Category: Peru

IFC, the private sector arm of the World Bank Group, has acquired a 6.5% stake in Peruvian microfinance provider Mibanco from the Peruvian Group ACP for over $6m. IFC’s director for Latin America, Atul Mehta, said the operation would “serve to further consolidate its position as one of the main sources of microfinancing in Peru.”

Construction and manufacturing continued to lead economic growth in Peru, with GDP expanding 8.33% in May, year on year, according to the national statistics agency, INEI. This compares with growth of 7.25% in April. Year-on-year growth for the first five months of the year rose to 7.63% from 7.45% for the period January through April. The Central Reserve Bank of Peru is forecasting that GDP will expand by 7.2% in this year, while the finance ministry has predicted growth of 7.0%.

Peru’s recent moves to improve its external debt position have earned it a foreign-currency credit upgrade from Moody’s Investors Service, from Ba3 to Ba2, just two notches away from investment grade. “External debt ratios have moved towards those observed in other Ba-rated countries, while the share of foreign-currency denominated government debt and the degree of financial dollarization in the Peruvian banking system have reported steady reductions,” said Moody’s vice president Mauro Leos. Commenting on the rating, Goldman Sachs noted that it believes “Peru may earn the investment grade credit status (by at least one of the agencies) by late 2008 or 2009.” Peru is set to offer at least $1bn equivalent in new PEN-denominated bonds this week in a deal that establishes a series of milestones for the sovereign. The 2037 is the longest dated local currency deal from Peru and the sovereign’s first to get investment grade. Proceeds are earmarked for paying down some $1.8bn in Paris Club debt. Peru is already rated at just one notch away from investment grade by both S&P and Fitch (BB+/BB+). Domestic-currency government bonds – which were unaffected by this rating action – are rated Baa3.

Peru’s central bank raised the benchmark interest rate 25bp to 4.75% in its monthly monetary policy committee meeting, which ended the evening of July 5. The hike, the first in 13 months, was apparently a preemptive move to curb rising expectations on inflation and keep it within its target range of 1%-3%. It caught some by surprise, though analysts generally agreed with the decision. “Although we did not expect a hike at this meeting, we were of the view that rate hikes were becoming imperative to protect the inflation target,” according to Goldman Sachs.

Peru has managed to secure agreements with 13 of the 15 member countries of the Paris Club to prepay its debt to the group, which totals $2.592bn, and is due 2015. The country will prepay $1.754bn, with payment of another $838 still to be negotiated with France, South Africa and Italy – the first two of which declined to participate in the prepayment agreement and the last of which only agreed to a 50% prepayment. Peru’s vice-minister of finance Juan Miguel Cayo told LatinFinance earlier this year the country would look to pay down $1.8bn in Paris Club debt by the end of 2007.

Former Peru president, Alberto Fujimori, will apparently be standing for election in Japan after failing in his bid to run as a presidential candidate in Peru’s general elections last year. Fujimori is currently under house arrest in Chile after arriving in that country last year. He will stand for election to the upper house of Japan’s parliament in July as a representative of the People’s New Party.

Following a few months’ vacation in her native Peru, Susana de la Puente has resurfaced after “retiring” from JPMorgan. The veteran Andean region banker has joined The Rohatyn Group, the EM investment specialist, according to market sources. De la Puente was JPM’s country head for the Andes, Central America and Caribbean and left the bank amid a senior management restructuring that is apparently still going on. The banker, who advised Peru on its telecoms privatization in 1994, joins former client Pedro Pablo Kuczynski, who was appointed by Rohatyn earlier this year as a senior advisor. Prior to becoming prime minister of Peru in 2001, Kuczynski served as minister of economy and finance. He is charged with developing private equity investments with a focus on LatAm at Rohatyn.

Peru continued its stellar economic growth in April, with GDP expanding 7.25% in April year on year and taking y-o-y growth for the first four months on the year to 7.45%. The non-primary sector proved to be the strongest, with construction up 13%, manufacturing up 9.87%. The Central Reserve Bank of Peru is forecasting that GDP will expand by 7.2% in this year, while the finance ministry have predicted growth of 7.0%.

China’s largest, state-owned aluminum producer, Chinalco, has agreed to pay C$6.60 per share for Vancouver-based Peru Copper in a deal worth $790m (C$840m). The Chinese producer will also make an initial purchase of 13 million shares, representing just under 10% of Peru Copper, worth C$70m or $C$5.30 per share to help finance exploration of the Toromocho project. The acquisition by Chinalco will help the government fuel China’s continued economic growth with the much needed supply of the raw material.

Peru’s central bank held the benchmark interest rate at 4.5% Thursday, despite some analyst expectations that the higher-than-expected May inflation figures would prompt a 25bp hike. The key reference rate has now remained unchanged since May last year.