Living in Peru : your everyday companion

Living in Peru
Israel J. Ruiz

After several rounds of discussions and working out differences among them to benefit the interests of their countries, it seems that Peruvian and Chinese negotiation teams have agreed on a free trade deal between the two countries.

Peru's Minister of Foreign Trade and Tourism Mercedes Aráoz (right) confirmed this in her announcement that negotiations, which are currently taking place in Beijing, for a trade pact between the nations would be finished by this weekend.

"If the deal is closed, officials will stay a few more days to finish some texts," said Aráoz, explaining that in the worst case unresolved issues would be discussed over the phone or through video conferences.

It was reported that one of the most difficult issues in negotiations of the free trade deal was keeping China from dumping and selling products that were undervalued.

The Ministry of Foreign Trade and Tourism (MINCETUR) affirmed this problem had successfully been solved in negotiations on Thursday.

MINCETUR affirmed that this was the first time China had agreed to this type of deal.

Living in Peru
Israel J. Ruiz

After starting off the week with two strong increases, the Lima Stock Exchange (BVL) has dropped to low levels once again.

For the second consecutive day this week the BVL has fallen, decreasing over 6 percent to 7,833.74 points by Thursday afternoon.

The country's selective index, which represents Peru's top stocks, dropped 7.2 percent to 12,460.5 points while the Inca index fell 7.28 percent to 42.95 points.

Furthermore, despite the Central Reserve's sale of over $153 million on Thursday, the country's currency, the nuevo sol has dropped 0.33 percent in value.

The sol/dollar exchange rate is currently fluctuating around 3.05 soles for every dollar.

Peru's gross domestic product expanded 8.94 percent in August achieving 86 months of consecutive growth, the National Institute of Statistics and Informatics (INEI), said Wednesday.

Living in Peru
Israel J. Ruiz

After U.S. and European bailout plans were approved by governments, the Lima Stock Exchange (BVL) saw its second day of consecutive growth on Tuesday.

With a 13.67 percent increase on Monday, the Lima Stock Exchange registered its highest jump since August 1990.

While Tuesday's rise was not as high, the 5.46 percent increase in the stock exchange's general index helped counter the 10.8 percent drop on Friday - the country's largest drop ever.

On Tuesday, the BVL's selective index closed 6.76 percent higher, benefiting junior mining companies (8.31%) and mining companies (6.43%) - both helped by an increase in the global prices of minerals.

The Peruvian companies that saw the largest rises were Aceros Arequipa (15.31%), Brocal Mining (15.03%), Cerro Verde Mining (15.02%) and Sider-Perú (14.62%).

Despite these increases over the past two days, the general index for the Lima Stock Exchange has dropped 47.8 percent in 2008 - one of the largest declines in the region.

Bloomberg
Joshua Goodman and Bill Faries

Peru plans to issue as much as $600 million in international bonds in what would be the first foreign bond sale in Latin America since the world financial crisis began tying up credit markets, Finance Minister Luis Valdivieso said (right).

Potential underwriters and investors have said that the debt won't be difficult to place, Valdivieso said today in a Bloomberg Television interview in Washington. Peru plans to issue $400 million to $600 million in 30-year bonds, he said.

``Our success will be the leading indicator that the market is an option for other emerging economies,'' Valdivieso said. ``Those of us who are confident in our economic performance don't have to see multilateral or emergency financing as the only option.''

Peru will test investor appetite for new bond offerings just days after withdrawals from emerging markets sent stocks and currencies plunging. Central banks from Mexico to Chile have sold dollars to slow the fall of their currencies as risk-averse investors sought refuge in the dollar and U.S. Treasury bonds amid the worst financial crisis since the Great Depression.

``There will be a cost to this, certainly,'' said Hugo Perea, an economist at BBVA Banco Continental in Lima. ``This could give a pricing for new emissions and begin to reactivate markets that have been paralyzed.''

Perea said he didn't have details about Peru's bond offer.

Valdivieso said the bond's currency and coupon are still being decided. He said the purpose of the bond is to extend the average maturity of the country's public debt, now 11 years, and clear the way for Peruvian companies to return to the market.

Investor Interest

``All the details remain to be discussed, because although we've received important interest from big players, we want to talk with all market participants and explore our options,'' Valdivieso said.

The bond would be Peru's first international issue since it sold $1.2 billion in fixed-rate dollar bonds in March 2007.

Yields on Peru's benchmark bond have climbed as the global credit crisis has intensified. The yield on the 6.55 percent dollar bond due in 2037 fell 34 basis points to 8.93 percent today, from a record high of 9.271 percent Oct. 10.

Peru, which won investment grade ratings in July, is trying to sustain economic growth in the face of a corruption scandal that forced President Alan Garcia's cabinet to resign Oct. 9. The global credit crunch is expected to further dampen economic growth that was 8.3 percent in July from a year ago, down from a 10.4 percent annual expansion in the first half of the year.

The Ministry of Economy and Finances (MEF) projected that Peru's economy grew nine percent during the third quarter of this year, according to estimates based on its Indicador Líder which shows trends of economic activity in the very short term.

MEF said this result was achieved thanks to the country’s economic growth of 8.3 percent in July, 9.6 percent in August and 9 percent in September.

MEF's growth projection of the Peruvian economy for the third quarter is lower than the 9.9 percent estimated in September.

It also shows there is some slowdown in the local economy, which grew 10.9 percent in the second quarter and 10.3 percent in the first half.

MEF said that the main indirect indicators, components of the Indicador Lider, showed a positive development in August this year.

In that month, imports of raw materials and intermediate goods rose 20.1 percent, highlighting imports for manufacturing (37.2 percent) and agriculture (107.1 percent).

Imports of capital goods rose 69.1 percent, mainly as a result of an increasing number of orders used in industry (42.9 percent) and increased imports of construction materials (245.7 percent).

Living in Peru
Israel J. Ruiz

The Lima stock exchange dropped 11 percent on Friday morning to 7,606 points, Peru's largest drop ever.

Even though trading was halted for 30 minutes on Friday morning in an effort to prompt a recovery, the IGRA index continued on a downward spiral, forcing the Andean country to suspend trading indefinitely.

The Lima Stock exchange opened at 8,637.23 points Friday morning and saw drops over 9 percent in all of its main indexes before the 30 minute halt.

President Alan García said Thursday that the best Peruvian response to the international crisis is to multiply investments and employment generation all over the country.

He reaffirmed his administration’s commitment to continue on the path of good economic management.

He affirmed exports had doubled from 17 billion soles to 30 billion soles, which are focused not only on mining exports but on industrial products.

The Peruvian leader made these remarks during the inauguration of a sanitary napkin and diaper plant built by Kimberly Clark as part of the company's plan to make Peru its South American hub.

News source: ANDINA

Peru will emerge as the winner when negotiations of the Free Trade Agreement (FTA) with China are concluded, said Tuesday the minister of Foreign Trade and Tourism, Mercedes Araoz.

"That's the goal. I must make clear that our technical team will not give up, since we are working on a deal that will make us all win, especially our productive sectors".

In this way, she ruled out any possibility that during the Sixth Round of Negotiations of the FTA, from October 13 to 18 in Beijing (China), Peru would reduce the basket of sensitive products included in the negotiation.

The Peruvian technical team is working hard to reach a much wider agreement than just negotiating a tariff movement from either part.

Therefore, other subjects such as customs (which will have adequate cooperation), services, labor and even intellectual property are also being negotiated.

"This FTA is being negotiated thinking of the Peruvian economic growth, which should not only be tied to the current economic cycle, which is bad, but the future economic cycle".

On the eve, several business associations attended the Commission of Foreign Trade and Tourism of the Congress to unveil the situation of the negotiations, and ask the Ministry of Foreign Trade and Tourism (Mincetur) not to give up on the free trade deal with China.

They warned that China's proposal to reduce the list of exclusions from 13.89 to ten percent of sensitive items would put into risk Peruvian products such as footwear, textiles and garments.

Minister Aráoz made clear that the Peruvian team would not accept any immediate duty elimination on sensitive products.

"At no time did we say that the textile sector will be subject to any duty elimination and we will never do it, we talked about partial breaks and long term duty elimination, that is, 17 years. In addition, we will keep the most sensitive products on the list of ten percent".

She recalled that the Mincetur works on its own strategy with business associations to follow up FTA negotiations. "You can be sure that a good job is being done".

"I know the unions attended the Congress to express their concerns, but on the other hand, we made the lists of access with them themselves. The negotiation is not for today but forever and that is a negotiation with clear rules for bilateral trade, which is the most important thing for business".

News source: ANDINA