Category: Peru

Despite its high exposure to falling commodity that has contributed to its first trade deficit since 2003, Peru’s economy is well grounded and its growth may lead the region in 2009, says JPMorgan. The shop sees GDP expansion ending the year at 5.3%, its highest country forecast within LatAm. With reserves of $34bn representing a quarter of total GDP and an expected fiscal surplus of $1.1bn, Peru’s finance ministry may succeed in sticking to its 6% GDP target for next year. A new trade agreement with China and expected FDI of $5bn should bolster that bid, says JPM. The shop recommends overweight positions in two Peruvian companies: Credicorp, the financial conglomerate that owns BCP, and Buenaventura, the mining company. With Credicorp, investors get exposure to domestic growth, while a recent drop in gold may produce a buying opportunity for companies like Buenaventura that are exposed to the precious metal as the holidays begin.

Peru’s director of public credit, Pablo Secada, has resigned, according to Peru’s official gazette. The finance ministry did not give a reason for the departure or an indication of his replacement when contacted by LatinFinance. Secada was appointed to the post mid-August, replacing Jose Miguel Ugarte at the same time that Luis Valdivieso replaced Jose Luis Carranza as finance minister.

Norsemont Mining says it has received unsolicited offers from suitors interested in acquiring the company. The Canadian miner, which operates the Constancia project in southern Peru, has hired Fraser Milner Casgrain as legal counsel and is in search of a financial advisor to evaluate expressions of interest. No formal bids have been received yet, says the company. Norsemont Mining, which trades on the Toronto Stock Exchange and the Peruvian bolsa, has a market cap of CAD94m. Shares were down almost 5% November 24.

Fitch has revised the outlook on Banco de Credito de Peru to positive from stable and affirmed its IDR ratings. It also upgraded its individual rating. Fitch says BCP’s ratings reflect its “dominant franchise, important market share across all segments, broad, low cost deposit base, diversified loan portfolio, improved asset quality and adequate reserve coverage. BCP’s systemic importance, improving efficiency and the depth and breadth of its management also support its ratings.” Fitch affirmed BCP’s foreign and local long-term currency IDR ratings at BBB minus, its foreign and local short-term currency ratings at F3.

The IFC has disbursed a $15m 4-year revolving senior debt facility to BPZ Exploracion y Produccion to help it exploit Peruvian natural resources. It is working with commercial banks to add $200m deal under the same terms. “As the credit markets have dried up, IFC has stood alongside BPZ as a strong partner,” says Manolo Zuniga, BPZ’s president and CEO. The loans will support BPZ’s drilling program in offshore Block Z-1’s Corvina oil and gas field and the start-up of its Nueva Esperanza power plant, which will be fired with gas supplied from the Corvina field. IFC’s loan complements previous equity investments worth $39m.

Moody’s has upgraded the foreign currency senior secured discount notes issued by the Peru Enhanced Pass-Through Finance to Ba1 from Ba2 following an upgrade of the foreign currency bond rating of the sovereign. The special purpose entity issues project notes to finance the construction of two segments of Corredor Vial Interoceanica Sur Toll Road, sections 2 and 3. Moody’s says the rating of the notes reflects the importance of the highway segments which are the subject assets of the 25 year concession agreements between the concession companies – Concesionaria Interoceanica Sur, Tramo 2 and Concesionaria Interoceanica Sur, Tramo 3 – and the government. The concession agreement provide for the construction, maintenance and operation of the two segments. However, the sources of repayment for the notes are annual payments from the state.

Vancouver-based Cardero Resources has agreed that its subsidiary Cardero Hierro del Peru will sell its Pampa de Pongo iron ore property to China’s Nanjinzhao Group for $200m. However, a Cardero spokesman says this is only the first bid for the property, and that Cardero will entertain other offers for a 9-month period. He adds that a virtual data room was launched yesterday for potential bidders to obtain more information on the project and that the company is working with a broker, but does not disclose the name. If the Chinese company is bested at the auction block, it will be entitled to a $20m break-up fee, the spokesman says. Proceeds from the sale of the Pampa de Pongo property will be used to advance the Pampa el Toro iron sands project in Peru and the Baja IOCG project in Mexico.

The US and Peru have signed a debt-for-nature agreement totaling more than $25m in which the US will reduce Peru’s debt payments in exchange for protecting the latter’s tropical forests. This agreement with Peru was made possible by the Tropical Forest Conservation Act of 1998. It will complement an existing TFCA debt-for-nature program in Peru dating from 2002, a 1997 debt swap under the Enterprise for the Americas Initiative, and the US-Peru Trade Promotion Agreement, which includes a number of forest protection provisions. With this agreement, Peru will be the largest beneficiary under the Tropical Forest Conservation Act, with more than $35m generated for conservation. Other countries in LatAm to have benefited from this plan are Belize, Colombia, Costa Rica, El Salvador, Guatemala, Panama and Paraguay.

Peru’s finance ministry says it is contemplating a 30-year cross-border bond issue of $400m-$600m. The transaction could occur “in the coming weeks,” after finance officials received interest from international investors while in Washington this past weekend, the ministry adds. It would be Peru’s first international bond since a $1.2bn offering of 6.55% 2037 bonds in March 2007 via Deutsche Bank and Citi. Given current market turmoil, an issue of such size and duration seems highly unlikely short term, even from a high grade sovereign. Investors are waiting for stability before buying and their extreme caution would have a significant impact on tenor and spread.