Category: Peru

Peru has raised its benchmark lending rate for a second straight month to cool inflation amid strong growth. The central bank increased its reference rate by 25bp to 1.75%, in line with forecasts. Bulltick predicts a total of 200bp in tightening this year, with the benchmark policy rate ending at 3.25%. Barclays anticipates Peru ending the year at 3.00%

Barclays believes Peru’s central bank will hike the policy rate 25bp to 1.75% today and to 3.00% by year-end. It previously expected no hike this month and the rate ending within a 2.25%-2.50% range this year. Morgan Stanley, meanwhile, thinks the rate will end 2010 at 3.25%. In addition, it revised GDP growth forecasts for 2010 to 7.0% from 4.9%. In 2011, it now believes GDP will grow 6.4%, up from a previous forecast of 5.5%.

Fitch has revised to positive from stable the outlook on the ratings of Peru’s Banco Continental and Scotiabank. The brightened outlook for both banks is a result of the revision of the outlook for the sovereign, changed to positive from stable. Scotiabank, rated BBB, is Peru’s third largest bank, with a 16% market share. Continental, also rated BBB, is the country’s second largest bank, with a 23% market share.

Fitch changed the outlook on Peru’s BBB minus ratings to positive from stable to reflect the sovereign’s healthy growth trajectory, which is supported by the sovereign’s disciplined macroeconomic policies. Fitch expects Peru’s growth to reach at least 6% in 2010 due to the global recovery and the residual effects of accommodative policies. This compares with Fitch’s BBB median growth forecast of 3.7% during the same period. IMF MD Dominique Strauss-Kahn last week said Peru sets an example to other EM of how to reach a fast track of growth and poverty reduction by carrying out strong economic policies. “With a recovery underway that will see growth in Peru of between 6%-7% this year, the challenge now is to manage success by continuing the timely and gradual phasing out stimulus and avoid the build-up of inflationary pressures, which hit the poor hardest,” Strauss Kahn said, following a trip to Lima.

Hong Kong-based China Fishery Group is buying Dorbes Holding, the parent company of Peru-based fishery Pesquera Alejandria, for $95m in cash. The sellers are Silkfield International, Orbel Business and Harleston Technologies. With the acquisition, China Fishery claims it will become Peru’s sixth largest fishmeal company, increasing its fishing quota allocation in northern Peru to 6.05% from 5.08%, and in the south to 10.91% from 7.87%. Citi advised Alejandria, according to a Peru-based corporate lawyer familiar with the deal. He adds that it is likely the Chinese buyer did not use an advisor. The buyer says it hired Peruvian surveyor JRZ Ajustadores y Peritos de Seguros to conduct a valuation of the target. The deal is expected to be completed May 24. China Fishery trades in Singapore, while the sellers are incorporated in Panama.

Peru’s finance ministry plans to auction up to 150 million soles ($53m) in 2 series of reopened sovereign bonds on the local market today. The bonds will be auctioned on Tuesday, according to the state news agency. A PES100m 2042 tranche pays 6.85%, while PES50m in 2046 pay 3.83% plus the Valor Adquisitivo Constante rate.

Barclays Natural Resource Investments (BNRI), a unit of Barclays Capital, is giving a line of equity to the management team of Southern Peaks Mining, a Peru-focused mining start up. The deal is BNRI’s first with a LatAm-focused mining management team. A Barclays spokesman declines to state how much BNRI is lending, though he adds that the unit typically commits between $50m-$100m per transaction. Deals are generally structured as lines of equity, whereby management teams identify potential asset and transaction opportunities and take them to the board for discussion and approval. The equity is then drawn down as required, subject to a total commitment cap agreed upfront. Southern Peaks Mining was established to acquire operating or close-to-operating, small-to medium-sized base and precious metals assets initially in Peru, and later potentially elsewhere in LatAm. The team is lead by Adolfo Vera, who has served as CFO at Peru-based Volcan Cia. Minera and Canada-based Silver Eagle Mines.