Category: Peru

Ratings agency Standard & Poor’s has raised its long-term foreign currency sovereign credit rating on Peru to BB+ from BB and its long-term local currency sovereign credit rating to BBB- from BB+. The outlook on the ratings was revised to stable from positive. S&P said the ratings action, which brings Peru’s long-term local currency rating into investment grade, reflected the country’s: “Greater signs of political stability, combined with a strong economic performance”. The ratings agency noted that “The combination of a favorable international environment and sound implementation of economic policies has led to a substantial reduction in the government’s main historic credit risk, in particular its fiscal and external vulnerabilities,” and pointed to the 20-year, fixed-rate sol-denominated bonds issued by the sovereign as a reflection of the stable inflationary environment in Peru.

Peru’s economy expanded 7.35% in September, year on year, following growth of 9.2% in August, according to the institute of national statistics and data (INEI). The September figures mean annual growth is up to 7.5%, from 7.4% in August. Continuing buoyant global commodities prices, in particular of silver and fishmeal, have helped to keep revenues up. Growth of 25.8% in the fishing sector helped drive expansion in September, while the construction sector remained robust, expanding 14.5%.

Energy provider Globeleq of the UK began construction of its $135 million Kallpa electricity plant in Chilca, Peru. The 504 MW plant, being built 63 kilometers south of the capital Lima, will use natural gas from the country’s Camisea reserves. Financing for the project has come from Citibank Peru and Banco de Crédito del Perú.

Ratings agency Moody’s Investors Service has improved is outlook on Peru’s Ba3 foreign-currency government bonds to positive from stable. The action was taken to reflect significant reductions in Peru’s external vulnerabilities, said the Agency. Moody’s highlighted the declining trend in the country’s external debt ratios and the fiscal restraint being applied by President Alan García’s new administration. However, the Agency also noted that although the government has taken steps to increase local-currency funding in the domestic market, “a latent credit vulnerability remains given the presence of a relatively high share of foreign currency denominated debt”.

Peru’s annual inflation slowed in October to 1.89%, from 2% in September, helped down by the decline in international oil prices. On a monthly basis, prices were up by 0.04%, versus 0.03% in September. The Bank is targeting annual inflation this year of between 1.5% and 3.5%. The Bank was expected to hold the benchmark interest rate steady at 4.5% at its meeting Thursday evening.

Telefonica del Peru, a subsidiary of Spain’s Telefonica, reported a 39.2 percent increase in profits in the third quarter to $36.2 million. The company, which controls the fixed line market and competes principally with America Movil in the mobile phone market, said the increase was a result of the purchase of a competitor, Telefonica Empresas Peru.

Peru’s GDP expanded by 9.2% in August, year on year, the second highest monthly growth this year according to the institute of national statistics and data (INEI). Construction showed the strongest climb during the month, up by 21.4%, followed by the agri-fisheries sector, which expanded by 11.6%. August’s growth figures were up from July, when the economy expanded by 9.04% and took the increase for the eight months through August to 7.25%. Annual expansion was 7.29%. Last year, Peru recorded growth of 6.5%; the target for economic expansion this year is 6.6%.

Valentín Paniagua, former interim president of Peru, died Monday in Lima following heart problems. He had been in hospital since August. Paniagua, who was 70, ran for president in Peru’s April elections, finishing in fifth place. He served as interim president from November 2000 until July 2001 after the collapse of the government under President Alberto Fujimori.

Peru is to sign a new standby agreement with the International Monetary Fund (IMF) before the end of the year. The credit line will help the country protect itself against future drops in commodity prices, the government said. The last agreement with the Multilateral expired in July. The announcement follows President Alan García’s whirlwind tour of Washington earlier this week, which began with the first meeting so far between the “Comeback Kid” and President George W. Bush. The last time Alan García was in Washington as head of state, George Bush senior was in the White House. García also spent time in high-level talks with the IMF, the World Bank, and the Inter-American Development Bank (IDB). Peru is keen to push forward US ratification of the free-trade agreement between the two countries and the US is hoping to enlist Peru’s support in the war on drugs.

Peru’s banking superintendency has given the nod to UK and Hong Kong-based financial giant HSBC to set up operations in the local market. The Bank will operate under the name HSBC Bank Peru and is due to start operations on October 9. HSBC applied in March to the superintendency as part of a strategy to expand in the region. The Bank, the third-largest in the world, also heard from Colombia’s financial regulator this week that it could open a representative office in that country. HSBC already operates in Argentina, Brazil and Mexico. Earlier this year it agreed to buy the assets of Lloyds TSB in Paraguay for $15 million.