Peruvian economic outlook and investment opportunities Javier Correa Merchan Director, Investment Promotion Division Proinversión
Our country: Peru Economic perspectives Investment environment Investment perspectives Infrastructure
Our country: Peru Economic perspectives Investment environment Investment perspectives Infrastructure
Peru: Geography
A growing economy connected to the world Investment Protection Agreements and Free Trade Agreements with several countries. Tax agreements with: Brasil, Chile, Canada, South Corea, México y Switzerland. Australia China 1 South Corea 1 Malasya Singapur 1 Tailand Japan Canada 1 US. 1 México 1 Cuba El Salvador Costa Rica 1 Panama 1 European Union 2 European association for free trade (Islandia, Liechtenstein, Switzerland and Norway) 1 Argentina Bolivia Chile 1 Colombia Ecuador Paraguay Venezuela (1) Trade Agreements (2) Trade Agreements. While Peru has Bilateral Investment Protection Agreement with Germany, Belgium, Luxemburgo, Denmark, Spain, Finland, Francia, Italy, Portugal, United Kingdom, Chec Republic, Sweden and Switzerland.
Key Indicators Extension in Latin America (Km2 Thousand) Population (Million) 2,353 Nominal GDP (US$ Billion) 8,510 202.77 119.72 1,283 2,780 1,970 1,290 1,140 910 760 70 47.66 41.96 31.42 30.46 17.82 3.93 540 385 258 206 203 44 Extension Population (2014) Nominal GDP (2014) (Km2) Millions (USD millions) Brazil 8,510,000 Brazil 202.769 Brazil 2,353,025 Argentina 2,780,000 Mexico 119.715 Mexico 1,282,725 Mexico 1,970,000 Colombia 47.662 Argentina 540,164 Peru 1,290,000 Argentina 41.961 Venezuela 384,901 Colombia 1,140,000 Peru 31.424 Colombia 257,968 Venezuela 910,000 Venezuela 30.457 Chile 205,787 Chile 760,000 Chile 17.819 Peru 202,948 Panama 70,000 Panama 3.928 Panamá 43,784 Source: IMF
Investment as % of GDP Investment as % of GDP Economic Model Standing out among the biggest Latian American countries (LA6) including Brasil, Chile, Colombia, Mexico, and Uruguay 30 25 20 15 27,2 LA6 1 : Total Investment 1990 (% of GDP) 20,4 19,9 18,4 13,9 13,5 30 25 20 15 26,8 LA6 1 : Total Investment 2014 (% of GDP) 25,0 23,1 22,2 21,9 17,0 10 10 5 5 0 Chile México Colombia Brasil Perú Uruguay Source: IMF 0 Perú Colombia Uruguay Chile México Brasil Estructural reforms paid off: Market Economy. Private Investment is the main engine of GDP growth. Regional leader in Investments (Total Capital / GDP).
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016* 1955-1964 1965-1974 1975-1984 1985-1994 1995-2004 2005-2014 Growth Performance In the last 10 years Peruvian Economy has grown considerably Nominal GDP, 2004-2014 (US$ Billion) Real GDP (Average annual % change) 192.7 202.4 202.9 190.3 202.3 170.6 7.0 6.0 5.7 6.1 148.6 5.0 4.8 66.7 75.0 87.9 121.6 121.2 102.2 4.0 3.0 2.0 1.0 1.2 1.4 3.6 0.0 Source: IMF, Central Reserve Bank of Peru
Tasa de Inflación promedio (%) Inflation and Growth 8 AL6: Inflation & Growth 2005-2014 1/ (Average) 7 6 Brasil Uruguay 5 4 3 2 México Chile Colombia Perú 1 0 0 1 2 3 4 5 6 7 Tasa de crecimiento promedio (var. % anual) Source: Ministry of Economy, IMF, Consensus Forecast (March 2015)
Our country: Peru Economic perspectives Investment environment Investment perspectives Infrastructure
Economic Perspectives Chile (Aa3) Mexico (A3) Peru (A3) Colombia (Baa2) Uruguay (Baa2) Brazil (Baa3) Paraguay (Ba1) Panama (Baa2) Costa Rica (Ba1) Argentina (Caa2) Venezuela (Caa3) Moody s: Reform - progress & advances Decline in reforms First generation Positive continue development Stagnation Second generation Negative development Peru s A3 sovereign rating reflects its long-standing track record of macroeconomic stability, marketfriendly policies and prudent fiscal management Peru s fiscal strength is Very High on account of its low and affordable debt and prudent fiscal policy framework Source: Moody s (Moody s. August, 2015)
Economic Environment Risks we are facing in this enviroment Reduction of commodity prices and further troubles in China. Greater perception of risk in the región. Lower growth in the Euro zone, US and China. Potential spill over effects from the recent downgrade of Brazil. El Niño Southern Oscillation. Our key strengths Fiscal strength. Resilent private consumption. Mega projects under execution. Capacity for public investments. Greater mining production.
Deuda Pública(% del PBI) Perspectives: Leveraging fiscal strength AL6: Debt & Growth 2016 1/ 70 60 50 Brasil I. Menor crecimiento y alta deuda pública Prom. AL6 Uruguay México II. Mayor crecimiento y alta deuda pública Prom. AL6 40 Colombia 30 20 Chile Perú (MMMR) Perú 2/ 10 0 IV. Menor crecimiento y baja deuda pública 0 1 2 3 4 5 Crecimiento del PBI Real (%) III. Mayor crecimiento y baja deuda pública 1/. LA6: se refiere a los seis (6) países latinoamericanos que han adoptado un marco de metas explícitas de inflación y que han desarrollado más sus mercados de capitales. La lista incluye a: Brasil, Chile, Colombia, México, Perú y Uruguay. También son llamadas economías financieramente integradas. Estos países representan el 73% del PBI de América Latina y El Caribe. 2/ Para el crecimiento del PBI se considera la media del Consensus Forecasts y para el ratio de deuda pública el dato del Fiscal Monitor Abril 2015. Fuente: Consensus Forecasts de agosto 2015, Fiscal Monitor Abril 2015 (FMI), MMMR 2016-2018 (MEF).
Economic Perspectives Despite of the ammendement in the forecasted economic growth rate in 2015, country perspectives are still positive IMF: Forecast of GDP Growth rate (% annual) Peru: Sovereign rating (LT debt in USD) 7 Perú Peru Brasil Brazil Chile Colombia Mexico Uruguay A3 29 Moody's 6 5 4 Baa1 27 Baa25 Baa3 23 S&P Fitch Investment grade Grado de inversión 3 2 1 0 2012 2013 2014 2015P 2016P 2017P 2018P 2019P Ba121 Ba219 Ba317 B1 15 Perspective Perspectivas S&P S&P Fitch Fitch Moody s Moody's Estable Stable Estable Stable Estable Stable 2001 2003 2005 2007 2009 2011 2013 2015 Source: IMF
Political Environment: Presidential Elections Forecast Las survey results Keiko Fujimori Pedro P. Kuczynski Alan García Alejandro Toledo IPSOS - julio 2015 33% 15% 11% 8% DATUM - agosto 2015 34% 17% 6% 3% GFK agosto 2015 33% 13% 6% 4% Candidates with major options support a liberal economy model with favorable legal framework for investments.
Our country: Peru Economic perspectives Investment environment Investment perspectives Infrastructure
Favorable legal framework Non discriminatory treatment of foreign investments Guarantees for Private Property A Market Economy that promotes free competition Legal stability agreements
Easiness for doing business and competitiveness 35th in the Doing Business Ranking 2015 65th Global competitiveness report 2014 Venezuela Colombia 34 Ecuador 115 Perú 35 Chile 41 182 Guyana 124 123 Argentina Uruguay 82 Surinam 162 Brasil 120 Bolivia 157 2014-2015 País País 1 Switzerland 19 Luxemburgo 2 Singapur 20 Malasya 3 United States 21 Austria 4 Germany 22 Australia 5 Finlandia 23 France 6 Japan 24 Arabia Saudí 7 Hong Kong 25 Irleland 8 Netherland 26 South Corea 9 United Kingdom 27 Israel 10 Sweden 28 China 11 Norway 12 United Arab Emirates 33 Chile 13 Denmark 57 Brasil 14 Taiwan 61 Mexico 15 Canada 65 Peru 16 Qatar 66 Colombia 17 New Zeland 104 Argentina 18 Belgium 131 Venezuela Source: World Bank Source: WEF
Trade with Asian Economies (1) Total Trade Peru-Asian Economies (US$ Billion) 30 25 24 27 27 26,066 20 15 12 15 13 19 10 5 6 8 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 After the rebound in April and June, in the coming months it is expected that trade flows between Asia and Peru will keep similar to last years. Source: AdexDataTrade
Trade with Asian Economies (2) Peru s Main Buyers within Asian Economies (Percentage 2014) Philippines Taiwan 1% 3% India 3% Korea 11% Others 5% Hong Kong 1% Peru s Main Sellers within Asian Economies (Percentage 2014) Taiwan 3% Thailand 4% India 6% Turkey 2% Others 8% Japan 14% China 62% Japan 8% Korea 9% China 60% Total 2014: US$ 11,309 millions Total 2014: US$ 14,756 millions Source: AdexDataTrade
Our country: Peru Economic perspectives Investment environment Investment perspectives Infrastructure
Investment Perpectives US$ 40bn worth of investment announced for 2015 and 2017 Announced Private Investment by Sector 2015-2017 (US$ Million) Number of Projects Mining, 34 2015-2017 (US$ Million) Mining 14,408 Hydrocarbons 7,224 Electricity 4,617 Industrial 2,408 Infrastructure 4,057 Other Sectors 7,370 Total 40,084 Other Sectors, 109 Infrastructure, 24 Electricity, 34 Industrial, 14 Hydrocarbon s, 22 Source: Central Reserve Bank of Peru
Mining: Greater Competitiveness Our mines have lower cash costs Copper Cash Cost (US$/lb) Total registered and forecasted Copper Production to 2017 (Thousand TM) 2,5 2,0 1,5 1,0 2,13 1,76 1,74 1,57 1,11 33% 2 000 1 500 1 000 0,5 0,0 Australia Chile China EE.UU. Perú 500 0 2013 2015P 2017P Source: Cochilco, Osinergmin, Morgan Stanley Research. 1/ considers industrial customers or those which consumption is higher than 500 thousand KW per hour P: Proyectado. Fuente: MINEM, MEF.
Energy: High potencial Competitive pricing and potential for clean energy generation Power Energy Production, by source Electricity rates to Industrial customers 1/ (US$/kWh) 0.2% 0.4% Perú 7,4 47.6% 50.3% 2.1% 0.4% 0.5% 0.6% Chile Promedio Latam Colombia México 10,4 10,8 13,5 21,7 Hydraulic Wind Coal Others Natural Gas Solar Residual & Diesel 0 5 10 15 20 25 Energy potential by source Source MW Wind 22,000 Hydropower 69,000 Geothermical 3,000
Agribusiness: Booming sector (1) Highest standards of quality: Taste, color, aroma and consistency. Mangoes, table grapes, avocados, citrus, organic bananas, among others. counter-season and throughout the year production 5,000 Traditional Exports (US$ million) 4,525 4,117 4,156 5,006 4,000 Non traditional Total 3,178 3,000 2,599 2,462 2,000 1,794 1,973 1,000 1,126 1,339 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Agribusiness: Booming sector (2) Area for modern agriculture (thousand of hectares) 78% 38 63 Majes-Siguas II Chavimochic III 180 218 New 100 thousand of hectares 2013 2020
Infrastructure 28 APP projects worth USD 20 billion in the last 4 years 3 Mega projects include: Line 2 of the Lima Metro, South Gas Pipeline, International Airport of Chinchero Cusco. 16 APPs awarded by ProInversión 2006-2015 (Investment amounts in USD millions + Sales Tax) 13280 14000 14 12 10 8 6 4 2 0 Amount of awarded Investments (US Millions) Number of process 14 11 11 10 9 8 8 5331 5672 4359 5 5 4 2140 1683 885 1065 828 336 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 12000 10000 8000 6000 4000 2000 0 Source: ProInversion
Our country: Peru Economic perspectives Investment environment Investment perspectives Infrastructure
Selected Projects 2015 Projects Estimated Investment (USD million) Estimated Award Date (2015) Main Works and Conduction of Drinking Water Supply for Lima 600 Quarter IV Longitudinal de la Sierra Highway Section 4 / Section 5 1 340 Quarter IV Liquid Petroleum Gas Supply System for Lima and Callao 250 Quarter IV Quillabamba Thermal Power Plant 180 Quarter IV /1 To be awarded on 2016
Projects 2016 Projects Estimated Investment (USD million) Estimated Award Date in 2016 Huancayo Huancavelica Railway 194 Quarter I Lima Peripheral Ring Road 2,00 Quarter II San Gaban 3 Hydroelectric Power Plant 437 Quarter II Lines 3 and 4 1 of the Metro Network of Lima and Callao 5,00 (each) Quarter III Three New High Complexity Hospital Centers 400 2016 Port Terminals - 2016 /1 To be awarded on 2017
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MAIN WORKS AND CONDUCTION OF DRINKING WATER SUPPLY FOR LIMA CALLED TO BE ANNOUNCED represas DBFO including: Re-enlargement of two dams 10 Km trans-andean tunnel New drinking water plant of 5 m3/ 40km pipeline Seven reservoirs 90km interconnection lines Operation and maintenance of existing facilities: Water intake (12 m 3 /s) Drinking water plant (5 m 3 /s) 27km pipelines 4 compensation reservoirs (Storage volume: 23,000 m 3 ) Projects 2015
LIQUID PETROLEUM GAS SUPPLY SYSTEM FOR LIMA AND CALLAO CALLED Design, construction, operation, financing and maintenance. LPG transport system of 200 km. Storage and Dispatch. Projects 2015
QUILLABAMBA THERMAL POWER PLANT CALLED Design, financing, construction and operation. Length: 129 km approx. 200 MW. Beginning of operations: 2017. Energy to be incorporated to The National Electric Power Grid (SEIN) Type of concession: Self-sustained. Estimated Investment: US$ 180 million. Estimated date of award : Q IV 2015 Projects 2015
HUANCAYO HUANCAVELICA RAILWAY CALLED Rehabilitation of 128 km of existing railways Civil Works: Rolling stock, Rehabilitation of 15 railway bridges, Rehabilitation of 38 tunnels. Junín Huancavelica Type of concession: Co- financed. Estimated Investment: US$ 194 million. Estimated date of award : Q I 2016 Central Railway Huancayo Huancavelica Railway South Railway Projects 2016
LIMA PERIPHERAL RING ROAD UNDER EVALUATION Private Co-financed Initiative Construction, operation and maintenance. 33 km of urban highway. Estimated award date: Quarter II 2016 Peripheral Ring Trace Projects 2016
SAN GABAN 3 HYDROELECTRIC POWER PLANT UNDER EVALUATION Puno Self-sustaining Private Initiative. Design, construction, operation, financing and maintenance. Capacity: 205.8 MW. Production: 1,256 GWh/year. Estimated award date: Quarter II 2016 Projects 2016
LINES 3 AND 4 OF THE METRO NETWORK OF LIMA AND CALLAO Line 3 TO BE CALLED Line 4 DFBOT/ Co - financed. Two Independent Bidding Processes. 3.5 million of passengers (Lines 3 and 4). Line 3 Line 4 Length 32 Km 30 Km Award Quarter III 2016 2017 Lima and Callao Line 1: Under Operation Line 2: Under Construction Projects 2016
THREE NEW HIGH COMPLEXITY HOSPITAL CENTERS - ESSALUD TO BE CALLED Piura Ancash Design, construction, equipment, operation and maintenance of 3 hospitals. Provision of complementary services. Estimated Investment: US$ 400 million. Estimated award date: 2016 Lima Projects 2016
PORT TERMINALS Under evaluation Private Self-sustaining Initiatives: 1. Salaverry: Modernizing and developing the Multipurpose Terminal Salaverry. Salaverry Chimbote 2. Chimbote: Design, financing, construction, operation and maintenance of a port container terminal. 3. Ilo: Development and operation of the Ilo Multipurpose Terminal Port. Estimated award date: 2016 Ilo Projects 2016