Category: Peru

No change is expected to Peru’s economic policy following the appointment of former IMF economist Luis Valdivieso to lead the finance ministry. “The Garcia administration continues to resist wage pressures and has used the commodity windfall to invest in infrastructure, pay down public debt and increase assets, a strategy which Fitch believes the new finance minister will maintain,” says Theresa Paiz Fredel, a senior analyst at Fitch. Others agree. “We believe that in Peru there is a consensus around an economic policy that favors growth without neglecting the social component. In that regard, we believe that the change of Luis Carranza for Luis Valdivieso represents a continuation of this economic policy,” says Alejandro Grisanti, LatAm analyst at Barclays. Valdivieso was sworn in yesterday by Peruvian president Alan Garcia, hours after S&P raised the Andean nation to investment grade. Fitch also rates Peru high grade.

BPZ Energy, a Houston-based oil company operating in Peru, has unveiled a new investment scheme in Peruvian oil & gas alongside Royal Dutch Shell totaling $750m over four years. Shell will contribute $300m for three gas exploration lots in Tumbes, on the northern coast. “We are still determining our strategy, but there will be several hundred miles of seismic lines and least 20 test wells drilled,” Carlos Niño Neira, VP of administration and finances at BPZ, tells Latin Finance. BPZ will also invest $300m, but it will concentrate on oil. In addition, the company has plans to build a 150MW thermal plant in Tumbes that would provide power to the northern coastal departments. The plant would require $150m in investment and could be ready by end-2010. BPZ has four concessions totaling 2.4m acres in northern Peru. Shell was active in Peru until 1998, when it decided to pass on the development of the Camisea gas fields. BPZ is producing an average of 474 barrels a day of hydrocarbon liquids at its off-shore Z-1 lot. It produced 86,319 barrels through the end of June, according to the Perupetro, the state agency in charge of promoting hydrocarbons.

Deutsche Bank has opened an office in Peru, making a move into a region that represents a growing interest for Wall Street shops. Deutsche Bank Peru’s new office in Lima is headed by Jose Miguel Alcalde, chief country officer for Chile and Peru. Eduardo Sanchez-Carrion, a director, has been appointed head of global markets sales for Peru reporting to Alcalde, Marcelo Blanco and David Hinsley, co-heads of Latin American capital markets and institutional sales. Gino Monteferri was hired from Scotia’s Peru office where he was head of FX and fixed income trading. At Deutsche he will be head of global markets trading in Peru, reporting to Alcalde and Christian Binaghi, head of LatAm trading.

Peru LNG, the LNG regasification project being built by Hunt Oil, is planning to issue $200m-$300m-equivalent in local bonds in Peru by year end. The tenor is likely to be 18 years and pricing will come at a spread over Libor, says a banker close to the process. The issuer is also considering dividing the issue into different tranches to offer shorter-dated paper to suit small investors. Among the possibilities being considered is a smaller amount of roughly $50m in 5-year notes aimed at retail buysiders, with the remainder carrying the full 18-year final maturity and a 5-year grace period. The project doesn’t need the local portion given the success in placing more than $1bn in bank and multilateral debt, notes one banker. But he adds it is important to offer a stake in a project of such national importance to the local buyside. Banco de Credito del Peru will assume a co-lead role in an eventual offering, with a second co-lead to be named as early as this week.

Atacocha Mining Company, one of Peru’s leading miners, is in the final stages of financing the construction of the 115MW Quitarasca hydroelectric plant. The total cost will be approximately $120m, of which $80m will be in debt and $40m in equity, CFO Juan Alberto Franco tells Latin Finance. “We have secured the financing for Quitarasca and the name of the bank will be made public soon,” says Franco. Atacocha took control of the Quitarasca project in 2007 from the Chaprin Energy Company. It is Atacocha’s first foray outside of the polymetalic business. In addition to lead, Atacocha also mines copper and zinc. It acquired Poderosa, a related gold mining operation, in 2006. Quitarasca is a key component in the Peruvian government’s effort to guarantee that energy production meets demand, which is increasing by 10% annually. The country needs to add at least 350MW yearly to satisfy that.

Copeinca, Peru’s second largest fishmeal processor, is expected obtain approval for a local listing in Peru as early as today, Eduardo Castro Mendivil, CFO, tells LatinFinance. “Local investors are more stable than EM investors and the multiples in the local market have been very good thanks to ample liquidity,” says Castro, whose company has been listed on the Norwegian exchange since January of 2007. “We want to take advantage of that,” he adds. If confirmed Copeinca’s depository receipt would be the first for the fishmeal sector in Peru. The listing will not involve any new capital raising initially, but could open the door for a local market tap in the future, says the CFO. Other companies including Telefonica, Credicorp and Buenaventura have sought local depository receipt listings. No banks are assisting Copeinca in the process. Copeinca commands roughly 10.5% of the local fishmeal market.

The departure of Peruvian finance minister Luis Carranza Ugarte is not expected to affect Peru’s economic and fiscal policies, or result in a change in its economic outlook, say analysts. “The government is doing a good job managing its finances and I don’t think the new minister, whoever it might be, is going to change that,” says Carola Sandy, an analyst at Credit Suisse. Mauro Leos, a sovereign analyst at Moody’s, says historically Peru has been known for having a steady economic policy regarding changes at the ministry. “We believe that there are no signals that the economic and fiscal policy will change in Peru and that is implicitly incorporated in our rating,” adds Leos. Moody’s rates Peru Ba2, two notches below investment grade.

Peruvian finance minister Carlos Carranza Ugarte has resigned, according to multiple local press reports. Carranza Ugarte is leaving to attend to family commitments, say the reports which say he will depart July 18. The Peruvian government has yet to make the resignation official, according to the state news agency Andina. The papers say Carranza will be replaced by economist Luis Miguel Valdivieso, an advisor in the Asia-Pacific department of the IMF.

The Peruvian presidential office has dismissed local press reports that say finance minister Luis Carranza Ugarte will leave his post. “We cannot confirm those rumors. There is not official information [to suggest that,]” says a spokesman, calling the reports unfounded. Peruvian daily “La Republica” reported rumors that Carranza Ugarte had already resigned and would leave his post in July. The paper cited unnamed sources as saying the minister would be replaced by economist Luis Miguel Valdivieso, an advisor in the Asia-Pacific department of the IMF.