deposits, from Antamina mining company, and gold mine Pierina of Barrick Gold.

Duran Ventures is a Canadian exploration company focused on the exploration and development of porphyry copper, precious metal, and polymetallic deposits in Peru.

The company's principal project is the Aguila Copper-Molybdenum Porphyry Project with related silver-lead-zinc mineralization. (Andina)

500,000 Peruvians expected to attend Dakar Rally in Peru

2012-01-04T18:44:00.000-08:00

The Ministry of Foreign Trade and Tourism (Mincetur) on Wednesday estimated that 500,000 Peruvians will follow the 2012 Dakar Rally from Tacna to Lima.

The rally, which began in Argentina on January 1, will pass through Chile and is to arrive in Peru on January 12 through Tacna, to end in Lima three days later.

“We expect 500,000 Peruvians to travel to the different places [along the route] to see the competition. In addition, there will be a significant number of foreigners who are coming as part of the crews of the rally,” the head of Mincetur Jose Luis Silva said.

He added that the Dakar Rally is a unique opportunity to promote the country’s tourist destinations as the television signal will reach 190 countries and will serve for hundreds of small and medium enterprises to showcase their products at the campsites that will host competitors.

According to Silva, as a result of this event a delegation of 200 Dutchmen booked a hotel in Lima, and it is expected that the same happens in other hotels of the capital.

“Therefore, the impact will be significant in these four days. However, the most interesting thing is what’s going to happen in the following months because since a billion people in the world will be watching images of Peru, there will be some interested in visiting the country.” (Andina)

Peruvian Consumer Prices Rose 4.7% in 2011, Fastest Pace in Three Years

2012-01-02T09:25:00.000-08:00

Peruvian consumer prices rose 4.7 percent in 2011, the fastest pace in three years, the national statistics agency said.

Inflation was forecast to accelerate to 4.8 percent last year, according the median estimate of nine analysts surveyed by Bloomberg. Prices increased 0.27 percent in December from the previous month, compared with an estimate of 0.3 percent.

Inflation, which outpaced the central bank’s target range of 1 to 3 percent, was spurred by fuel prices, which jumped 14 percent, and food and clothing, which increased 8 percent and 4.8 percent, respectively, the agency said yesterday in an e- mailed statement.

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

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

European Union invites Peru's Ollanta Humala to visit Brussels in 2012

2011-12-25T19:15:00.000-08:00

Head of the European Union Delegation in Peru, Hans Allden. Photo:ANDINA/Carlos Lezama

Peruvian President Ollanta Humala has been invited to visit Brussels, Belgium in the first quarter of 2012 to meet the highest authorities of the European Union (EU), the head of the EU delegation in Peru, Hans Allden said Sunday.

Allden said that the EU has proposed the Peruvian government to hold these meetings during the first days of February.

"We have a date for President Ollanta Humala's visit to Brussels scheduled for February 1-2. We are working with this target date. But it is a date which must be confirmed by the Peruvian government," he told Andina.

He stated that during the official visit, the Peruvian leader would meet with European Commission President Jose Manuel Durao Barroso and European Council President Herman Van Rompuy.

Humala will also hold talks with EU High Representative for Foreign Affairs Catherine Ashton as well as authorities of the European Parliament, a body that has been discussing the ratification of the trade agreement with Peru. (Andina)

Panama’s participation in Pacific Alliance being negotiated

2011-12-15T19:18:00.000-08:00

Pacific Alliance Members

The Peruvian government is negotiating an agreement with Chile, Colombia and Mexico to form part of the Pacific Alliance and allow Panama to join it.

According to the president of Peru's Exporters Association (ADEX), Juan Varilias, the incorporation of Panama to the Alliance will allow greater freedom for the transit of Peruvian products in the countries that form part of the group.

During the last meeting of the Alliance, held in Merida, Mexico, the president of Panama, Ricardo Martinelli, expressed his wish that his country forms part of the group.

For the first half of 2012 it is expected that the Free Trade Agreement (FTA) signed between Peru and Panama comes into force, recalled Varilias.

ADEX President argues that the agreement will be beneficial to small and medium enterprises (SMEs) of the Peruvian fishing sector, among others.

"On Tuesday, Panama's Legislative Assembly unanimously approved the FTA, which will help strengthen bilateral trade ties," Varilias was quoted as saying by FIS.com.

He added: "Geographically, Panama is near Peru, we have the same language, I think both countries will benefit substantially," the agency Andina reported.

According to the data provided by ADEX Economic Studies Management, the FTA with Panama will allow the 93.1 per cent of total tariff lines to enter immediately or to do so in a maximum of five years during which there will be reduced tariffs.

In the fisheries sector, the most favoured products are sardines, trout and mackerel, among other resources.

Between January and October 2011, Peru sent products to the Panamanian market for USD 244.9 million, that is to say, 12 per cent more than in the same period of 2010.

Of that total, 69 per cent (USD 169.6 million) were traditional products, mainly oil products, and the remaining 31 per cent (USD 75.3 million) were non-traditional products.

St. Elias Mines doubles diamond drilling program at Tesoro to 20,000 metres

2011-12-14T19:22:00.000-08:00

Canadian-based St. Elias Mines said Monday it has doubled the ongoing diamond drilling program at its Tesoro gold project in Peru to 20,000 metres.

In order to do this, the company said it is taking all necessary steps to mobilize a second diamond drill rig to the project - expected to come on site at the start of the new year.

Additional mechnical trenching on the both the Main Structural Corridor and the Parallel Structural Corridor is due to begin in January, Proactiveinvestors.com reported.

St. Elias said it is also in the process of hiring three more geologists for the project, with necessary project infrastructure being expanded to accomodate the plan.

The drilling program has been designed to test near-surface and deeper-seated geophysical anomalies identified by Titan 24 geophysical surveys, the company added.

The Tesoro gold project is 100 percent owned by the company with no underlying royalties, and covers roughly 6,974 hectares as part of the prolific 300 kilometre by 30 kilometre Nazca-Ocoña gold belt parallel to the Pacific coast of southwestern Peru.

While the veins in the belt tend to be narrow, the grade is significant and the mineralized structures typically extend along strike for several kilometres and to depths of up to 1,000 metres.

To date, the company has identified five mineralized zones with more than 50 quartz veins, having a total combined length of nine kilometres at Tesoro. Underground and development work has been carried out on three of these veins so far. (Andina)

Duran expands copper, molybdenum mineralization areas at Aguila project

2011-11-21T19:27:00.000-08:00

Canadian-based Duran Ventures has expanded the areas of known copper and molybdenum mineralization of its Aguila project located in the department of Ancash in north-central Peru, after finishing the final eleven drill holes of the 2011 drill program, the company reported.

Drilling has intersected mineralization over 800 metres in an approximately east-west direction, 400 metres in a north-south direction, and over 1000 metres vertically.

Limits on the size of the mineralized system have not been fully established, with numerous geological, geochemical, infill, and geophysical targets remaining to be drill tested at this large property, added the company.

Further drilling is required to define the ultimate shape, size and orientation of the Aguila Copper-Molybdenum Porphyry system.

According to Duran Ventures, a total of 15,175 metres were drilled in 27 diamond drill holes from April 18th to October 19th, 2011. Meanwhile, a cumulative total of 23,929 metres of core have been drilled by the company at the Aguila project from 2007 to 2011.

Data from all the holes will be included in the preliminary NI 43-101 compliant resource estimate now being prepared by SRK Consulting. The company expects to receive the SRK report in the first quarter of 2012.

The preliminary metallurgical test work currently being carried out by G & T Metallurgical Services Limited of Kamloops, British Columbia, Canada is expected to be available at the same time.

The 119.5 metre interval from 161.5 to 281.0 metres depth returned 0.32% Cu and 0.008% Mo (0.38% Cu equivalent).

At the same time, Compañia Minera Milpo S.A.A. is advancing development work at the Magistral copper – molybdenum porphyry and skarn deposit, located some 40 kilometres to the north of Aguila.

The Aguila area infrastructure is robust and constantly improving, with a large regional hydroelectric plant located on the Santa River approximately 40 kilometres from the project, abundant precipitation, and good road access available from several directions, the company says.

Duran Ventures, a Canadian exploration company focused on the exploration and development of porphyry copper, precious metal, and polymetallic deposits in Peru, plans to continue moving the Aguila project forward in 2012.

The Company's principal project is the Aguila Copper-Molybdenum Porphyry Project with related silver-lead-zinc mineralization. (Andina)

Peru's liquified natural gas output to soar 330.6% this year

2011-11-18T09:12:00.000-08:00

Peru’s exports of liquefied natural gas (LNG) might rise 330.6% up by US$ 1.23 billion this year fueled by rising demand in Spain, Japan, Republic of Korea, Thailand and Mexico, consultant firm Maximixe reported.

This increase ahs been possible despite expectations of a lower global energy demand that has reduced the prices of Peru's natural gas exports, from a maximum of US$ 175.7 per cubic metter in May to a minimum of US$ 115.7 in September.

This year, Taiwan, China, Japan and Thailand have become new markets for this Peruvian product.

It is expected that exports continue increasing in the coming years fueled by Pluspetrol's investments, which might increase its tested reserves through a project to expand the development drilling program on block 56.

Between January and October 2011, total exports of natural gas reached US$ 1.02 billion, an increase of 588% compared with the same month in 2010.

Peru LNG consortium (the only Peruvian natural gas exporter) has made 60 shipments, while Spain was the main market concentrating 36.8% of total exports and an increase of 437.7%.

Spain is followed by Korea (22%), Japan (12.7%), Thailand (12%), Mexico (5.9%), US (3.8%), China (3.7%) and Taiwan (3%).

In terms of volume, Peruvian gas exports added up to US$ 7.3 billion of cubic meters. (Andina)

Construction of Peru's Muelle Sur second phase to begin Sep. 2012

2011-11-17T20:05:00.000-08:00

Dubai Port (DP) World, concessionary of Muelle Sur in the port of Callao, is expected to start the second phase of investments in said terminal in approximately 11 months, that is, in September next year, president of the National Port Authority Frank Boyle announced Thursday.

"We, as well as the Supervisory Agency for Investment in Public Infrastructure (Ositran), are convinced that DP World exceeded the rate of employability during the first phase of operations, which triggers a second phase of investments in the terminal" said Boyle.

Ositran recently announced that operations at Muelle Sur surpassed 80 percent of its operating capacity; which is why, in compliance with the contract signed with the government, the company must start the second phase which requires an investment of US$240 million.

Boyle explained that in the next 11 months, DP World will have to develop the technical file, as a first step for the beginning of works.

"During that time they must also obtain a certificate of absence of archaeological remains and pass the environmental impact report, with which they would be ready to start building the second phase," he said. (Andina)

Peruvian film wins award in Argentina

2011-11-14T18:29:00.000-08:00

Peruvian film “Las Malas Intenciones” (Bad Intentions) won Sunday the best Latin-American feature film award at the Mar de Plata International Film Festival in Argentina.

Rosario García-Montero's film beat out nine other nominees, including “El Campo” (Argentina) by Hernan Belon, “Porfirio” (Colombia) by Alejandro Landes and “El velador" (Mexico) by Natalia Almada.

According to the festival’s website, the exceptional thing about The Bad Intentions is that disturbing and at the same time innocent childhood view, when the eyes start to open in order to decipher what is going on and to try to understand it.

"Difficult for an adult, pitiless for a child. The Bad Intentions is that moment when we all stop being naive and uncover our eyes," the festival's website said.

The film is about a nine year old girl, named Cayetana de Los Heros, who fights against the world to become an adult. She lives in a beautiful middle-class home with her father and governess. Her mother is often abroad and might not even miss her.

At school she studies the period of Peru's struggle for independence. When her mother returns home from one of her trips, she is pregnant and unhappy. She does not even see her daughter.

And so Cayetana, who is convinced she will die when her younger brother is born, starts fighting alongside the heroes that made history in her country, entering an imaginary world that will teach her how to escape from solitude and the sense of abandonment to find the path that leads to the sun. Just like the heroes hidden in her surname. (Andina)

video: http://www.youtube.com/user/TrailerPeruano

Peru Central Bank Keeps Rate at 4.25% as Inflation Bars Monetary Stimulus

2011-11-12T13:12:00.000-08:00

Julio Velarde

Peru’s policy makers yesterday kept their benchmark interest rate at a two-year high as above-target inflation outweighs concern about slowing global demand.

The central bank’s seven-member board, led by bank President Julio Velarde, left the overnight rate unchanged at 4.25 percent, matching the forecasts of all 16 economists surveyed by Bloomberg.

“There continues to be a heightened uncertainty in international financial markets and the potential negative impact on global growth,” policy makers said in their statement posted on the central bank’s website.

The threat of stagnation in Europe and the U.S. has dimmed the outlook for Peru’s commodity-dependent economy and led the government to announce what it has called “preventive” stimulus measures. At the same time, while prices rose more- than-expected last month, inflation expectations remain within the central bank’s target range, which gives policy makers room to room to maneuver, Eduardo Cavallo, Latin America vice president at Goldman Sachs Group Inc. in New York, wrote in a research note after the decision.

“The bank maintained the conditional easing bias going forward which shows that despite the still robust performance of the Peruvian economy, the bank is concerned about the potential spillovers of the global backdrop on Peru,” Cavallo wrote.

After holding the rate steady for a fifth straight month at the Oct. 6 meeting, policy makers highlighted areas of the $153 billion economy that had begun to slow.

Government Steps

Prices for copper, Peru’s top export, have fallen 23 percent since July on concern that Europe’s sovereign-debt crisis may lead to a global recession.

An uncertain global outlook has damped domestic investment and may lead Peru to grow below potential in the fourth quarter, Velarde said today in an interview in Santiago.

“Consumption continues to be strong but investment isn’t showing the same vigor as before because of international fears,” he said. “If the problems are overcome, there could be a major bounce in confidence and commodity prices. That can’t be ruled out, although everyone is pessimistic now.”

There are no inflationary pressures at the moment, Velarde said.

The sol strengthened 0.2 percent 2.7025 per U.S. dollar at 11:06 a.m. in Lima, from 2.7075 yesterday.

Stimulus Measures

The government is spending over the next six months the equivalent of 1 percent of gross domestic product on stimulus measures that focus on infrastructure projects.

“As the Euro zone struggles to resolve its debt issues and uncertainty about contagion remains, we expect the bank to keep its benchmark rate at 4.25 percent in its next meeting,” Roberto Flores, head of research at Inteligo SAB, a Lima-based brokerage, wrote in a research note e-mailed to investors.

The government is tapping a wider-than-expected budget surplus to finance a stimulus plan aimed at safeguarding Peru’s commodity-dependent economy from global market turmoil.

Though a “sizeable” budget surplus makes President Ollanta Humala’s stimulus package feasible, in a context of faster-than-expected growth, the move “can also be read as reflecting a higher marginal propensity to spend and a lower weight on inflation objectives on the part of the Humala administration,” said Bank of America in a Oct. 26 report.

‘Transitory’ Factors

Rising domestic food and clothing costs pushed the annual inflation rate to 4.2 percent in October, a 29-month high and above the central bank’s target range of 1 percent to 3 percent.

On the month, prices rose 0.31 percent, higher than the 0.2 median estimate of analysts in a Bloomberg survey. October’s inflation rate was affected by “transitory supply factors,” policy makers said yesterday.

Though international grain and crude oil prices are mainly to blame for higher inflation, pressures stemming from domestic demand are intensifying, said Mario Guerrero, an economist at Scotiabank Peru.

Velarde had said Sept. 16 that monthly inflation would be less than 0.2 percent in the months ahead and forecast periods of deflation as global commodity prices eased.

Economists expect inflation will be 4 percent this year, according to the latest central bank survey, up from a forecast of 3.5 percent a month earlier. The analysts expect the economy to expand 6.5 percent this year, before slowing to 5.5 percent growth in 2012.

Peru’s gross domestic product rose 8.8 percent in 2010, which ranks as the country’s third-fastest annual growth rate in 16 years.

Inflation Outlook

Economists in the central bank’s survey see inflation slowing to 2.6 percent in 2012 and 2.5 percent in 2013, prompting the central bank’s monetary policy manager, Jorge Estrella, to say Nov. 9 that inflation expectations remain “anchored” in policy makers’ target range.

Growth has rebounded along with consumer and business confidence following the country’s June 5 presidential election. Peru’s stock index, bonds and sol had declined ahead of the election on concern that a Humala government might boost state control of the economy, raise mining royalties and deter investment.

The economy expanded 7.5 percent in August from a year earlier, after rising 6.5 percent in July and 5.3 percent in June.

If Europe contains its debt crisis and domestic inflation pressures don’t ease as quickly as the central bank anticipates, rate increases are possible next year, according to Scotiabank and Barclays Capital Inc.

Peru’s sol rose to its highest level in more than three years Nov. 7 as rising prices and quickening growth reduces the possibility of the central bank lowering rates, said Gonzalo Navarro, head trader at Banco Santander in Lima.

“If the crisis dissipates, the pressure will be for the bank to raise rates,” Navarro said.

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 evaluates with US future of TPP talks

2011-11-11T19:47:00.000-08:00

Hillary Clinton

Peru’s Minister of Foreign Trade and Tourism Jose Luis Silva and of Foreign Affairs Rafael Roncagliolo discussed Thursday with United States Secretary of State Hillary Clinton and Trade Representative Ron Kirk the future of the negotiations on the Trans-Pacific Partnership Agreement (TPP).

In the context of the Asia-Pacific Economic Cooperation (APEC) Forum, the government representatives of Peru and the United States evaluated the process of the TPP talks, Minister Silva said from Honolulu, Hawaii, where the APEC Leaders’ Summit is to take place this weekend.

"Both Kirk and Clinton expressed their interest in continuing the TPP negotiations and bet on APEC, as well as increasing trade in the region," he told Andina news agency.

He stated that all members of the TPP countries are keen to continue negotiations and agree on the issues yet to resolve.

Negotiation on a TPP includes New Zealand, Chile, Singapore, Brunei Darussalam, Peru, United States, Australia, Malaysia and Vietnam.

Silva said that the heads of the negotiating teams met previously and drafted a document summarizing the progress of the negotiations, which was presented to the ministers of foreign trade, and that will be presented to the leaders of these nine economies.

"The document is ready and was presented to us ministers. It will be now presented to the presidents of the countries of the TTP, who will decide whether to approve it and make it public." (Andina)

Astaldi to build $680mln hydroelectric plant in Peru

2011-11-06T16:13:00.000-08:00

Italian builder Astaldi, in a joint venture with Peru's Grana y Montero S.A., has been awarded a US$ 680 million contract for developing the Cerro del Águila hydroelectric project in Peru.

The project – to be carried out in accordance with the EPC (Engineering, Procurement, Construction) scheme – calls for building a 380,000 m3 concrete dam, an underground power plant with 510MW of installed power, 9 kilometres of tunnels, and 60 kilometres of roads accessing the site.

The initiative was commissioned by Peru’s KALLPA Generación S.A., which works in the power distribution sector. The project will be carried out by the joint venture set up by Astaldi (at 50% and leader of the JV) and by the Peruvian Group GyM - Grana y Montero S.A.

Astaldi said in a statement it would develop the project over four years, with the preliminary activities to be started before the year end.

Cerro del Águila, together with Santa Teresa (98MW) recently acquired also in Peru, brings to six the number of hydroelectric projects that Astaldi is carrying out in Latin America, including El Chaparral (66MW), Huanza (90MW) and Pirris (125MW), which are under construction respectively in El Salvador, Peru and Costa Rica while in Chile Astaldi is a shareholder of the concession company owner of the Chacayes hydroelectric power plant (111MW) which since the month of October has started the energy production phase. (Andina)

Peru guarantees economic growth of at least 6% for upcoming years

2011-10-30T07:52:00.000-07:00

Interoceanic Highway Brazil Peru

With the implementation of the economic stimulus plan and the search for greater competitiveness in the medium term, Peru guarantees an annual growth rate of at least six percent for the next years, Maximixe consulting firm said.

“If in the coming years, conditions are similar to the current ones, without tightening of financial conditions abroad and without adverse climate impacts, the economy could grow six percent annually over the five years," Jose Razuri analyst at Maximixe estimated.

Last Wednesday, the Executive approved the second package of measures that will prevent an economic slowdown in Peru in the coming months, in case of global uncertainty.

Economy and Finance Minister Luis Miguel Castilla said that the country has officially relaunched its competitiveness agenda and expects to grow at rates of six percent in the next years, with sustained increase in productivity.

He added that said relaunch of the competitiveness agenda seeks to achieve continuous growth in Gross Domestic Product (GDP).

In this regard, Razuri said that after the agreement made this week among the eurozone countries to overcome their fiscal debt crisis, the international outlook is friendlier for Peru, at least in the short term. (Andina)

Peru likely to become largest producer of wind energy in Latin America

2011-10-27T20:16:00.000-07:00

Peru will become one of the largest producers of wind energy in Latin America, renewable energy expert at the European University of Madrid Alberto Rios said.

Rios, who was a guest speaker at a wind farm integration seminar, organized by Concytec in Lima, praised the construction of three new wind farms for 2012, which would significantly benefit the country, as it would reduce dependence on natural gas.

He said that the development of wind energy in Peru will boost social inclusion of rural populations - and by not emitting Co2, the country could reduce the emissions of greenhouse gasses.

In addition, the three new wind farms are being built in the towns of Talara, Cupisnique and Marcona, which are expected to be completed by the end of 2012.

"The importance of wind energy is that in countries with great potential, such as Peru, it becomes a fantastic vehicle to hook up to electrical generation systems, which are modern, sophisticated and highly competitive," he said. (Andina)

Bird-watching seen as Peru’s new tourism potential

2011-10-25T08:10:00.000-07:00

Peru could benefit from the diversity of its fauna and cater to the approximately 69 million bird-watchers in the United States, said Jose Koechlin, president of Peru’s Hotel Society.

Koechlin told Andina that these visitors could have a positive impact on creating jobs and improving the quality of life in rural areas in Peru.

"We have 84 of the 104 ecological zones in the world, which allows for a large presence of birds. Therefore it is necessary to insist on the protection of natural areas that are home to this legacy," Koechlin stated.

According to the country’s export and tourism promotion agency Promperu, Peru has one of the largest varieties of birds in the world.

Ideal spots for bird watching are the Manu National Park, between Cusco and Madre de Dios, and the Pantanos de Villa, in Lima. A 15-day tour at the Manu National Park can cost around $3,000.

Peru holds two world records: 331 bird species spotted in one day in the Manu, and 569 species sighted in one location at the Tambopata National Reserve, peruthisweek.com reported today. (Andina)

video: http://www.youtube.com/user/PROMIX
video: http://www.youtube.com/user/hotelscusco

Antonio Brufau: investing in Peru is a great advantage and luck because it is a tremendously friendly country to develop investment projects

2011-10-17T10:08:00.000-07:00

Peru is becoming an attractive destination for foreign investment because, amid the difficult international context, it is a very friendly country for development projects and guarantees political and macroeconomic stability as well as energy supply.

The chief executive of oil company Repsol, Antonio Brufau, said this week that investing in Peru is a great advantage and luck because it is a tremendously friendly country to develop investment projects.

After holding a meeting with Peruvian President Ollanta Humala Tasso on Thursday at the Government Palace, Brufau expressed confidence in Peru and announced that the Spanish company will invest three billion dollars in the Andean country over the next five years.

Previously, the Ministry of Energy and Mines (MEM) reported that mining investments totaled US$ 4.04 billion between January and August 2011, a 70 percent increase over the same period in 2010, noting also the importance of Peru as a destination for global investments.

The presence of capital in our country, as well as announcements of new millionaire investments, are being registered in parallel to the energy matrix change that Peru has taken towards natural gas. (Andina)

World Gold Council: Large gold mines dominate Peru's economy

2011-10-16T10:18:00.000-07:00

Large gold mines play a dominant role in the Peruvian economy, a study by gold-mining-industry group the World Gold Council said Friday.

The report, which examined the economic impact of the country's four largest gold mines over a period of 14 years, found that they accounted for 60% of the $5.6 billion in gold exports in 2008.

The WGC's research focused on Newmont Mining Corp.'s Yanacocha, Barrick Gold Corp.'s Lagunas Norte, Gold Fields Ltd.'s Cerro Corona and Compania de Minas Buenaventura's Orcopampa. The mines represented nearly 10% of foreign direct investment in Peru and accounted for over 20% of mining exports and 12% of total exports from Peru in 2009, the group said.

Gold mining also plays an important role in government revenues, with the government collecting around $800 million from the four mines in 2009, Dow Jones Newswires quoted the industry body as saying.

While aggregate employment across the four mines is seen peaking at 5,000 employees this year, 99% of the work force is made up of Peruvian nationals, while community salaries represent nearly half the $250 million expected to be paid in wages in 2011 through 2014, WGC said. It added that around 90% of total procurement spending by the four mines was on national suppliers. (Andina)

Canadian giant set to operate in Peru with Century Mining takeover

2011-10-14T19:08:00.000-07:00

A Canadian mining giant will soon operate in Peru as the Canadian federal government have given approval for White Tiger Gold's takeover of Century Mining, which already operates in the Andean country and which is owner of the Lamaque mine in Quebec and other mines in the world.

Under the planned transaction, Century Mining will be acquired by a wholly owned subsidiary of White Tiger, a company that trades on the TSX but operates mainly in Russia, reported The Canadian Press.

The deal has received some of the necessary approvals, including from shareholders, but is still subject to final approval of the Toronto Stock Exchange and TSX Venture Exchange where the companies' shares are listed.

"We appreciate the approval given by the Government of Canada. We are now one step closer to creating a larger, more diversified gold mining company with multiple properties in various stages of production and development in Canada, Russia, and Peru" said Daniel Major, president and chief executive officer of Century and Geoffrey Cowley, White Tiger's CEO, in a joint statement.

Century's stock closed at 21.5 cents, up half a cent, on the Venture Exchange while White Tiger's ended trading Wednesday at 62 cents, down three cents on the Toronto Stock Exchange.

White Tiger Gold Ltd. is a TSX-listed mining and exploration company, focused on the development of mineral resources in the Russian Federation and which currently operates the Savkino heap leach gold operation located in southeastern Siberia.

In addition to Ildikan, Nasedkino/Uryum and Pridneprov, White Tiger Gold Ltd. also holds gold exploration licences in Zolin-Arkinsk and Takhtamygda which are prospective geological environments in south central Siberia.

Century Mining Corporation is a Canadian gold producer and holds strategic land positions in Canada, the United States and Peru.

Its strategy is to grow to its gold production through existing mine expansions and acquisitions of other strategic and synergistic gold opportunities. (Andina)

Peru miners invest US$4.44 billion in Jan-Aug

2011-10-12T21:11:00.000-07:00

Mining companies in Peru invested US$4.44 billion in the first eight months of 2011, up 70% from the same period last year, the government said.

In the January-to-August period, mining companies invested US$679 million in infrastructure, US$597 million on mining equipment, US$555 million on processing plant equipment and US$547 million on preparation activities for projects, the Mines and Energy Ministry said Wednesday.

According to marketwatch.com, companies also spent US$533 million on production and US$520 million on exploration, the ministry said.

Cajamarca region had investments of US$745 million, while Apurimac had investments at US$554 million, Cuzco at US$507 million and Ancash at US$459 million.

Companies investing in the sector include gold producer Minera Yanacocha, which is 51.35%-owned by Newmont Mining Corp., and Xstrata PLC.

Yanacocha invested US$556 million in the period, while Xstrata invested US$514 million at its Tintaya mine and US$489 million at its Las Bambas project, the ministry said. (Andina)

Peru's Antamina Mine expansion to up 2012 output

2011-10-10T18:55:00.000-07:00

Peru's Antamina Mine

Peruvian base metals miner Compania Minera Antamina expects to increase production next year following the completion of a large-scale expansion at its mine, company Chief Executive Abraham Chahuan told business newspaper Gestion.

In an interview published Monday, Chahuan said the US$1.3 billion expansion of the mine is "practically in the final stage."

"We could be starting the new equipment by the end of the year, and we expect that our capacity will increase in 2012," he noted.

Antamina the biggest producer of copper in Peru, with output of 1.2 million metric tons of copper concentrate a year. It is also the largest producer of zinc, with 600,000 tons a year of concentrates, he said.

Chahuan also told Gestion that Antamina is the second-largest producer of silver and the largest producer of molybdenum in Peru.

Chahuan said the new windfall taxes placed by the Peruvian government in the mining sector have put the mining industry at the limit of what can be placed before competitiveness declines.

The owners of Antamina are BHP Billiton, with a 33.75% stake; Xstrata Copper with another 33.75%; Teck Cominco Corp. with 22.5% and Mitsubishi Corp. with 10%.

The mine, located in the central Andes Mountains region, started operations in 2001. (Andina)

Guerrero double gives Peru first win in WC qualifiers

2011-10-07T21:35:00.000-07:00

A second-half brace from Paolo Guerrero earned Peru a hard fought victory over Paraguay in their first 2014 World Cup qualifier on Friday.

Peru continued their superb Copa America form in their first match of qualification, defeating visiting Paraguay 2-0 at a packed National stadium in Lima.

The best chance for the Peruvians in the first half came moments before the break when Juan Vargas was sent into the box on the left side.

The Fiorentina star delivered a low, swift ball across the face of the goal, perfectly finding the right foot of Guerrero, but the striker's effort from five metres flew by the wrong side of the right post, passing the by-line, Goal.com reported.

The striker earned back the confidence of the fans a minute into the second half after a fantastic pass from Jefferson Farfan sent the attacker through. Guerrero did the rest, taking a touch by Diego Barreto and a defender, finishing into the open goal with ease.

The Hamburg striker added his second 27 minutes into the second half. Farfan sent Claudio Pizarro on goal, and the Werder Bremen man chipped the ball in front of net, falling right to the the feet of Guerrero, who made no mistake, finishing with a low effort, sealing the victory. (Andina)

Peruvian restaurant opens new stores in Florida

2011-10-07T06:52:00.000-07:00

Rotisserie chicken. Photo: Hector Vinces.

La Granja Peruvian restaurant has opened two new locations in Florida, United States, one in Port St. Lucie and the other in Okeechobee.

The Port St. Lucie La Granja is the 30th store for the Margate-based regional chain and the second location on the Treasure Coast. A Fort Pierce store opened at 7040 Okeechobee Road in 2005.

Monica Castillo, manager of the Fort Pierce store and general manager of La Granja's north district stores, is a franchisee at the Port St. Lucie location.

Castillo's partner in the franchise is Paul McNesky of Port St. Lucie, a longtime customer of the Fort Pierce store who said he saved up to buy a franchise because the food is good and the price is right, according to a news release.

La Granja, meaning "the farm," specializes in rotisserie chicken and other Peruvian specialties served with a number of different fresh salsas, Castillo said. (Andina)

Peru May Keep Interest Rate at 4.25% for a Fifth Month on Global Slowdown

2011-10-06T10:49:00.000-07:00

Peru’s central bank will probably leave borrowing costs unchanged for a fifth month as the threat of recession in Europe and the U.S. outweighs concern about accelerating inflation.

The seven-member board, led by central bank President Julio Velarde, will keep the overnight rate at 4.25 percent today, according to 17 of 18 economists surveyed by Bloomberg. One analyst predicts a 0.25-point cut to 4 percent. The board will announce its decision at about 7 p.m. New York time.

The threat of stagnation in Europe and the U.S. has dimmed the outlook for Peru’s commodity-dependent economy and led the government to announce what it has called “preventive” stimulus measures. Though the central bank has indicated it will cut rates if global risks intensify and domestic activity slows, rising prices and stronger-than-expected domestic growth indicate there’s no need for laxer policy yet, said Juan Pablo Fuentes, a Latin America economist at Moody’s Analytics Inc.

“There’s a risk of a hard landing, so the government is preparing its tools for a negative scenario,” Fuentes said in a telephone interview from West Chester, Pennsylvania. “The central bank will be paying attention to the very fluid global situation and change its stance if necessary.”

Stimulus, Sentiment

The Andean nation is tapping its first fiscal surplus in three years to finance stimulus measures worth about $470 million as it seeks to reverse a decline in public infrastructure spending in the first half of this year.

The stimulus will become more “aggressive” should a global slowdown cause exports and company spending to ease, Finance Minister Miguel Castilla said Sept. 22.

The International Monetary Fund on Sept. 20 cut its 2011 growth forecast for Peru to 6.2 percent from 6.6 percent previously. Growth will slow to 5.6 percent next year, the Washington-based lender said.

The central bank’s latest survey shows companies are less optimistic about domestic demand and hiring prospects because the global outlook has darkened, said Carlos Durand, president of the Lima Chamber of Commerce, in a Sept. 27 interview.

Investor caution on the global outlook and “political uncertainty” following Peru’s presidential election is affecting medium and long-term investment, Luis Castellanos, chief executive of Banco Internacional del Peru, told reporters Sept. 29. Demand for consumer loans remains “vigorous,” he said.

Policy, Trade, Growth

President Ollanta Humala on Oct. 3 confirmed Velarde’s appointment to serve a second five-year term, which Pedro Tuesta, a former Peruvian central bank analyst and current economist at 4Cast Inc. in Washington, said indicated policy continuity.

Growth in retail and services helped offset a slowdown in manufacturing and construction in July and fuelled a 6.5 percent rise in gross domestic product, beating analysts’ and the central bank’s expectations.

Cement demand rose for the first time in three months in August while electricity output climbed at the fastest annual pace in six months, which suggests growth is accelerating, Tuesta said.

Peru’s trade surplus will probably fall to $4.3 billion next year from $7.4 billion this year because of lower copper, zinc, gold and silver prices, Velarde said Oct. 4.

China’s growth will remain “strong” this year and next, which “will guarantee that the price of exports will remain relatively high,” he said.

Gross domestic product growth will slow to 5.7 percent in 2012 from 6.3 percent this year, the central bank chief said Sept. 16.

Europe, Precautions

Economic activity will slow in the next few months amid weaker construction and manufacturing output even though consumer demand remains “very strong” Velarde told congress Oct. 4. “In investment, there isn’t a lot of pessimism, but nor has there been such a strong recovery yet.” Investors “are waiting to see what will happen with the global outlook.”

Policy makers will probably give more weight to the fall- out from Europe’s debt crisis, which led global stocks and commodity prices to tumble since their last meeting, said Roberto Melzi, at strategist at Barclays Capital Inc. in New York.

“Risks to economic activity haven’t dissipated anywhere by any means,” said Melzi, who forecasts a 0.25-point rate cut today to be followed by similar cuts at the bank’s November and December meetings. “The global crisis is deepening.”

Higher fuel costs pushed Peru’s consumer prices up 0.33 percent in September from 0.27 percent in August, driving the annual inflation rate to 3.73 percent, a two-year high. The central bank targets annual inflation in a range of 1 percent to 3 percent.

Monthly inflation may slow to close to zero before year-end as some prices reverse recent increases, Velarde said Sept. 16. The annual inflation rate will converge toward the central bank’s target range next year, he said.

Peru’s sol posted the steepest quarterly decline since 2008 in the July-through-September period as copper prices fell and concern about slowing world growth wiped $10 trillion from global equities.

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.

Yale University officials travel to Cusco for formal opening of Inca exhibit

2011-10-04T14:04:00.000-07:00

Casa Concha - Cuzco Perú

Yale University officials are heading to Peru’s southeastern Cusco region this weekend to celebrate the opening of a new home for Inca artifacts long housed at the US university.

Provost Peter Salovey will join other members of the University in the Imperial city for the formal opening of the Universidad Nacional de San Antonio Abad del Cusco-Yale International Center for the Study of Machu Picchu next Thursday.

The ceremony follows this summer’s centennial celebration of Machu Picchu’s discovery in 1911, and will cement a collaborative relationship between the UNSAAC and Yale for the years to come, Salovey said.

“Yale is very pleased to be the UNSAAC’s partner in this project, and is delighted by the progress we have made together so far,” Salovey said in a Thursday email.

“We expect Yale faculty and students to travel often to the museum for research projects involving these objects, and we are very impressed by the beauty of Casa Concha and the way the objects will be housed and displayed there.”

Meanwhile, Yale archaeology professor Richard Burger ’72 said that hosting the artifacts in Cusco enabled greater protection and conservation than would have been available in Machu Picchu.

The Inca artifacts that will soon be on display in Peru caused decades of controversy between Yale and the Peruvian government, as both fought for control of the collection discovered between 1911 and 1916 by Yale archaeologist Hiram Bingham III 1898 and housed in Yale’s Peabody Museum for much of the past century, Yale Daily News reported.

The center’s opening comes after Harold Forsyth, the Peruvian ambassador to the United States, conferred the Order of “The Sun of Peru” — the nation’s highest civilian award for extraordinary services to Peru or contributions to the art, literature, culture or politics the country — upon University President Richard Levin at a ceremony in Washington, D.C.

Though the artifacts have not quite returned to Machu Picchu, they will reside just 50 miles southeast of their original home in a 16th century Cusco mansion known as Casa Concha, which serves as the site of the center jointly-run by UNSAAC and Yale.

Hosting the artifacts in Cusco enabled greater protection and conservation than would have been available in Machu Picchu, Yale archaeology professor Richard Burger ’72 said, adding that Cusco was the capital of the Inca empire.

“Casa Concha is a remarkable place because you have Inca architecture visible and you have colonial architecture from the sixteenth and seventeenth centuries visible,” Burger said.

Planning for the Center has primarily been a collaborative process between Yale and UNSAAC, with the Peruvian government playing a secondary role, Burger said. The government has played an important role in helping import large dioramas and other supplies needed for the exhibits, he added (Andina)

Peruvian organic produce to feature on EU priority list

2011-10-03T10:03:00.000-07:00

The European Union plans to add Peru to a preferred list of third world organic food supplying countries through legislation.

Peru’s National Agricultural Health Service (SENASA) organic products director Jorge Jave said the EU authorities had included Peru as a priority in the list along with China and Turkey, freshfruitportal.com reported.

“It’s a process and we are in the final stage, we are optimistic that by the end of this year or the start of next year we will obtain this permission,” Jave was quoted as saying.

He stressed the inclusion requirements for the list were similar to the demands placed on E.U. countries, which meant legislative and certificate costs would be low.

Argentina and Costa Rica are the only Latin American countries currently on the E.U. organic import list.

Bananas, coffee and cocoa represent 90% of Peru’s organic exports, according to website Agraria.pe.

The main markets for this type of produce are the U.S. and the E.U., although demand is growing in Asia, especially in Japan, South Korea and China. (Andina)

Peru to post region's lowest inflation in 2011-2012

2011-09-25T11:08:00.000-07:00

The International Monetary Fund (IMF) has predicted that Peru will register the lowest inflation rate in the region this and next year, at 3.1 and 2.4 percent respectively.

Inflation is forecast to recede from 6.3/4 percent in 2011 to 6 percent in 2012 as activity moderates and commodity prices stabilize, although with considerable intra-regional differences.

According to the IMF, Chile, Colombia, Ecuador and Brazil will post 2011 inflation rates of 3.1, 3.3, 4.4, 6.6 percent, respectively.

In the inflation-targeting countries (Brazil, Chile, Colombia, Mexico, Peru, Uruguay), it is projected to stay within the target range during 2011, but near or above the upper bound (Brazil, Peru, Uruguay).

In other economies, such as Argentina and Venezuela, inflation is projected to remain in double digits, reflecting expansionary policies.

Uruguay, Paraguay, Bolivia, Argentina and Venezuela will have inflation rates of 7.7, 8.7, 9.8, 11.5 and 25.8 percent, respectively.

By 2012, inflation in Chile, Colombia, Ecuador and Brazil is expected to reach 3.1, 2.9, 4.9 and 5.2 percent, in each case.

For their part, Uruguay, Paraguay, Bolivia, Argentina and Venezuela will post inflation rates of 6.5, 7.8, 4.8, 11.8 and 24.2 percent respectively next year. (Andina)

Humala meets South Korea's president in New York

2011-09-22T10:33:00.000-07:00

Peruvian President Ollanta Humala holds meeting with his South Korean counterpart Lee Myung-Bak

Peruvian President Ollanta Humala held on Thursday a bilateral meeting with his South Korean counterpart Lee Myung-Bak, within the framework of the 66th General Assembly of the United Nations, held in New York.

The meeting began at 08:30 hours in Lima (09:30 local time), the presidential press office reported on its Twitter page.

During the meeting, both leaders discussed the interest of Korean investors in developing various projects in Peru. These projects include the construction and operation of a petrochemical complex in southern Peru, as well as the construction of the new airport in Cusco.

Peru is the country that benefits the most with South Korea's cooperation in Latin America, which is focused on health, education, nuclear energy, science and technology, environment and defense issues.

In 2010, a Memorandum of Understanding on Scientific and Technical Cooperation was signed between Peru's Education Ministry and South Korea's Ministry of Science and Technology. (Andina)

Peru's Mistura food festival attracts over 361,000 people in ten days

2011-09-19T10:30:00.000-07:00

More than 361,700 Peruvian and foreign foodies attended the fourth edition of the International Gastronomic Festival Mistura 2011, in which they sampled several dishes, participated in conferences, bought agricultural products and enjoyed different artistic shows.

Last year’s festival attracted over 200,000 foodies in six days. The last three editions have been held at Parque de la Exposicion in Lima.

According to the Peruvian Society of Gastronomy (Apega), the most crowded day was Friday, Sept. 16, with 39,610 people who visited the festival throughout the day and always following the suggestions made by Peru’s Civil Defense.

Of the total attendees, 18,000 were children; 4,500 tourists who came to Lima exclusively for Mistura, 233 journalists from 19 countries and 300 cooking and hotel management students from Chile, Ecuador, Colombia, Mexico, Argentina and Brazil.

Apega’s president Mario Valderrama highlighted that the festival’s service and organization also improved compared to the edition carried out last year, according to a survey of 430 attendees.

The event organizers hired 200 security guards to protect the visitors. These guards support the work done by 2,000 police officers deployed in strategic points at the festival venue in downtown Lima.

Valderrama mentioned that the fourth edition of Mistura produced over 163 tons of solid waste (plastic, paper and cardboard) which will be sold and the profits will be donated to Aniquem (rehabilitation center for burn victims) and the National Federation of Recyclers of Peru. (Andina)

Peru to triple pecan nut plantations next year

2011-09-16T15:23:00.000-07:00

The Peruvian pecan nut industry is set to grow its plantation area by 333% in 2012 as the country looks for new markets, said the National Institute of Agricultural Innovation (INIA).

The plans come as demand continues to increase in Europe and North America, INIA leader William Daga told Agraria.pe.

“Due to the increase in this niche market it’s estimated that pecan production will grow in 2012 and the hectares of cultivation will increase significantly, going from 900 to 3,000 hectares, prioritizing the coast and the north,” Daga stated.

INIA figures show 70% of Peru’s pecan nut production is exported to the U.S., Germany and Asia, while the rest is traded in the local market through supermarkets and companies that incorporate the product such as snack producers, bakeries and delicatessens.

Peruvian pecan nuts are able to arrive without the shell in China, where it is believed the nut brings good luck and a long life, said an article on freshfruitportal.com.

In 2010 Peruvian pecan nut production stood at 1,847 metric tons (MT). (Andina)

Mining companies to invest $50bln in new Peru mines, expansion projects

2011-09-12T19:51:00.000-07:00

Mining companies in Peru are planning to invest $50 billion in new mines and expansion projects, the government said Monday.

The Mines and Energy Ministry had previously forecast that projects in the country's key mining sector would require investments of about $42 billion this decade.

According to an article from Dow Jones Newswires, the majority of the investments are for copper and gold projects.

The biggest projects include Xstrata PLC's $4.2 billion Las Bambas copper project in Apurimac region and Newmont Mining Corp's (NEM) 51.35%-owned Minas Conga gold project in Cajamarca. Conga has an estimated capital cost of $ 4.0 billion to $4.8 billion.

Peru's Compania de Minas Buenaventura SAA has a 43.65% stake in Conga, while the World Bank'sInternational Finance Corporation holds the remainder.

Peru is the world's second biggest producer of copper and silver and a major producer of gold, zinc, lead and other minerals. (Andina)

Peru Central Bank Keeps Rate at 4.25% for Fourth Month on Global Slowdown

2011-09-08T20:31:00.000-07:00

Peru’s central bank kept its benchmark lending rate unchanged for a fourth month amid a global slowdown and indicated a readiness to cut borrowing costs at future meetings to protect the country’s economy.

The seven-member board, led by central bank President Julio Velarde, held the overnight rate at 4.25 percent, matching the estimates of all 15 economists surveyed by Bloomberg.

“This decision reflects the deceleration in economic activity and heightening of international financial risks,” policy makers said in their statement posted on the bank’s website. “The central bank will modify monetary policy if these trends continue.”

Europe’s debt crisis and stagnation in the U.S., the world’s largest economy, may undermine Peru’s commodity- dependent growth, policy makers said when they left rates unchanged at their last meeting on Aug. 11. Colombia, Chile and Mexico have also halted rate increases in the past few months, while Banco Central do Brasil cut its key rate for the first time in more than two years.

“Growth is going to be slightly below potential given the global context so you won’t have the pressure from domestic demand,” said Alonso Segura, head of investment and strategy at Banco de Credito del Peru, in a phone interview from Lima. “It’s premature to cut rates now but going forward the trend will be downward.”

‘Gradual Process’

The central bank expects Latin America’s sixth-biggest economy to expand 6.3 percent in 2011, and 6 percent in 2012, down from previous forecasts of 6.5 percent for both years, Velarde told congress on Sept. 6. Over the past five years, Peruvian growth averaged 7.2 percent.

A 35 percent surge in imports that increased company inventories in the first half of the year masked a slowdown in investment sparked by concern President Ollanta Humala, who took office July 28, would reverse policies that made Peru the region’s fastest growing economy in the past decade.

The $153 billion economy expanded 6.6 percent in the second quarter, the slowest pace in more than a year, as construction output stalled and manufacturing growth weakened.

Business sentiment is improving after Humala appointed a business-friendly Cabinet and struck a deal with mining companies on increasing royalties.

“The uncertainty is clearing, but it’s a gradual process,” said Segura. “In the fourth quarter, we’ll see a more significant recovery in confidence and investment.”

‘Can Act Quickly’

Electricity demand grew at the fastest pace in six months in August, while retail sales also signal domestic activity is “vigorous,” Velarde said.

The sol gained 0.1 percent to 2.7247 per dollar today to boost its gain since April 29 to 3.7 percent, the best performance among 25 emerging market currencies tracked by Bloomberg.

Though the central bank is focused on reining in inflation, which is running at a two-year high of 3.35 percent, policy makers stand ready to adjust rate policy if the global economy deteriorates, Velarde said.

“We have an array of munitions on the monetary and fiscal side and can act quickly if the more negative scenario materializes,” Velarde said. “We can cut interest rates, lower reserve requirements, and inject liquidity.”

Policy makers are concerned slower global growth may exacerbate a deceleration in private investment that banks including Barclays Capital Inc. expect to become more apparent in the third quarter of this year.

‘Context’ of Growth

The government has drafted what Finance Minister Miguel Castilla on Sept. 1 called “conservative” 2012 spending plans in case metal prices drop, and is ready shore up demand if a slowdown threatens metal exports and a projected $73 billion of private investment over the next five years.

Slower activity and declining international food and energy prices will keep monthly inflation around the central bank’s target of 0.2 percent for the rest of the year, said Isaac Foinquinos, an economist at BBVA Banco Continental, in a Sept. 1 note to investors.

“The board will monitor the outlook for inflation and its internal and external determinants and make adjustments to monetary policy instruments in order to guarantee inflation converges to the target range in a context of economic growth,” policy makers said in their statement today.

‘Scope’ to Cut

Consumer prices rose 0.27 percent in August on a monthly basis, after jumping 0.79 percent in July. Annual inflation will probably end 2011 at 4 percent, BNP Paribas analysts including Italo Lombardi wrote in a Sept. 2 report.

The central bank targets inflation of 1 percent to 3 percent.

The global slowdown led Brazil’s central bank to unexpectedly cut its benchmark rate last week even as inflation runs above target. The reduction marked the start of monetary easing in the region, according to Bank of America.

With the exception of Colombia, Latin America’s central banks will “move swiftly and cut policy rates much sooner” than their Asian counterparts, the bank said in a Sept. 1 report. Peru’s central bank will reduce its key rate by 25 basis points by the end of next year, Bank of America said.

“A rate cut is likely in the next six months because of the external uncertainty and given business confidence is still recovering from the elections,” said Segura. “There’s scope for a cut to 4 percent, but not just yet.”

Bloomberg - John Quigley

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.

Freeport Peruvian Copper Miners Start 48-Hour Strike in Protest at Wages

2011-09-07T10:31:00.000-07:00

Freeport-McMoRan Copper & Gold Inc. (FCX)’s Peruvian copper miners began the first of a series of strikes planned over pay increases, a union official said.

About 1,200 workers at Freeport’s Sociedad Minera Cerro Verde SAA (CVERDEC1) unit, Peru’s third-largest copper producer, began the 48-hour strike at 8:30 a.m. New York time and will hold a second strike from Sept. 14 if no accord is reached, union official William Camacho said by telephone. Workers at Freeport’s Grasberg mine in Indonesia also may strike starting Sept. 15.

“Freeport unions around the world seek to raise their wages to the same level as the rest of the mining industry,” Camacho said today from Lima. “We seek the company’s respect for the workers as they aren’t complying with our labor pact.”

Workers in Peru, Chile and Bolivia have gone on strike at copper, gold and zinc mines this year for better working conditions and a bigger share of record company earnings. Shougang Corp.’s Peru iron-ore miners began a strike Aug. 31.

Phoenix-based Freeport will continue negotiating a new labor contract, spokesman Eric Kinneberg said yesterday in an e- mailed response to questions. Cerro Verde, which is studying a $3.5 billion expansion to boost annual output 45 percent, boosted first-half output by 4 percent to 161,246 metric tons.

Copper futures for December delivery gained 6.1 cents, or 1.5 percent, to $4.117 a pound at 9:50 a.m. on the Comex in New York. A close at that price would mark the biggest gain since Aug. 31.

Copper Output Decline

Peru is the world’s third-largest copper producer behind Chile and China. Chile, which accounts for a third of global supply, may have lost 8 percent of estimated 2011 output because of strikes at mines owned by Codelco and BHP Billiton Ltd. (BHP), Codelco Chief Executive Officer Diego Hernandez said Aug. 12. Chile produced 5.42 million metric tons of copper last year.

Mine production is set to lag behind demand by 256,000 metric tons in 2011, a second year of deficit, according to Citigroup Inc. Prices have more than doubled since the end of 2008 as demand increased in China, the world’s top consumer.

Freeport rose 66 cents, or 1.5 percent, to $45.02 at 10:36 a.m. in New York trading. Cerro Verde fell 83 cents, or 2.1 percent, to $38.12 in Lima.

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.

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Peru’s wood exports up 20% this year

2011-09-02T14:38:00.000-07:00

Peruvian wood exports are likely to jump 20 percent in 2011 compared to the same period last year, due to greater dynamism in the stock of companies in the industry, reported the Peruvian Exporters' Association (Adex).

Adex's President, Juan Varilias, recalled that wood exports totaled US$171.8 million in 2010, representing an 11% growth compared to the same period in 2009 (US$154.7 million).

During his participation in VII International Convention on Sustainable Forest Industry, Varilias noted that between January and July in 2011, wood exports reached US$84.6 million, 18 percent less than the same period a year earlier (US$102.6 million).

“We expect a greater dynamism in exports during the second semester and we could register a 20 percent growth this year,” he indicated.

However, he noted that other countries such as Chile and Brazil export more than Peru, climbing US$1.81billion and US$1.90 billion in 2010 respectively. (Andina)

Lima braced for Eurofruit congress in November

2011-08-30T14:01:00.000-07:00

The Southern Hemisphere's leading fresh produce conference event, Eurofruit Congress Southern Hemisphere takes place in Lima, Peru, on 9-11 November and promises to be another premier event following on from last year's edition, which saw over 220 delegates from 21 countries convene in Uruguay.

This year's conference programme will feature a supplier spotlight on host nation Peru, with speakers set to discuss what the country's rapidly developing fresh produce industry has to offer the Northern Hemisphere market, fruitnet.com reported.

Leading the discussion will be Fernando Cillóniz from Inform@cción, the Lima-based research and consultancy agency, which provides information on Peru's agricultural sector.

A delegation of senior-level, international speakers will also offer tips on how to stay ahead in the highly competitive retail sourcing and marketing arena, plus an insight into what the major markets are demanding from growers and exporters when it comes to sustainability, logistics and packaging.

Other hot topics up for discussion will include a look at the opportunities for new growth in certain product categories and market sectors within traditional export destinations like North America and Europe, as well as the potential to supply alternative markets in Asia, Eastern Europe and Russia.

Staying ahead of the game with the most up-to-date and comprehensive knowledge is vital in today's competitive global market. Long-term business success also comes down to the ability to make the right kind of relationships with the right kind of people.

Eurofruit Congress Southern Hemisphere offers ample networking opportunities to ensure participants make lasting contacts with the best fresh produce business professionals in the region and beyond.

The 2010 Eurofruit Congress Southern Hemisphere was held in Uruguay’s renowned sea resort Punta del Este last December. That was the first time the annual conference and exhibition event for the region’s fresh produce industry came to Uruguay. (Andina)

IDB says Peru’s economy “robust” in face of global crisis

2011-08-29T10:59:00.000-07:00

Peru’s economy is “robust” in the face of any international crisis like that affecting the United States and Europe, the Inter-American Development Bank (IDB) has said.

IDB representative in Peru, Fidel Jaramillo, stated that Latin America is well prepared to handle the effects of a global recession.

Jaramillo noted that Latin America has done an excellent job with the macroeconomic and financial management, thus accumulating a large amount of forex reserves.

"This is clear in the case of Peru, where all its indicators show great strength," he told Andina.

However, Jaramillo pointed out that "according to some IDB studies, one of the possible scenarios includes a slowdown in developed countries and a decrease in economic growth rates in other nations."

In this regard, he noted that "the challenge of the Peruvian government will be to strengthen the counter-cyclical policies to mitigate the financial crisis' impact on growth, but in the case of Peru, it will remain robust." (Andina)

Andean Community to strengthen integration during Lima meeting

2011-08-22T12:50:00.000-07:00

Representatives of the Andean Community (CAN) will meet today in Lima to evaluate a “re-engineering” of the Andean group which allows to strengthen the sub-regional integration process.

Colombian Foreign Minister Maria Angela Holguin is to chair the meeting which will address social issues such as the participation of Afro-descendant communities, Andean cooperation and specific environmental and agricultural projects.

Moreover, the four-nation bloc will discuss Spain’s request to participate as an observer of the Andean Community and the implementation of the Andean Council of Culture Ministers.

The foreign ministers of Bolivia, Ecuador, Colombia and Peru will also take part in the 34th Extraordinary Meeting of the Andean Council to be held at the CAN headquarters in Lima, where they will discuss ways to restructure the sub-regional bloc and prepare a new strategic agenda.

The ministers of foreign trade will also attend the meeting to analyze proposals related to statistics, public health, customs and energy.

The Andean Community is a trade bloc of four countries, Bolivia, Colombia, Ecuador and Peru. Chile Argentina, Brazil, Paraguay and Uruguay are associated while Panama and Mexico are Observers. (Andina)

Peruvian Sol Bonds Post Longest Winning Streak Since 2006 on Inflation

2011-08-19T18:08:00.000-07:00

Peruvian bonds posted their longest winning streak since 2006 as traders bet a slowdown in the global economy will spread to the Andean nation and help contain inflation.

The yield on Peru’s benchmark 7.84 percent sol-denominated bond due August 2020 declined four basis points, or 0.04 percentage point, to 5.90 percent at 2:57 p.m. in New York, according to prices compiled by Bloomberg. The bond’s price rose 0.25 centimo to 113.32 centimos per sol.

Bond yields have fallen for nine straight days, the longest streak since the period ending Dec. 18, 2006, when yields also fell for nine days. Yields shed 12 basis points this week.

Investors are betting Peruvian inflation will ease as slower growth in Europe and the U.S. dim growth prospects for the South American country and cause international food and fuel prices to fall, said Siobhan Morden, head of Latin American strategy at RBS Securities Inc. in Stamford, Connecticut.

“Inflation expectations have collapsed,” Morden said. “It’s not a liquidity crisis like we had in 2008, but more the traditional global slowdown. Emerging markets aren’t heading into crisis, but there are certainly slower growth prospects.”

The deceleration in the world economy and domestic activity in Peru led the country’s central bank Aug. 11 to keep interest rates unchanged for a third month.

Inflation will ease after hitting a three-year high in July, the central bank’s research director Adrian Armas said Aug. 12.

Economic Outlook

Peru’s export revenue is likely to fall next year as global demand for its metals declines, Finance Minister Miguel Castilla said Aug. 8. The $153 billion economy will expand 6 percent to 6.5 percent this year, after growing 7.7 percent in the first half, he said.

“If metal prices were to plummet, Peru’s economy could contract in 2012, due to its heavy reliance on mining investments,” Nomura Securities Inc. said today in an e-mailed report. “Under this scenario, we would expect the central bank to cut rates aggressively and for the government to increase spending in order to jump-start the economy.”

Peru is the world’s biggest silver producer, third largest in copper and zinc, and sixth in gold.

The sol strengthened 0.3 percent to 2.7340 per U.S. dollar, from 2.7414 yesterday. That’s the currency’s strongest level since April 2008.

The extra yield investors demand to own Peruvian government bonds instead of U.S. Treasuries fell six basis points to 210, according to JPMorgan Chase & Co.

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

World Bank electricity use project to remote areas expand to seven Peruvian departments

2011-08-16T08:12:00.000-07:00

The World Bank approved the expansion of the Productive Use of Electricity (UPE) project to remote areas in seven departments of Peru, following the success of the Cusco, Junin and Lima pilots, the Ministry of Energy and Mines reported.

The General Directorate of Rural Electrification (DGER) of MEM explained that Piura and Tumbes departments are benefited in the electrified rural area of the Empresa Regional de Servicio Público de Electricidad Electro Noroeste (Enosa).

Meanwhile, Lambayeque and San Ignacio, Jaen, Cutervo, Santa Cruz, Chota provinces, as well as and Hualgayoc in Cajamarca department are benefited in the electrified area of Electricidad del Norte (ENSA) electricity distribution company.

Also, other provinces of Cajamarca, such as Contumaza, Celendin, San Marcos and Cajabamba, are in the electrified rural area of Electro Norte Medio (Hidrandina).

In addition, the expansion project includes Ancash department in the electrified rural area of Electro Norte Medio and Ucayali in the one of Electro Ucayali.

He said that UPE aims is to achieve a more intensive use of electricity in electrified rural communities to help increase productivity and provide other benefits to businesses, improving the quality of life in rural communities by having better incomes. (Andina)

Peru among three most attractive countries for investments

2011-08-11T15:11:00.000-07:00

Peru ranks among the three most attractive countries for investors who regard Latin America as a safe option amid a global crisis that is shaking markets in the United States and Europe, stated Santiago-based brokerage firm Celfin Capital.

“Since the current crisis is different from the one in 2008 as it affects countries more than companies, emerging countries are now seen as attractive places to make investments despite all the risks,” said Hedmon Rios, an economist at Celfin Capital.

Rios noted that observing recent evaluations of sovereign credit ratings, some Latin American countries could easily be mistaken with developed countries.

“Peru, Chile and Colombia are the countries that attract more capital flows in Latin America as their macroeconomic indexes guarantee a proper economic management,” he said.

Rios went on to say that these three countries have reacted with such a flexibility that they have proven to be strong economies.

Among these countries, Peru could be the most attractive one for investments because of its expected high growth rates and strong investments in infrastructure to be carried out in the next months. (Andina)

Today in Peru

Over 1,500 businessmen to meet in Lima for APEC SME summit

2011-08-10T07:31:00.000-07:00

In order to enter world markets, more than 1,500 entrepreneurs will meet in Lima on August 25 for the Asia Pacific Economic Cooperation (APEC) Small and Medium Enterprises (SME) Summit 2011.

The summit is organized by the country’s foreign trade association (ComexPeru) as Peruvian Secretariat of the APEC Business Advisory Council.

“In this event, we’ll give the SMEs tools to reach markets around the world and face globalization through different information technologies such as websites, social networks, e-commerce platforms, among others,” president of ComexPeru Alfonso Garcia said.

On this regard, general manager of ComexPeru Patricia Teullet mentioned that within the framework of the ABAC meeting in Lima, to take place from August 22-24, the SME Summit will seize the opportunity to create a space for large companies to share their successful experiences with the SMEs.

According to the latest National Economic Census (2008), 94.5 percent of the total companies in Peru are micro enterprises, 4.8 percent are small enterprises and only 0.6 percent are medium and large enterprises.

Despite these numbers, the SMEs account for 20 percent of the country’s Gross Domestic Product. (Andina)

Today in Peru

Duran Ventures reports latest positive results from Aguila drill program

2011-08-08T13:44:00.000-07:00

Duran Ventures Inc. provided additional results from the ongoing resource drilling program at the company's 100% owned Aguila Porphyry Copper and Molybdenum Project in Peru.

All drill holes are located on The Aguila Project, located in the Department of Ancash in north central Peru, some 400 kilometres northwest of Lima.

It said more than 8,500 metres had been drilled as of July 29 with 17 holes completed and four in progress.

A fourth drill rig, which was previously working on the company's Corongo Project, was mobilized to Aguila on July 15 in order to accelerate the drilling program.

"Company geologists believe that the Aguila Project is comparable in terms of style and grade of mineralization and geological setting to the nearby Magistral deposit but that Aguila may offer greater tonnage potential," it said. (Andina)

Today in Peru

Xstrata sees no threat to investments under Peru's new government

2011-08-04T21:24:00.000-07:00

Anglo-Swiss mining group Xstrata sees no threat to the company's investments in Peru following the recent change in government, according to CEO Mick Davis.

"President Humala, who took office last week, has underlined his government's intention to maintain Peru's economic growth and stability by re-nominating the current governor of the central bank of Peru, Julio Velarde, for another term and appointing experienced ministers to the cabinet including the Minister of Mines and Energy Carlos Herrera," Davis said.

"Other positive signals from the new administration include a commitment to respect fiscal stability agreements, currently in place for all of Xstrata's projects," he added.

In Peru, Xstrata currently fully owns and operates the Tintaya copper mine and has a 33.75% stake in the Antamina copper-zinc operation. The company is also developing the Antapaccay and Las Bambas projects.

"From initial interactions with the incoming government, we are confident that President Humala is cognizant of the mining sector's significant contribution to Peru's economic growth and the vital role of foreign investment in unlocking the nation's mineral wealth," Xstrata CEO noted.

Mining company contributions to the Peruvian government are already amongst the highest of resource-rich countries, stated Davis.

"The new government has confirmed its intention of negotiating additional fiscal contributions from the mining sector with companies. It has also recognized the importance of preserving the competitiveness of Peru's fast-growing and valuable mining industry," Davis said.

"Early indications of a willingness to consult with the mining industry to try and find a sensible way forward are encouraging," the executive went on to add. (Andina)

Today in Peru

Trade between Peru, Brazil doubled in five years to nearly US$3bln

2011-08-02T21:18:00.000-07:00

Trade of goods and services between Peru and Brazil has doubled in the last five years since the signing of the Economic Complementation Agreement (ECA) Nº 58 within the framework of the Southern Common Market (Mercosur), going from US$1.4 billion in 2005 to nearly US$3 billion in 2010.

Brazilian imports are mainly inputs such as copper, zinc and silver. However, these imports also include textiles, garments and agro-industrial products, BBVA Banco Continental reported Tuesday.

In turn, Peruvian purchases to the neighbouring country include crude petroleum, manufactured products of iron and steel and capital goods such as trucks, buses, trailers, and construction and mining equipment, noted the report.

The document further indicated that these figures show that trade relation between both countries is strengthening and that there is still room to continue growing stronger.

Peru exported around US$900 million to Brazil last year, while shipments doubled in the last decade.

In the first five months of 2011, Peruvian exports to Brazil soared 80 percent, reaching US$540 million in May.

Brazil has more than 150 million of consumers, becoming a market full of opportunities for Peru.(Andina)

Today in Peru

Peru Inflation Doubles Forecast as July Prices Jump Most in Three Years

2011-08-01T09:35:00.000-07:00

Peruvian consumer prices rose at the fastest pace in more than three years in July, double what analysts were expecting, fueling speculation the central bank is getting closer to raising borrowing costs.

Inflation accelerated 0.79 percent last month, according to a statement published today in the Official Gazette. Economists expected a 0.31 percent increase, according to the median estimate of 10 analysts surveyed by Bloomberg.

Peru’s economy is expanding faster than expected even after companies scaled back spending ahead of the June 5 presidential election. President Ollanta Humala announced an investor- friendly cabinet, which will probably allow economic activity to remain “strong” in the second half of this year, sparking inflation pressures, said Carola Sandy, an economist at Credit Suisse AG.

“The slowdown doesn’t seem to be as big as people thought,” Sandy said in a phone interview from New York before the number was released. “That will translate into faster inflation and require the central bank to put the brakes on in the third quarter.”

Policy makers led by bank President Julio Velarde left Peru’s benchmark lending rate unchanged for a second straight month July 7, citing slower inflation, a deceleration in some parts of the economy and concern about global growth.

Gross domestic product rose 7.1 percent in May from the year before, according to the statistics agency. While the figure was the lowest in 15 months, it beat the 6.7 percent median estimate from 10 analysts surveyed by Bloomberg.

Humala retained Velarde as central bank president, making him the linchpin of a cabinet that include five businessmen and seven officials who served previous governments.

The government’s consumer price index is based on a survey of establishments conducted by the agency in the Lima Metropolitan area.

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

New Peruvian Cabinet takes office today

2011-08-01T06:37:00.000-07:00

Peru’s new Cabinet led by Prime Minister Salomon Lerner Ghitis will officially take over their offices on Monday.

The new Cabinet takes office with Rafael Roncagliolo as foreign minister, Daniel Mora as defense minister, Luis Miguel Castilla as finance minister, Oscar Valdes as interior minister, and Francisco Eguiguren as justice minister.

Also, Patricia Salas as educaction minister, Alberto Tejada as health minister, Miguel Caillaux as agriculture minister, Rudecindo Vega as labor minister, Jose Luis Silva as foreign trade and tourism minister, Carlos Herrera as energy and mines minister.

The list is completed by Carlos Paredes as transport and communications minister, Kurt Burneo as production minister, Rene Cornejo as housing minister, Aida Garcia as women and social development minister, Ricardo Giesecke as environment minister, and Susana Baca as culture minister. (Andina)

Today in Peru

South America Plans Summit to Defend Currencies From Debt-Crisis Fallout

2011-07-29T16:22:00.000-07:00

Finance officials from South America and Mexico will gather next month to discuss ways to protect their currencies and economies from the debt crisis in the U.S. and Europe.

The meeting of finance ministers from the Union of South American Nations, to take place Aug. 10-11 in Buenos Aires, was organized at the urging of Colombian President Juan Manuel Santos. The gathering will allow governments to coordinate action to deal with shared problems including “speculative” capital inflows that are fueling a rally in their currencies, Santos said at a summit yesterday of regional leaders.

“Latin America is sitting on $700 billion in reserves that are losing their value because of the crisis we’re going through with the impasse in the U.S. Congress over the debt ceiling,” Santos said in Lima, Peru at a summit of the 12-nation bloc, known as Unasur. “This is affecting us and we can’t continue as mere spectators.”

Policy makers in Latin America are trying to curb gains in their currencies, which hurt the competitiveness of their exports, and fight inflation after near-zero borrowing costs in advanced economies such as the U.S. and Japan spurred demand for higher-yielding assets in emerging markets.

Capital Controls

This week, Brazil imposed a 1 percent tax on bets against the dollar in the country’s derivatives market after the real reached the highest level since the country abandoned its peg to the greenback in 1999. Since last year, policy makers in Latin America’s biggest economy also tripled a tax on foreigners’ purchase of bonds and raised levies on foreign borrowing.

Policy makers in Colombia and Chile, while so far avoiding similar capital controls, have each stepped up daily dollar purchases in their local spot currency markets.

The region’s currencies are among the best-performing in the world over the past two years, with the Brazilian real surging 22 percent, the Chilean peso gaining 19 percent and the Colombian peso up 17 percent.

The International Monetary Fund said in June that it expects Latin America and Caribbean economies to grow an average 4.6 percent this year and 4.1 percent next year, after nations including Peru and Brazil expanded at their fastest pace in two decades in 2010.

Argentine President Cristina Fernandez de Kirchner hailed yesterday’s summit in Lima, saying regional leaders need to be more proactive about addressing common challenges.

“It wasn’t only a routine meeting of Unasur,” Fernandez said today in Brasilia, alongside her Brazilian counterpart, Dilma Rousseff. “For the first time we looked collectively at the problems and how they are affecting our region, like speculative capital inflows that tend to strengthen our currencies.”

Santos said Unasur leaders agreed to invite officials from Mexico to attend the meeting in Buenos Aires, given that the country is a member of the Group of 20 richest nations along with Argentina and Brazil.

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

Journalists from Africa, Europe & Asia cover Humala’s inauguration

2011-07-28T19:01:00.000-07:00

More than 1,900 journalists from all over the world, including countries such as Qatar, Morocco, Switzerland, Japan and South Korea, are covering President Ollanta Humala’s inauguration.

Peru's Government Palace, the Basilica Cathedral of Lima, the Congress of the Republic and the Chancellery, are the different venues where the official events are taking place.

Among Asian countries, Japan is the one with the biggest group of journalists, with more than 15 professionals of TV broadcast as NHK, Kyodo News, NKH and Asahi Shimbun.

Ari Hirayama and Mitsuri Oue, of Asahi Shimbun, pointed out that Peru is very attractive for Japanese channels because of its tourist places such as Machu Picchu and news related to former President of Peru Alberto Fujimori.

Finally, they noted that Humala created great expectations on mining investment policies that will be implemented during his government. (Andina)

Today in Peru

Buenaventura Second-Quarter Profit Rises 83% on Higher Gold, Silver Prices

2011-07-26T18:45:00.000-07:00

Cia. de Minas Buenaventura SA, Peru’s biggest precious-metals producer, said second-quarter profit jumped 83 percent as metals prices surged.

Net income rose to $204.2 million, or 80 cents a share, from $111.6 million, or 44 cents, in the year-earlier period, Buenaventura said today in an e-mailed statement. Analysts expected profit of 90.5 cents a share on an adjusted basis, the average of four estimates in a Bloomberg survey.

Buenaventura sold gold for an average $1,508 an ounce in the quarter, 26 percent more than a year earlier. Record gold and silver prices offset lower output of zinc and lead, said Imaru Casanova, chief analyst at McNicoll Lewis & Vlak.

“Help came from much stronger metals prices in the second quarter,” Casanova, who rates the stock a “hold” and doesn’t own shares, said by telephone before the report was released. “Production was slack and shareholders should be concerned with where future gold production will come from.”

Gold production rose 3 percent to 269,778 ounces, while zinc and lead output fell 10 percent and 7 percent, respectively, the company said. Silver output gained 11 percent to 3.73 million ounces. New York-traded silver futures doubled in the period.

Buenaventura’s revenue climbed 52 percent to $343.3 million, while operating costs fell 33 percent to $19.5 million. Exploration spending rose 17 percent to $12 million.

Buenaventura’s American depositary receipts, each representing one ordinary share, rose 38 cents, or 0.9 percent, to $42.55 in New York Stock Exchange composite trading. The ADRs have gained 8.5 percent over the past year. The report was released after the close of regular market trading in New York.

‘Attractive’ Risk-Reward

The company has a 19 percent stake in Phoenix-based Freeport-McMoRan Copper & Gold Inc. (FCX)’s Cerro Verde copper mine and a 44 percent stake in Newmont Mining Corp. (NEM)’s Yanacocha gold mine, which contributed $129.6 million toward earnings, a 50 percent increase from a year earlier.

Gold output at Yanacocha, Latin America’s largest gold mine, fell 3 percent to 341,665 ounces in the quarter. Cerro Verde copper production rose 2 percent to 76,905 metric tons.

The company and Peru’s mining industry face less risk of radical change from President-Elect Ollanta Humala’s government than originally expected, said Carlos De Alba, an analyst at Morgan Stanley. Humala, who takes office July 28, won the May 5 elections on pledges to impose a mining windfall tax.

“After proposing to reappoint the current central bank president for a new period, we believe the next administration in Peru will pursue a moderate, more market friendly position than the market is discounting,” De Alba, who upgraded the stock to “overweight,” said in a July 20 report. “The stock’s risk-reward is attractive.”

The proposed tax may make Peru’s mining industry less competitive, Chief Executive Officer Roque Benavides said in a July 13 interview.

Gold futures for December delivery rose $4.90, or 0.3 percent, to $1,619.30 an ounce today on the Comex in New York. The August contract reached a record $1,624.30 yesterday. Silver climbed to a 31-year high of $49.845 on April 25.

(Buenaventura will hold its quarterly conference call July 27 at 11 a.m. New York time. To call from outside the U.S.: 1-973-582-2710, Code: 78016946. For U.S. participants: 1-888-693-3477.)

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

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

Today in Peru

Peru exports up 30% to US$20.9bln in first half

2011-07-25T14:51:00.000-07:00

Exports from Peru rose 30 percent year-on-year in the first half of 2011 to a total value of US$20.9 billion, the country's foreign trade association ComexPeru said Sunday.

Between January and June, China was the main market for Peruvian products taking over 15.8% of total exports, followed by the United States (12.3%), Switzerland (11.8%) and Canada (9%).

Exports to China increased 32 percent from a year earlier, while those to Switzerland and Canada jumped 36 percent and 18 percent, respectively.

During the first six months of 2011, the value of exports from Peru's traditional sector reached over US$16.3 billion, fueled by strong sales of copper (up 54% to US$4.1 billion) and gold ores and concentrates (up 14% to US$4.3 billion).

Exports from the agricultural and manufacturing industries also witnessed strong growth in the period, rising 54 percent to US$300 million and 33 percent respectively. (Andina)

Today in Peru

Humala Names Castilla Peru’s Finance Minister in Bid to Attract Investors

2011-07-21T18:52:00.000-07:00

Peru’s President-elect Ollanta Humala moved to ease investor concerns about how he’ll manage the Andean nation’s economy by filling his cabinet with experts in finance and markets.

Humala will name Miguel Castilla finance minister, his Gana Peru party said in a post on Twitter. In an interview on television channel ATV, Humala said he will name campaign manager and businessman Salomon Lerner as cabinet chief and Carlos Herrera as energy and mining minister.

Humala, a former army rebel who takes office July 28, is seeking to reassure investors that his plans to raise mining royalties and enlarge state control won’t erode economic growth under departing President Alan Garcia that was the fastest in Latin America. In addition to Castilla, who served as Garcia’s deputy finance minister, Humala this week tapped central bank President Julio Velarde to remain in his post.

Naming Velarde and Castilla is a “magnificent” sign that Humala has heard investors’ concerns, said Patricia Teullet, general manager at the Peruvian Exporters’ Association and a critic of Humala.

“It reveals pragmatism and that he’s prioritizing long- term development over measures designed for effect and with an ideological face,” Teullet said.

Slowing Expansion

Peru’s $153 billion economy expanded at the slowest pace in 15 months in May as companies cut spending while waiting for Humala to detail his economic plans. The president-elect, after running as an ally of Venezuela’s Hugo Chavez in a failed 2006 presidential bid, changed tack during this year’s campaign and said he would emulate the pro-business policies of former Brazilian President Luiz Inacio Lula da Silva.

Humala, in a message posted on his Twitter account today, asked Peruvians “to have confidence” in his appointments and that each member of his cabinet “is committed to change.”

The 42-year-old Castilla has a doctorate in economics from Johns Hopkins University and worked as chief economist at the Caracas, Venezuela-based Andean Development Bank, known as CAF, according to a copy of his resume sent by the Finance Ministry. A former consultant to the World Bank, he wrote a chapter on Latin America and East Asia trade strategies in a 2008 book titled “Growth and Development in Emerging Market Economies.”

Former Businessman

Lerner is a former deputy trade minister and businessman who managed Humala’s campaign while Herrera served as mining minister under ex-President Valentin Paniagua.

“Humala understands that these types of appointments are necessary to tackle the deficit of trust that hangs over him,” said Alvaro Vargas Llosa, a senior fellow at the Independent Institute in Washington.

Louis Maccini, who advised Castilla on his thesis at the Baltimore-based university, said in a phone interview that his former pupil “has a way of communicating with people who aren’t so in tune with economics.”

Since Velarde was reappointed July 17, the yield on the nation’s benchmark 7.84 percent sol-denominated bond due 2020 has fallen 6 basis points to 6.232 percent, a four-month low, at 9:52 a.m. New York time today, according to prices compiled by Bloomberg. Lima’s General Stock Index has gained 11 percent.

`Perfect Understanding'

Cesar Perez, a managing director at Celfin Capital SA in Santiago, Chile, said Castilla has “a perfect understanding of finance and micro-economic needs” while future mining minister Herrera “will give comfort to Peru’s key sector, which is the backbone of the economy.”

While Humala’s appointments are likely to please investors, they may anger supporters in his Nationalist Party who are pressuring him to fulfill earlier pledges to rewrite the constitution, unilaterally boost mining royalties and renegotiate free trade agreements, said Vargas Llosa.

“If he makes those changes we will end up badly,” said Teullet.

Humala narrowly defeated Congresswoman Keiko Fujimori in a June 5 runoff by pledging to better distribute Peru’s mining wealth to help the nation’s heavily-indigenous poor, who were slower to benefit from economic growth that averaged 5.6 percent a year over the past decade.

Spending Boost

He said he plans to boost spending on pensions, education and child care through a windfall tax on gold and copper mining companies that won’t make Peru less attractive to foreign investment. Peru is the world’s third-largest copper and zinc producer.

As much as $42 billion in planned mining investment may be derailed if Humala changes investment rules, Southern Copper Corp. Chief Executive Officer Oscar Gonzalez Rocha said June 14. Peru’s economy expanded 8.8 percent in the first quarter from a year earlier after growing 9.2 percent in the fourth quarter.

The country’s next energy and mining minister “will have to be a great communicator to be able to negotiate changes to oil and gas contracts,” said Cesar Gutierrez, an energy consultant and former president of state oil company Petroperu. “Any negative changes will be taken as general policy and will discourage future investment.”

To contact the reporters on this story: Helen Murphy in Lima at hmurphy1@bloomberg.net; Alexander Emery in Lima at aemery1@bloomberg.net

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

ABB wins major greenfield hydro project In Peru

2011-07-20T19:42:00.000-07:00

Canadian-based ABB, a leading power and automation technology company, announced it has recently won a major power generation order to provide power equipment and electrical engineering support for the Cheves greenfield hydropower plant in central Peru, which will benefit thousands of Peruvians.

ABB to provide power equipment and engineering for Cheves hydropower plant in Peru; region will benefit from greater reliability, relief from voltage fluctuations, power cuts

Cheves is a 2 x 84 megawatt hydropower project located in the provinces of Oyon and Huaura in Peru. This project is scheduled for completion by November, 2013.

"The award of this project to ABB reflects the trust our customers have in the strong project management and engineering capabilities of our team in leading full scope Water-to-Wire projects, and it continues our success in the region," said Gary Shaw, vice president and general manager, Power Generation, ABB Canada Inc.

He added the once commissioned, electricity consumers in the region will benefit from significant improvements in reliability and relief from voltage fluctuations and power cuts common to the area.

ABB will provide engineering services and power equipment to Empresa de Generacion Electrica Cheves S.A, which is a special-purpose hydropower generation company in Peru, and 100 percent owned by SN Power of Norway.

The company is executing the project, leading a consortium among ABB Canada Inc., Rainpower Norway and Jeumont Electric out of France; which is providing a complete "Water-to-Wire" solution for the hydro power plant.

ABB is providing the complete electrical balance of plant (eBoP) systems including GIS substation, generator breakers, medium-voltage and low-voltage switchgear, step-up transformers, plant controls, protection system and other electrical auxiliaries. The consortium's scope includes the installation and commissioning of equipment.

The consortium provided a competitive commercial proposal and a superior technical proposal.

ABB is a leader in power and automation technologies that enable utility and industry customers to improve performance while lowering environmental impact.

The ABB Group of companies operates in around 100 countries and employs about 124,000 people. The company's North American operations, headquartered in Cary, North Carolina, employ about 18,000 people in multiple manufacturing, service and other major facilities. (Andina)

Today in Peru

Julio Velarde to Stay On at Peru Central Bank for Five Years, Humala Says

2011-07-18T13:59:00.000-07:00

Peru’s President-elect Ollanta Humala said Central Bank President Julio Velarde will remain in his post for another five-year term to help maintain economic stability.

Velarde accepted an invitation to stay on after his term ends July 28, Humala said in an interview with Lima-based America Television yesterday. Velarde has led the central bank “well,” he said. Humala said he’ll announce ministerial posts July 20.

“Our commitment is to provide macroeconomic stability and stability in monetary policy, which Julio Velarde is going to do,” Humala said. “We’re sending the right messages.”

Humala, who takes office July 28, is seeking to reassure investors concerned that his plans to raise mining royalties, increase Peru’s minimum wage and enlarge state companies may crimp private investment fueling the region’s fastest growth of the last decade. The $153 billion economy expanded at the slowest pace in 15 months in May as companies reduced spending while waiting for the 49-year-old former army rebel to announce his economic policies.

The Lima General Index of stocks has fallen 13 percent this year amid concern Humala’s plans to introduce a mining windfall tax will endanger $42 billion of investment in mine expansions. The yield on Peru’s benchmark 7.84 percent sol-denominated bond due August 2020 has risen 36 basis points, or 0.36 percentage point, to 6.30 percent this year, according to prices compiled by Bloomberg.

Tripling Reserves

Since being appointed in 2006 to head the central bank, Velarde, 59, has helped triple international reserves to a record $47 billion and raised lending rates to a two-year high in May to curb inflation, which has been the lowest in the region since 2006.

Velarde, who holds a doctorate in economics from Brown University, introduced measures including raising reserve requirements for bank deposits to rein in lending. He increased the operating limit on pension fund managers’ investments overseas four times last year to help cool demand for the local currency.

Humala said he’ll seek to spur investment in the Andean nation’s mining and gas industries and will urge pension fund managers to invest in infrastructure projects instead of buying stocks or overseas assets.

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

Humala flies to Caracas to meet with Hugo Chavez

2011-07-14T15:50:00.000-07:00

Peruvian president-elect Ollanta Humala flies to Caracas (Venezuela) tonight to visit President Hugo Chavez, who is receiving treatment for cancer, as well as hold a meeting with the Andean Development Corporation (CAF).

Humala will travel with his wife Nadine Heredia and a small delegation, reported his press office in Lima.

The meeting between Humala and Chavez will take place on Friday at 14:30 hours at the Palace of Miraflores.

Earlier, at 11:30 hours, President-elect Humala is expected to meet with CAF President Enrique Garcia.

Humala’s journey to Caracas will be short and his flight to Lima is scheduled for Friday at 16:00 hours. (Andina)

Today in Peru

Light and sound show covers Machu Picchu

2011-07-07T19:49:00.000-07:00

Machu Picchu was lit at night for the first time ever late on Thursday to mark the 100th anniversary of the scientific discovery of the archaeological site.

A light and sound show directed by Peruvian theatre director Luis Llosa was staged at the famed ancient citadel, which was declared a Unesco world heritage site in 1983.

This 15th-century Inca city of carved stone structures, built high on an Andean mountain range in southeastern Peru, was introduced to the world by American explorer Hiram Bingham in July 1911.

Tonight's event also coincided with the four-year anniversary of the site being voted one of the New Seven Wonders of the World in a global Internet poll.

The festivities will continue on July 8th in Cusco with traditional dance competitions, parades, music and fireworks and will culminate in a concert on the evening of July 9th, boasting national and international artists.

Today in Peru

US Department of State confirms Humala-Clinton meeting

2011-07-05T18:13:00.000-07:00

Peruvian President-elect Ollanta Humala will meet with US Secretary of State Hillary Clinton on Wednesday, during his official visit to Washington, State Department spokeswoman Victoria Nuland said Tuesday.

At a press conference, Nuland announced that the meeting will take place in the Department of State headquarters, in Washington D.C., though she did not confirm if Humala will meet US President Barack Obama.

“We welcome him gladly and we hope to continue strengthening our ties with Peru,” Nuland told reporters.

The trip marks the first top-level contact between the United States and the president-elect, who will take power on July 28.

As part of his agenda, Humala will also meet with the Secretary General of the Organization of American States (OAS), Jose Miguel Insulza.

Peru president-elect travels to US to meet with government officials

Peruvian President-elect Ollanta Humala left Tuesday morning to Washington to meet with Barack Obama government officials and other authorities like the Secretary General of the Organization of American States (OAS), Jose Miguel Insulza.

Before embarking on his trip, the leader of Gana Peru party noted that he was looking forward to this meeting as it will have an open agenda.

His arrival is scheduled for 20:35 hours and on Wednesday morning, Humala will have a meeting with Insulza, the main representative of the Organization of American States (OAS).

Afterwards, he will get together with representatives of the US Department of State and at 16:00 hours he is to have another meeting at the White House. The president-elect will return to Lima on Thursday evening.

So far, the press office of Gana Peru has not confirmed if Humala will meet with US president Barack Obama. (Andina)

Today in Peru

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

2011-06-22T07:05:00.000-07:00

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

2011-06-20T20:53:00.000-07:00

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

2011-06-15T19:32:00.000-07:00

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

2011-06-14T10:18:00.000-07:00

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

2011-06-10T10:54:00.000-07:00

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

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

2011-06-09T13:12:00.000-07:00

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.

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

2011-06-08T10:37:00.000-07:00

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

2011-06-07T20:07:00.000-07:00

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

2011-06-06T07:40:00.000-07:00

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