Peru positioned for growth pick-up, says FinMin

GDP growth in Peru should bounce back to around 4% this year and 5% next year, the country’s finance minister, Alonso Segura, has told LatinFinance.

Higher fish stocks, new mining industry capacity and sustained infrastructure spending will boost economic performance, Segura said.

Additionally, government stimulus should add about one percentage point to growth this year, he said in an interview with LatinFinance.

“The key variable to determine whether we’re going to grow above 4% or below 4%, is what’s going to happen with private investment and private consumption,” Segura said.

If a decline in private investment stabilizes or reverses, the country is likely to hit official growth targets of around 4.2%, he said.

The Andean economy posted growth of just 2.4% in 2014.

“The economy hasn’t recovered at the speed we expected,” Segura said. The weaker performance was exacerbated by last year’s oil price shock, which although a net positive for the real economy, shook confidence, he said.

Funding foundation

While investors differentiate strongly between countries, contagion from a major crisis in another emerging market remained a risk, Segura said. The sovereign has strengthened its defenses against further debt market turmoil through two large-scale exercises, he added.

In October, the A3/BBB+/BBB+ rated sovereign reopened a dollar bond and sold a new global-sol bond, raising $3 billion. In March, Peru reopened both debt instruments again, raising over $1.2 billion. These bond sales have pre-funded the budget, extended debt maturities, and pushed more borrowing into local currency, Segura said.

“We’ve worked as much as possible to be ahead of the curve,” he said. “From a public sector view, we have strengthened and protected ourselves against rate increases.”

The sovereign is taking an aggressive approach to funding, already raising cash to finance the 2016 budget and looking at new markets for further funding, the country’s head of public credit, Carlos Linares, told LatinFinance recently.

“Previously we focused more on the local market and, given we didn’t have big financing needs, we kept a presence in the US dollar market,” Linares said. “But facing a possible scenario where it will be more difficult to place local currency debt overseas, we’ll look at these possibilities.” LF