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Economy | October 3, 2008 [ 8:27 ]

It's time for global investors to put Peru on their radar screens


Peru’s growth is more robust, inflation is lower, savings rates are stronger and internal consumption is growing faster than in other emerging markets

Recent economic trends drive home that global investors would do well to look more broadly at emerging market opportunities.

“Investors seeking growth and alternatives to uncertain developed economies, and potentially overheated developing ones, should to consider Peru, as well as other Latin American markets,” said Alfredo Sillau of Compass Group, an independent investment advisor focused on Latin America.

“Peru is a growth story – and it has a very flexible economy.  There’s a trade surplus; inflation is low; the banking system is growing at about 30% year after year, with more room to grow; and there’s high internal demand for malls, ports and retail,” added Carlos Rojas, also of Compass Group.

Mr. Sillau and Mr. Rojas are available to share their perspective on how investors should view and approach Peru – both the opportunities and the downsides.  During a conversation, they can address:
  • Growth that’s not distorted by inflation. Average annual growth in GDP in Peru is 6%, but inflation is low, only 2.5%. “This is one of the fastest levels of growth in the world without a high level of inflation,” Mr. Sillau said.
  • Solid fundamentals and policies. Once known for terrorism and upheaval, Peru is now known for lessened vulnerabilities. The currency is strong, and there is a decreasing debt/GDP ratio. In fact, Peru is no longer a debtor; reserves have surpassed net debt.  Further, Peru is now investment grade, and the country has recently entered a free trade agreement with the U.S.
  • Economic self-sufficiency and strength through savings. Because of a private pension fund system that has been successful, savings in Peru have gone from virtually nothing to 28% of GDP.  And this savings, which, because of the pension system, goes into companies rather than a government “cash box,” translates to strong private investment.
  • Peru and the global commodities crisis.  While the global food shortage may affect prices in Peru, the country is in a good spot in terms of energy.  It has a substantial amount of natural gas, which is attracting investment from neighboring countries, and two large oil deposits have been found.  Also, Peru is one of the top-five producers of commodity metals.
  • Sectors with significant growth. Peru is under-banked, and the baking system that’s in place is very healthy. “The financial sector has been growing at very high rates – around 30% a year or more – to play catch up, and the delinquency level is very, very low, under 0.7%. There is still room for a lot of growth in banking,” Mr. Sillau said.  In addition, the construction sector grew 25% during the first half of 2008, and the energy sector is growing at 11% per year.
  • Potential expansion of investment opportunities.  Ten IPOs are expected in Peru over the next 12 months.  They’re in such industries as energy, fishing, financial, retail and agribusiness.

News Source: Compass Group, LLC

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