Peru Eyes LM, Seeks Fresh Funds

Peru is considering both liability management and raising fresh debt funds before year-end as it gears up for additional spending on its domestic infrastructure program, its finance minister says. “We may have plans to do an LM transaction. We also have financing needs for a number of infrastructure projects, including the financing of the Lima metro project, and we may tap the markets this year,” Luis Miguel Castilla tells LatinFinance. The ministry is still evaluating its options for raising up to $1bn, in international and domestic markets. “Most of that we will raise in our internal market, but it really depends on the appetite, we’ll see. We’re conscious that the world is changing,” Castilla says. Peru’s government is also poised to press ahead with further politically hazardous measures to boost productivity in the face of slowing growth, following the successful passage last week of new fiscal rules. The measures seek to keep national debt in check through the adoption of fiscal rules similar to those in Chile, rendering Peru’s fiscal framework among “the most sound” in Latin America, he says. The priority is maintaining debt sustainability, for more predictability, taking away the cyclical component, and the new measures represent “a necessary but not a sufficient condition to boost growth,” he says. The government is eyeing changes to labor laws in order to increase market flexibility. “Our main challenge is to undertake reforms to boost productivity, which become all the more important as the global situation changes,” he says. While acknowledging that such reforms could knock the government’s already flagging popularity, he insists they are critical for sustainable economic growth. Peru has not issued internationally since a $1.1bn sale in January 2012.