Peru: Morning News Roundup – Tuesday March 11

Ecuador’s Correa Offers Support to Chile in Peru Border Dispute

Ecuador’s President Rafael Correa wished Chile well in its maritime-border dispute with Peru that both countries have agreed will be resolved by an international court. “We wish Chile the best of luck,” Correa said today in Santiago at a joint press conference with President Michelle Bachelet. “We applaud the desire for dialogue, the desire for peace that exists between South American countries at the moment to decide their real or supposed territorial disputes.” Peru claims its martitime border with Chile lies along a line running southwest, halfway between the two countries’ coasts. Chile says the border runs due west, along a parallel of latitude from the point where their land border meets the sea. Peru says the border has never been settled. At stake are more than 100,000 square kilometers of fishing waters. Chile and Peru will send representatives to the International Court of Justice in The Hague, Netherlands this week to discuss a timetable for a lawsuit. (Bloomberg – click here to read complete article by Sebastian Boyd)

Chile, Ecuador to carry out joint gas exploration

Chile’s state National Petroleum Company and its Ecuadorian counterpart, Petroecuador, have agreed to jointly explore for gas reserves, the two nations’ presidents announced Monday. No details of the agreement were immediately made public, but visiting Ecuadorian President Rafael Correa announced in a joint press conference with his Chilean counterpart, Michelle Bachelet, that the project will be carried out in the Gulf of Guayaquil in Ecuador and off Peru’s Pacific coast. The deal will help Chile "because it will be able to guarantee its energy sources," Correa said. Bachelet described the agreement as "bearing great importance for Ecuador and also for Chile," a nation that has suffered power cuts due to natural gas shortages in the past. Chile imports nearly all of its fuels and receives a dwindling and increasingly unreliable supply of natural gas from Argentina, its only gas supplier. (Xinhua – click here to see article)

Peru Makes Biggest Cocaine Seizure in Three Years

Peruvian police made their biggest cocaine seizure in almost three years, impounding 1.5 metric tons destined for Spain. The shipment was intercepted off the country’s northern coast, Interior Minister Luis Alva Castro told reporters today in Lima. Police arrested four Ecuadoreans and seized weapons, vehicles and communications equipment, he said. Police have confiscated 5.6 tons of cocaine so far this year, almost equivalent to the Andean country’s average annual seizures, Police Chief Octavio Salazar said. The most recent operation netted the biggest haul since police uncovered a 2.2- ton shipment in 2005. Peru is the world’s second-largest producer of coca leaf, the basis of cocaine. (Bloomberg – click here to see article by Alex Emery)

Scotiabank Targets $200m Syndication

Peru’s Scotiabank is looking to raise $200m through a 5-year amortizing loan. The deal through Citi includes a 2-year grace period with seven ensuing semi-annual installments. The margin is heard at 120bp over Libor, say bankers away from the deal. The deal was launched the same day Peru’s Interbank announced a $200m 3-year step up loan via Standard Chartered. That deal will offer Libor plus 80bp in year one, 85bp in year two and 95bp in year three. Earlier this year, Banco de Credito del Peru raised $410m in an upsized and repriced 3-year step up loan at 70bp, 75bp and 85bp over Libor. (Latin Finance)

Peru Pays Down Brady Debt

Peru followed through with plans to pay down $838m worth of Brady debt Friday. The sovereign eliminated its outstanding amounts FLIRBs, PDIs and Discount bonds, Jose Miguel Ugarte, head of public credit, tells LatinFinance. Peru used $685m worth of proceeds from peso-denominated sovereign issuances at the end of last year to pay down the notes at par. It also used $153m from the Treasury to pay the balance, says Ugarte. The process eliminates virtually all of Peru’s Brady debt. The country still has about $50m in Par bonds that are trading at 85, which it chose not to call. Having received news of the plans to pay down the debt earlier this year, markets didn’t react to the move Friday, says one Andean strategist. The strategist notes that in general, however, the move is a welcome development that is part of Peru’s overall positive story. (Latin Finance)

Microfinance Seen Expanding

Microfinance sector continues to grow in LatAm, according to Fernando Lucano, fund manager at Peru’s Cyrano Management, manager of the $265m Global Microfinance Facility fund. “In Peru there is more or less $2.5bn of financial market assets invested in microfinance,” says Lucano. “The size of the Peruvian financial system is between $18bn and $25bn, so there is 10% of assets in microfinance, and that will continue to grow,” he adds. The microfinance sector is growing by 30%-40% a year in Peru, Lucano states. “There is business for everybody: Investment banking, rating agencies, sophisticated investors,” he adds. But the growth and increasing of microfinance calls for a more sophisticated look at the sector, says Lucano, a panelist at a microfinance forum organized by Credit Suisse in New York. (Latin Finance)