Category: Regions

Peru’s government remains optimistic about the first steps of regional exchange integration. “We will likely first see the integration of Peru and Colombia, as these are the most similar models,” Mercedes Araoz, Peru’s finance minister, says, speaking at the LatinFinance Andean Investment Forum in Lima Thursday. She explains regulators in both countries have been discussing integration, and she is confident it will proceed. Araoz does not indicate a timeframe, though the government has said its plan was to have cross-listing begin in November. It is also a goal to involve Chile, she says, though this process is less far advanced. In terms of immediately helping Peru’s liquidity, it will depend on whether Colombian stocks would still count as “foreign” under the investment regimes of the country’s pension funds. “This will be positive, but if [the foreign cross-listed stocks] aren’t considered local for us, it won’t make much change in the liquidity in the local market in the short term,” Alejandro Perez-Reyes, who oversees $7.5bn in assets as CIO at Prima AFP, tells LatinFinance. He adds that he would still be buying for 2 separate buckets, and not selling local shares to increase holdings in Colombia. No definition on any change to the classification has been given, he adds. New York-based equity bankers remain skeptical that a combined Peru-Colombia exchange could divert issuers away from the equity hubs of New York, Brazil and London when it comes to larger transactions.

Corporates in Peru and Colombia remain optimistic about access to capital, despite global risk aversion and continued uncertainty about global demand. “Latin American issuers, and specifically Peruvian issuers, have good access to capital,” says Rossana Ortiz, CEO of fishery Pesquera Exalmar. “In the past year and a half, the businesses and the financial systems have shown great resistance to the international impact of the crisis,” she adds. Ortiz notes that corporates must take advantage of banker and investor enthusiasm driven by macro stability and strong growth forecasts. Exalmar is preparing to raise funds in the next few months. “There is uncertainty, but investors are willing to put money where growth is the fastest,” says Manuel Gonzales, director of investment banking at Credit Suisse, pointing to an outsized contribution to global GDP growth from LatAm. In Peru’s case, GDP expansion could top 6% this year, according to sell-side estimates. The main risk is a drop in commodity prices. “Peru will continue being linked to the price of commodities, the key is to develop new products,” says Mercedes Araoz, Peru’s minister of finance, noting that there is already a diversity of exports with an increasing variety of destinations. As for political risk in Andean countries following market oriented policies, Gonzales says 10 years of sustained growth has “tilted the balance” in favor of voters seeing the value in such policy. With Colombians having just made what is seen as the market-friendly choice, Francis Pilkington, CFO of conglomerate Grupo Gloria, sees most of the likely candidates in Peru’s next presidential election as sticking to the current model. He adds that there is a “medium-to-low” chance of electing an outsider who would greatly alter the direction. All were speaking at the LatinFinance Andean Investment Forum Thursday in Lima.