Category: Peru

Southern Copper has put its Tia Maria copper project in Peru on hold as weaker metals prices make it unfeasible, the company says. A 2007 feasibility study determined that the project would require a $934m investment. Copper closed at $1.62 a pound March 5, versus a high of around $4.00 last summer. Henry Walqui, sub-director of projects, says the project can only be developed if providers and engineering firms adjust costs to reflect new market conditions. The Tia Maria project was expected to begin producing in 2010, targeting an average 120,000 tons of copper annually.

Goldman Sachs and Merrill Lynch both expect Peru’s central bank to cut rates by 25bp to 6.0% at its March 5 meeting. “Increased evidence of a sharp activity slowdown, together with global easing, set the path for lower policy rates,” says Merrill. “However, still-high inflation, modestly lower inflation expectations and the PES slide grant a cautious pace versus other LatAm banks,” it adds. Goldman expects inflation to moderate in the months ahead and for the economy’s deceleration to become more visible. Inflation stands at 6.53%, according to the central bank. While Goldman forecasts the rate to drop to 5.0% by June, Merrill Lynch expects loosening to 4.0% by year-end.

APR Energy’s Peruvian unit has nabbed a $45m contract with Electroperu. Under the contract, says Electroperu, APR will generate up to 60MWof electricity for the Trujillo Norte substation. Electroperu says it will provide financing for the $45m, but does not disclose terms. Alfredo Sauza, an engineer at Peru’s ministry of mines and energy, says the contract was awarded through an auction process. He also explains that the Trujillo Norte substation is among the most important on the grid known as Sistema Electrico Interconectado Nacional.

The government of Peru says it has awarded Spain’s OHL Concesiones the right to build a 360km long highway along the country’s coastline between the cities of Pativilca and Trujillo. OHL says it will invest $400m in the project but does not say how it intends to finance it. The concession is for 25 years, including the construction period, according to government information.

Peru’s government has ordered its finance ministry to disburse $100m for an infrastructure fund as part of its anti-crisis plan, according to president Garcia’s office. State-controlled financial development company COFIDE would manage the fund. It will invest in public-private partnerships and concessions for infrastructure and public works projects.

Peru’s central bank has cut its monetary policy rate by 25bp to 6.25%, citing lower inflationary pressures. The bank says it expects inflation to continue falling. Merrill Lynch had correctly predicted the bank would make the quarter point reduction. “Increased evidence of slowing activity and global easing set the path for lower policy rates,” says the shop, adding that it expects a stronger cut at the March 5 meeting. Merrill expects 250bp of easing through 2009.

Peru’s finance minister Luis Valdivieso has resigned, according to Peruvian media and wire reports, with former finance minister Jose Luis Carranza sworn in late Monday as his replacement. No reasons for the departure had been immediately reported, and finance ministry officials were not immediately available for comment. Valdivieso, a former IMF economist, held the post since July, replacing Carranza, who resigned after 2 years for personal reasons. Carranza’s first go-around as finance minister was marked by a breakthrough $1.5bn 6.9% 30-year PES-denominated global bond in July 2007 and Peru’s first promotion to investment grade, from Fitch in April 2008. Valdivieso had been talking up a possible dollar-denominated bond issue in recent weeks, following meetings with international investors in December and January. Both Fitch and S&P have Peru at BBB minus, with Moody’s one notch below.

Fitch has affirmed Peru’s BBB minus debt rating, citing a solid macroeconomic framework and ability to withstand the current economic downturn. The outlook is stable. The ratings notice is the latest in a long line of teases suggesting a new debt issue is forthcoming. The issuer wrapped up meetings with investors this month, with finance minister Luis Valdivieso stating recently that January looks like a good time for a new issue and that there is demand for at least $600m. Goldman Sachs and JPMorgan handled Peru’s investor meetings.