D&B Country Insight Snapshot: Peru January 2015

Transcription

1 D&B Country Insight Snapshot: Peru January 2015

2 Overview Overall Country Risk Rating : DB4a Moderate risk: Significant uncertainty over expected returns. Risk-averse customers are advised to protect against potential losses. Rating Outlook: Stable Core Outlook + The upward trend in Peruvian per capita income is likely to continue over the next decade. + Peru has made noted progress in trade liberalisation in recent years, progressively reducing tariff barriers and other trade-distorting measures. - Poor education quality, infrastructure constraints, weak institutions and capacity issues are the main challenges Peru faces. - Pollution from extractive industries, unsustainable practices and intensive agriculture are threatening already precious freshwater resources. Key Development In a surprise move, the central bank reduces its benchmark interest rate following alarmingly weak economic growth data in November, with fishing, manufacturing and mining all underperforming. Credit Environment Outlook Key Development has had a positive impact on the outlook. Supply Environment Outlook Key Development has had a neutral impact on the outlook. Market Environment Outlook Key Development has had a neutral impact on the outlook. Political Environment Outlook Key Development has had a neutral impact on the outlook. 2

3 Key Indicators Rating History and Comparison Note: 1 = Low Risk, 7 = High Risk Regional Comparisons Chart of the Month Source : Haver Analytics/D&B 3

4 Economic Indicators Indicator f 2015f 2016f 2017f 2018f C/A balance % GDP External Debt, % GDP Govt balance, % GDP Inflation, annual avge % Real GDP Growth, % Source : Haver Analytics/D&B Trade and Commercial Environment Net international reserves stood at USD61.1bn at end-december 2014, down from USD64.4bn in the corresponding period in Even if additional downward pressure on the currency results in a further erosion of FX stocks, we expect FX reserves to remain reasonably robust in 2015, supporting a positive credit risk environment; import cover will exceed 12.0 months worth of goods and services. Meanwhile, the government is keen to protect investor confidence and has so far maintained a pro-investment agenda. However, the risk of a shift to a more populist stance persists, particularly given calls for the government to impose tighter controls on the mining sector and pressure from poor voters to address the country s social inequalities. Trade Terms and Transfer Situation Minimum Terms: SD The minimum form of documentation or trading method that D&B advises its customers to consider when pursuing export trade with the stated country. Recommended Terms: LC D&B's recommended means of payment. The use of recommended terms, which are generally more stringent than minimum terms, is appropriate when a customer's payment performance cannot be easily assessed or when an exporter may wish to limit the risk associated with a transaction made on minimum terms. Usual Terms: days Normal period of credit associated with transactions with companies in the stated country. Local Delays: 0-1 month The time taken beyond agreed terms for a customer to deposit money in their local bank as payment for imports. FX/Bank Delays: 0-1 month The average time between the placement of payment by the importer in the local banking system and the receipt of funds by the exporter. Such delays may be dependent on FX controls, FX availability and the efficiency of the local banking system. 4

5 Exchange Rate Source : IMF International Financial Statistics, National Statistical Offices LCU = Local Currency Unit Credit Conditions Source : Haver Insured export credit exposures, USDm 5

6 Risks and Opportunities Short-Term Economic Outlook Benchmark interest rate slashed In a surprise move, the Central Bank of Peru (BCRP) reduced its benchmark interest rate by 25 basis points (bps) to 3.25% in mid-january following disappointing economic growth data for November 2014; anchored inflation expectations, mixed signs of recovery in the global economy, increased volatility in financial markets and the impact of lower oil prices on the local economy also weighed on the decision to lower interest rates. The National Production Index (a proxy of GDP) recorded annual growth of just 0.3% in November 2014 (and 2.6% during the first 11 months of the year compared with 5.7% in the same period in 2013) the slowest pace of expansion since September 2009, as a sharp drop in fishing, primary manufacturing (mainly fish and metals processing) and mining offset gains in the banking, construction and telecommunications sectors. The monetary authority also trimmed its reserve requirements in soles once again, freeing up more liquidity, in order to stimulate further local-currency lending, while it adopted a loosening bias amid mounting evidence that the domestic economy is still growing well below potential. If inflation starts trending down and downward pressure on the currency eases, a 25-basis point in the benchmark rate is likely by end-q1. The poor growth performance has also prompted President Ollanta Humala s administration to propose a new package of measures, which will complement previous stimulus initiatives and aim to boost private sector investment and jump-start the economy. The government also recently introduced a series of new mining regulations designed to speed up and simplify the permitting process for mining exploration and mine development projects, with a view to spurring investment in the sector after output for most metals declined for a third year in These new measures, combined with looser monetary conditions and the launch of investment projects in the infrastructure sector worth over USD6.9bn, should help rev up the domestic economy in the coming quarters. That said, the new annual official growth target of 5.0% may still prove difficult to achieve as external and domestic downside risks continue to loom large. FX Risk Steps taken to reduce high levels of dollarisation The BCRP has recently adopted several measures aimed at reducing the persistently high levels of financial dollarisation and the exposure of agents to exchange rate risks. In particular, the rules for currency derivatives have been tightened and reserve requirements on dollar deposits increased, while incentives have been created for financial institutions to reduce their dollar loan portfolios by at least 10.0% by end-2015, although these do not affect long-term financing of large projects nor loans to finance import and export operations. Given the prospect of rising dollar yields and higher international financing costs, the central bank s intervention is a good step forward as it will help reduce risks to macroeconomic and financial stability. 6

7 Country Profile and Statistics Overview Peru is situated on the western coast of South America, and shares land borders with Brazil, Chile, Colombia and Ecuador. Its terrain is varied, with an arid coastal plain, a mountainous interior and tropical deep interior. Peru has abundant mineral resources, the exploitation of which has been a vital factor in recent strong GDP growth. However, poverty levels remain high and income distribution is uneven. As a result, there has been increasing resentment among the poor majority towards international investors (many of whom took advantage of economic liberalisation in the 1990s by moving in to develop the country s natural resources), with resource nationalism having significant potential for socio-political instability. Peru s modern political history has been turbulent: the widespread violent insurgency of the late 1980s was quelled in the 1990s, but tough government measures resulted in human rights abuses; key political figures continue to become embroiled in human rights abuses investigations. Key Facts Key Fact Head of state Capital Detail President Ollanta HUMALA Lima Timezone GMT Official languages Spanish, Quechua, Aymara Population (millions) 30.7 GDP (USD billions) 219 GDP per capita (USD) 7,131 Life expectancy (years) 74 Literacy (% of adult pop.) 87.7 Surface area (sq km) 1,285,220 Source : UN / Haver Analytics / D&B Historical Data Metric Real GDP growth (%) Nominal GDP in USDbn Nominal GDP in local currency (bn) GDP per Capita in USD 5,256 5,961 6,656 6,971 7,131 Population (year-end, m) Exchange rate (yr avge, USD-LCU) Current Account in USDbn Current Account (% of GDP) FX reserves (year-end, USDbn) Import Cover (months) Inflation (annual avge, %) Govt Balance (% GDP)

8 Forecasts Metric Real GDP growth (%) Nominal GDP in USDbn Nominal GDP in local currency (bn) GDP per Capita in USD 7,432 8,306 9,163 9,765 10,316 Population (year-end, m) Exchange rate (yr avge, USD-LCU) Current Account in USDbn Current Account (% of GDP) FX reserves (year-end, USDbn) Import Cover (months) Inflation (annual avge, %) Govt Balance (% GDP) Comparative Market Indicators Indicator Peru Argentina Bolivia Brazil Uruguay Income per Capita (USD) 7,432 6,619 2,980 9,199 19,512 Country Population (m) Internet users (% of population) Real GDP Growth (% p.a., )

9 Links User Guide Please click here to visit our online user guide. Other D&B Products and Services Sales Publisher D&B Telephone Marlow International UK: +44 (0) Parkway US: Marlow Rest of World Bucks SL7 1AJ contact your local office United Kingdom or call Tel: Fax: D&B provides information relating to more than 240m companies worldwide. Visit for details. Additional information relevant to country risk can be found in the: International Risk & Payment Review : Provides timely and concise economic, political and commercial information and analysis on 132 countries. Available as a subscription-based internet service ( and monthly update journal, the IRPR carries essential information on payment terms and delays. It also includes the unique D&B Country Risk Indicator to help monitor changing market conditions. Legal and Copyright Notices While the editors endeavour to ensure the accuracy of all information and data contained in this D&B Country Insight report, neither they nor Dun & Bradstreet Limited accept responsibility for any loss or damage (whether direct or indirect) whatsoever to the customer or any third party resulting or arising therefrom. All rights reserved. No part of this publication may be reproduced or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or information storage and retrieval systems without permission of the publisher. Disclaimer Whilst D&B attempts to ensure that the information provided in our country reports is as accurate and complete as possible, the quantity of detailed information used and the fact that some of the information (which cannot always be verified or validated) is supplied by third parties and sources not controlled by D&B means that we cannot always guarantee the accuracy, completeness or originality of the information in some reports, and we are therefore not responsible for any errors or omissions in those reports. The recipients of these reports are responsible for determining whether the information contained therein is sufficient for use and shall use their own skill and judgment when choosing to rely upon the reports. 9