Peru: Investment opportunities Harry Chang Director of Investment Promotion March 2011.

Peru: Investment opportunitiesHarry ChangDirector of Investment Promotion

March 2011

1. Internationally acknowledged macroeconomic stability

WHY INVEST IN PERU?

2. Friendly investment environment

3. Open trade and market access policy

4. Foreign Direct Investment

5. Investment opportunities

Peru has recorded the highest annual average real GDP growth

in Latin America in the last decade

2009 / 1990 2009 / 2000

1 Chile 5,06 Chile 2,97 Peru 1,72

2 Uruguay 3,79 Peru 2,69 Ecuador 1,63

3 Colombia 3,51 Argentina 2,52 Uruguay 1,60

4 Ecuador 2,96 Uruguay 2,46 Colombia 1,54

5 Peru 2,94 Colombia 2,04 Argentina 1,53

6 Argentina 2,91 Ecuador 2,01 Chile 1,50

7 Brazil 2,79 Bolivia 1,96 Venezuela 1,46

8 Mexico 2,75 Brazil 1,96 Brazil 1,45

9 Paraguay 2,37 Mexico 1,86 Bolivia 1,43

10 Bolivia 2,30 Venezuela 1,78 Paraguay 1,36

11 Venezuela 2,27 Paraguay 1,54 Mexico 1,27

1/ On a constant purchasing power basis.

2009 / 1980

GDP per capita increase 1/

Latin America: Average GDP Growth 2001-2009(Real % Change)

5,4

4,54,1 4,1 3,9 3,8 3,6

3,22,9 2,8

1,4

Source: WEO - IMF, April 2010.

1. MACROECONOMIC STABILITY

Peru is one of the fastest growing economies in the World

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(Average annual CPI inflation during 2001 – 2009 in %)

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Peru also recorded the lowest annual average inflation in Latin America in the last decade…


Private investment(% GDP)

Balance of Trade (US$ Million)

Source : Central Reserve Bank of Peru


Source : Central Reserve Bank of Peru

*Projections * Projections

20002001

20022003

20042005

20062007

20082009

2010*2011*

2012*-5,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Total exports Total imports Balance of Trade 2000

20012002

20032004

20052006

20072008

20092010*

2011*2012*

0.0

5.0

10.0

15.0

20.0

25.0

…growth has been driven by rising investment and labor productivity and sustained corporate sector confidence

…has supported a massive growth of consumption markets outside Lima

2000 2010

2005 Poverty

Poverty > 50%

2010 Poverty1

1/ Expected.

Source: National Bureau of Statistics, National Electoral Tribunal

Sustanined growth has promoted a dynamic increase in employment, a steady decline in poverty, and a reduction in inequality

Net International Reserves(US$ Million)

Source : Central Reserve Bank of Peru*Projection

Latin America benchmarkingInvestment grade

Source : Standard & Poor`s, Fitch Ratings y Moody´s

20002001

20022003

20042005

20062007

20082009

2010*2011*

2012*0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Peru has obtained investment grade from all major rating agencies


Country S&P Fitch Moody´s

Chile A+ A Aa3Mexico BBB BBB Baa1Peru BBB- BBB- Baa3Brazil BBB- BBB- Baa3Colombia BBB- BB+ Ba1Venezuela BB- B+ B2Argentina B B B3Bolivia B B+ B1Ecuador B- B- Caa3

Peru offers a favorable legal framework for foreign investment ... Recognition of a favorable Investment environment

Legal Framework: Constitutional provisions, “Law for the Promotion of Foreign Investment”, Legislative Decree N° 662, “Framework Law for Private Investment Growth”, Legislative Decree N° 757, “Law for the Promotion of Private Investment in Infrastructure and Public Service Works”, Approved by Supreme Decree N° 059-96-PCM

2. FRIENDLY INVESTMENT ENVIRONMENT

Non discriminatory treatment. Peru offers to foreign investor the same treatment as local investors. Unrestrictive access to most economic sectors * Free transfer of capital Free competition. Guarantee for Private Property Freedom to purchase stocks from locals. Freedom to access internal and external credit. Freedom to pay royalties. Network of investments agreements and member of ICSID and MIGA Legal Stability Agreements Peru is adherent to the OECD Declaration on International Investment and Multinational Enterprises.

*Investments that require authorization: Located within 50 km in the border line and those destined to arms, ammunitions and explosive. Likewise, a principal local partner for investments in radio and television as well as in air transport is required.

Peru has signed Bilateral Investment Treaties (BIT) and Free Trade Agreements that underpin its liberalization policy.

Australia China* Korea Malaysia Singapore* Thailand Japan Argentina

Bolivia Chile* Colombia Ecuador Paraguay Venezuela

Cuba El Salvador

Germany Belgium and Luxemburg Denmark Spain Finland France Nederland Italy Norway Portugal United Kingdom Czech Republic Romania Sweden Switzerland

Canada* United States*

* FTA


It has also signed double taxation agreements with Brazil, Chile and Canada.

… we have complemented our open trade policy with Investment Agreements

Peru ranks second place in the region as attractive country for investments.

And also is one the countries that improved its ranking the most.

Source: Doing Business 2011

Brasil

Argentina

Panamá

Chile

Colombia

Perú

México

117

115

72

43

39

36

35

“Ease of doing business” ranking 2011

Peru

2011 2010

DOING BUSINESS 36 46

Starting a business 54 103

Dealing with Construction Permits 97 103

Registering Property 24 28

Trading Across Borders 53 80

2010 – 2011 Comparison


Peru is the second most attractive country for investing in the region.

Perú18%

Uruguay, 2%

Argentina8%

Brasil,41%

Chile13%

Colombia14%

México,2%

Paraguay1%

Otros1%

Source: Pricewaterhouse Coopers 2010. (200 CEOs in LA survey)


…but there is no room for complacency, and we are working on further improving the investment climate

3. PREFERENTIAL ACCESS TO THE MOST IMPORTANT MARKETS

An economy working to become globalized and with access to the world’s largest markets and trade blocs.

Agreements n force Agreements soon enter into force

Agreements under negotiationsTranspacific Partnership Agreements (Vietnam, Brunei, Darussalam, Australia,Malaysia, New Zeeland, Chile, EEUU, Peru)FTA Central America

Source: Central Reserve Bank of Peru

Peru’s imports structure is strong in raw and intermediate materials as well as capital goods for Industry development.

Building materials

$854 12%

For agriculture$72 1%

For industry$ 4498

66%

Transportation equipment

$ 1426 21%

CAPITAL GOODS IMPORTS -2009( FOB VALUES IN MILLIONS OF US $)

Fuels$2929

29%

For agriculture$773

8%

For industry$6375

63%

RAW MATERIALS AND INTERMEDIATE GOODS IMPORTS -2009

(FOB VALUES IN MILLIONS OF US $)

IMPORTS STRUCTURE


Source: Central Reserve Bank of Peru

Peru’s Exports are led by the Mining Sector (62.7%), followed by Petroleum and Gas (8.6%) and Fishing, basically fishmeal and fish oil (7.7%)

Fishing, 7.7%

Agricultural, 1.2%

Mineral, 62.7%

Petroleum and natural gas, 8.6%

Agriculture and livestock, 5.7%

Textile, 4.3%

Chemical, 3.4%

Basic metal industries and jewelry, 2.5%

Fabricated metal products and

machinery, 1.1%

EXPORTS -2010I SEMESTER

EXPORTS STRUCTURE


Trade Peru – United States

BILATERAL TRADE(US$ MILLIONS)

Main Exports

Gold

Copper

Petroleum derivatives

Clothing

Vegetables

Main Imports

Mechanical devices

Petroleum derivatives

Plastic, rubber

Vehicles2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Imports Exports Trade balance

Source: Proinversion

COMMERCE4%COMUNICATION

19%ENERGY

14%

FINANCE15%

INDUSTRY15%

MINING21%

OIL2%

SERVICES3%

TRANSPORTATION2%

HOUSING3%

OTHERS8%

FOREIGN DIRECT INVESTMENT 2009BY SECTOR ( US $ MILLIONS)

Peru reached US$ 18,840 millions in Foreign Direct Investment in 2009. Spain (23%), United Kingdom (20%) and USA (15%) as the most important investors. The main sectors involved were Mining (21%), Communications (19%), Industry (15%), Finance (15%).

SPAIN23%

UNITED KINGDOM20%

USA15%

HOLLAND7%

CHILE7%

PANAMA5%

COLOMBIA4%

BRAZIL3%

MEXICO2%

SINGAPORE2%

CANADA2% SUISS

2%

URUGUAY1%

FRANCE1%

OTHERS6%

FOREIGN DIRECT INVESTMENT 2009(US $ MILLIONS)

4. FOREIGN DIRECT INVESTMENT (Only Equity)

…it is therefore not surprising that Peru keeps attracting large FDI inflows

PROINVERSIÓN offers its services, free of charge, for the installation of companies in the country throughout its three stages: Pre-establishment, establishment and post-establishment.

PRE-ESTABLISHMENT

ESTABLISHMENT

POST-ESTABLISHMENT

General and specific information service for the potential investor.

Preparation of agenda for potential investor: potential partners, suppliers, clients, authorities, associations, unions, etc.

Guidance, coordination and facilitation in obtaining municipal permits and licenses for installing an industrial or commercial plant.

Contact and assistance to visit the regions and the company’s potential production and/or exploitation areas .

Migratory proceedings for business executives’ entry and stay. Guidance for obtaining special permits.

Establishing a contact network with public and private companies. Aiding in business expansions. Identifying administrative barriers.

4. SERVICE OR ASSISTANCE TO INVESTORS

Main Investment Opportunities by Sectors

MAIN PROJECTS IN PROGRESS/TO BE BUILT IN 2010-2011.

Project Company Location Sector Total Investment(US$) 1/

Las Bambas Xstrata Copper Apurimac Mining 4.5 billion

Toromocho Chinalco Junín Mining 2.2 billion

Antapaccay Xstrata Copper Cuzco Mining 1.5 billion

Antamina Antamina (Xstrata, BHP, Teck, Mitsubishi) Ancash Mining 1.3 billion

Fertilizer plant CF Industries Ica Petrochemistry 1 billion

Cerro Verde Cerro Verde (Freeport Mc Moran) Arequipa Mining 50 million / 1

billion

Camisea Cashiriari Pluspetrol Camisea Cuzco Hydrocarbons 740 million

TGP II TGP (Tecgas, Hunt) Lima, Ica Hydrocarbons 720 million

Ammonium nitrate plant Nitratos del Perú (Brescia and Sigdo Koppers) Ica Petrochemistry 650 million

Lima Electric Train Odebrecht Lima Infrastructure 500 million

Bayóvar Vale Piura Mining 479 million

Olmos Odebrecht Lambayeque Infrastructure 470 million

Road Network 4 OHL Concesiones La Libertad, Ancash Infrastructure 360 million

Source: companies, media, APOYO Consultoría1/ Investment throughout the construction period.

Natural greenhouse.

The best agricultural yields in the world.

Sugar cane (1st)

Asparagus, olives and artichokes (3rd)

Grapes (5th)

Seasonal windows in the most important markets.

Projections expect that the 90,000 ha currently used for agro exports to double as consequence of large irrigation projects in portfolio.

Over US$ 2,5 billion in exports of fresh and processed products to over 113 countries.

Products with high export value.

AGRIBUSINESS SECTOR

PERÚ: UN CAMPO FERTIL PARA SUS INVERSIONESPERÚ: UN CAMPO FERTIL PARA SUS INVERSIONES

FISHERIES SECTOR

Extensive fishing coast (3,080 km) and “water mirrors” that offer adequate conditions for the development of marine and continental aquaculture.

first producer of fishmeal and fish oil in the world.

Distribution of Peruvian fisheries products to over 100 countries.

Trend towards product diversification.

MINING SECTOR

Polymetallic country, third in gold, silver, copper and zinc reserves.

Only 20% of territory with mining potential has been explored.

First silver world producer.

In Latin America: 1st gold, zinc, silver, tin and lead producer. 2nd copper and molybdenum producer.

The investment in the sector exceeded US$ 14 billion between years 1999 and 2009 and it is projected an investment of US$ 37 billion in the coming years.

Peru is one of the few countries with non-metallic minerals deposits.

• Sole sustainable natural gas source in the cost of the South-American Pacific Ocean.

• Expansion of gas pipeline to the Marcona and Ilo area: Development of Petrochemical industry and products: Fertilizers, plastics, synthetic fibers, etc.

• Progress in energy grid transformation and LNG export.

• Exploration continues in areas adjacent to natural gas and liquid deposits of Camisea.

• Scheduled investments for over US$ 6.0 billion for petrochemical industry development and LNG export: CF Industries, Orica, Grupo Brescia with Sigdo Koppers Group, Braskem.

HYDROCARBON SECTOR

TEXTILE SECTOR

Recognized quality of Peruvian pima cotton, considered one of the most demanded and finest fiber in the world.

First world producer of the finest South American camelids fibers: alpaca and vicuna.

Long textile tradition, favors workforce professionalization and training.

International recognition as “full package” supplier of the best brands in the world.

Sound trend towards exports growth, reaching its maximum level in 2008: US$ 2 billion.

FORESTRY SECTOR

Presence of great biological diversity and highly valued timber.

Development of hard tropical timber in the forest and soft timber in the highlands of the country.

2nd country with the largest natural forest area in Latin America.

78,8 million ha of natural forests, 10 million ha for reforestation and other areas for afforestation (plantations).

Forestry products exports grew to US$ 296 million in 2009.

Investment opportunities in industrial timber complexes.

Important cultural destination due to Inca and Pre-Inca cultures archaeological sites.

Machu Picchu was chosen as one of the new 7 Wonders Worldwide.

Diversity of natural landscapes.

Destination for bird and orchid watchers.

Lima is the gastronomic capital of Latin America.

Peru has the largest number of gastronomy schools in the world.

Significant investment in hotels of international recongnition.

Tourism attractions yet to be explored: North-Eastern tourism circuit: Kuelap, Sipan, Chan Chan, among others.

TOURISM SECTOR

Construction GDP annual average growth for 2010 is 14.4%.

Housing deficit affects 25% of households. Lima holds 25% of total deficit, and

48% of quantitative deficit.

There are several programs for housing financing, based on households’ socio-economic conditions and income level: Techo propio, Fondo Mi Vivienda and Commercial Banking.

Mortgage credits grew an average of 25% in the last 4 years; construction credits grew 33%.

REAL ESTATE SECTOR

PROJECTS IN PROINVERSION’S PORTFOLIO

PROJECTS GRANTED IN CONCESSION 2000-2010

NUMBER OF PROJECTS GRANTED IN CONCESSION

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

0

5

10

15

20

25

30

35

40

Venta de Acciones y/o Activos Concesiones Iniciativas PrivadasSale of Shares and/or Assets Concessions Private Initiatives

14 Concessions

US$ 2.55 billion in investment

commitments

CONCESSION US$ MM

NORVIAL (2002)Road Network Nº 5 73.1COVIPERU (2005)Road Network Nº 6 228.6IIRSA Norte S.A. (2005)Paita – Yurimaguas 218.9

Interoceánica Sur (2005)Section 2 263.0Section 3 332.4Intersur (2005)Section 4 214.6Concesión Canchaque (2005)Buenos Aires-Canchaque 31.1

Consorcio Interoceánico (2007)Section 1 98.9

Concesionaria del Sur (2007)Section 5 183.4

CONALVIAS-INFRACON (2008)Ovalo Chancay – Huaral – Acos 34.2

OHL (2008)Road Network Nª 4 370

OBRAINSA (2009)Nuevo Mocupe – Cayaltí – Oyotún 17.4

CONCESIONARIA VIAL DEL SOL (2009)Autopista del Sol 365.1IIRSA Centro, Section 2 (2010) 126

AWARDED ROAD CONCESSIONS

(2003 – 2010)

4 Concessions

DP WORLD PERÚ (2006)Callao Port Terminal – New Container Terminal – South Dock

US$ 617 MM

TERMINALES PORTUARIOS EUROANDINOS PAITA (2009)Paita Port Terminal

US$ 233 MM

TISUR (1999)Matarani Direct Docking Port US$ 31 MM

US$ 1.00 billionin investment commitments.

US$ 120 MMConsorcio Transportadora Callao (2010)Mineral Concentrates Shipping Terminal

AWARDED PROJECTS PORT SECTOR (1999 – 2009)

CONCESSION US$ MM

L.T. Mantaro – Socabaya (1998) 179

L.T. Socabaya – Moquegua; Moquegua – Tacna; and Moquegua – Puno (1999) 74.5

L.T. Oroya-Carhuamayo-Paragsha -Derivación Antamina (220 Kv); AND LT Aguatia-Pucallpa (138 Kv) (2001) 65.4

ETECEN AND ETESUR (2002) 10.5

L.T. Carhuamayo – Carhuaquero (2008) 106.14

L.T. Mantaro – Caravelí – Montalvo; and Machu Picchu Cotaruse (2008) 181

L.T. Chilca – La Planicie – Zapallal (2008) 52.2

L.T. Zapallal – Trujillo (2009) 167.5

Energy supply from new hydroelectric power stations(2009) 300

L.T. Chilca Marcona Montalvo (2010) 291

Tintaya- Socabaya transmission line (2010) 43.5

Strengthening of North system between Talara and Piura (2010) 14.5

Santa Teresa Hydroelectric Power Station (2010) 180

L.T. Machupicchu –Abancay-Cotaruse in 220 kV 62.5

Cold Power Generation Reserve 300

15 Concessions

US$ 2.02 billion in investment commitments.

AWARDED PROJECTS ENERGY SECTOR (1998 - 2010)

CONCESSION US$ MM

Consorcio Flughafen Frankfurt, Bechtel and Cosapi. (2000)Jorge Chavez International Airport

1,214

Consorcio Swissport GBH - Aeropuertos (2006)First Regional Airports Package

120

Second Regional Airports Package 257

AWARDED PROJECTS AIRPORT SECTOR (1999 – 2010)

US$ 1.59 billion in investment

commitments.

3 Concessions

PROJECT AWARD FITEL CO FINANCING (US$ MILLION)

Rural Broadband 07.26.07 8.9

Rural internet program 08.12.08 11.6

Broadband for isolated localities 02.12.09 48.8

Juliaca - Puerto Maldonado Rural Broadband 09.0810 8.9

Buenos Aires Canchaque implementation of Telecommunication Integrated services 10.29.10 15.9

Integration of Rural Areas and Locations of special social interest to the Mobile Network- South Centre 12.28.10 14.9

Integration of Rural Areas and Locations of special social interest to the Mobile Network-North Centre 12.28.10 17.1

Integration of Rural Areas and Locations of special social interest to the Mobile Network-Forest 12.28.10 14.7

Broad band for the development of the Valley of Apurimac and Ene Rivers 12.29.10 14.4

PROJECTS GRANTED IN CONCESSION TELECOMMUNICATION SECTOR (2007-2010)

….and over US$ 668 million in the allocation of 14 spectrums via public concession process.…And 4.3 MM in sale of ENTEL-CPT and Telefonica shares.

9 Concessions

155.2 M

PORTFOLIO PROJECTS FOR 2011

Projects in Proinversion’s Portfolio52 projects*

SECTOR N° PROJECTSESTIMATED

INVESTMENT (US$ MILLION)

Airports 1 379.0Agriculture 4 750.0Energy 12 5,160.0

Penitentiary Facilities 1 17.8

Railways 2 ---Real Estate 3 128.3Ports 8 1,220.7Sanitation 1 160.0Telecommunication 3 ----Tourism 2 810.6Land Transport 6 ---Capital Markets 4 ---Mining 5 300.0Total 54 8,926.4

www.proinversion.gob.peHarry Chang

[email protected]

PERU IS ON THE PATHWAY TO PROSPERITY

Peru: Investment opportunities Harry Chang Director of Investment Promotion March 2011.

Documents

investment agreements

investment climate slide

international investment

private investment growth

foreign direct investment

macroeconomic stability

bilateral investment

inequality slide