REPUBLIC OF PERU • Area: 1.3 million km2 • Third country in extension in South America (five times the size of the UK) • Population: 27 million inhabitants • Capital : Lima (8 million inhabitants) • Currency : Nuevo Sol • 3 Natural Regions: Coast, Highlands y Jungle Forest • GDP 2001: US$ 54 billions • GDP per capita: US$ 2,500
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REPUBLIC OF PERU Area: 1.3 million km2 Third country in extension in South America (five times the size of the UK) Population: 27 million inhabitants Capital.
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REPUBLIC OF PERU
• Area: 1.3 million km2
• Third country in extension in South
America (five times the size of the UK)
• Population: 27 million inhabitants
• Capital : Lima (8 million inhabitants)
• Currency : Nuevo Sol
• 3 Natural Regions: Coast, Highlands y
Jungle Forest
• GDP 2001: US$ 54 billions
• GDP per capita: US$ 2,500
REPUBLIC OF PERU
1. Economic fundamentals
• Peru’s estimated 2002 growth is poised to outpace the US, Europe and most of Latin America
• Strong economic fundamentals have allowed Peru to weather the regional crisis well
• Peru is undertaking measures to sustain economic growth by promoting private investment, and fostering regional and sectoral diversification
• Tax reform and the strengthening of the collection system are already boosting fiscal revenues
• The renewal of the Andean Trade Preference and Drug Eradication Act (ATPDEA) by the US will further enhance Peru’s export base
REPUBLIC OF PERU
Objectives of the economic program
• To achieve high and sustained economic growth
• To reduce unemployment and poverty
• To maintain low inflation rates
• To maintain high level of international reserves that provides
a safeguard against external shocks
REPUBLIC OF PERU
-1.3-2.5 -3.1
0.1
-0.3
-2.2
-0.2
2.7 2.82.1
4.2 3.9 3.4
1.6
7.6
4.3 3.6 3.8 3.8
7.3
1.4
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J F M A M J J A S O N D J F M A M J J A S
Peru’s economy has been growing consistently for the past 14 months…
Monthly GDP Growth(%, yoy)
0.3
1.5
0.3 0.2
2.5
0.7
-1.2
3.7
-2
-1
0
1
2
3
4
USA Europe Latin America Peru
2001 2002E
Despite persistent volatility in the region, Peru’s growth is recovering fast (%, yoy)
Toledo AdministrationTransition Government
Source: INEI (above) and Consensus Economics Inc. (below)
REPUBLIC OF PERU
…and the recovery is no longer being driven by mining alone
Source: MEF
GDP Growth by Sector (%, yoy) 2001 2002Q1 2002Q2 2002Q3
GDP 0.2 3.0 5.3 4.9
Agriculture -0.6 7.4 5.6 1.4
Fishing -13.3 -22.1 2.2 4.4
Mining and Hydrocarbons 11.2 23.7 18.3 3.8
Manufacturing -1.1 -0.8 4.3 5.6
Primary -2.9 -3.6 -2.3 -1.7
Non-Primary -0.6 0.0 6.4 7.6
Construction -6.0 10.3 7.4 11.5
Retail 0.0 -0.1 4.0 3.0
Other Services 0.4 1.6 4.3 4.1
Primary Sectors 1.9 9.4 7.2 1.8
Non-Primary Sectors -0.2 1.6 4.7 5.6
REPUBLIC OF PERU
The economic recovery is helping to reduce unemployment
Unemployment Rate(%)
Source: MEF
9.1
9.5
8.9
10.0
9.7
9.49.2
7.9
10.8
11.1
9.9
11.0
9.7
9.0
8.2
9.0
8.4
8.1
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
Lima Unemployment Rate
Three Month Moving Average
REPUBLIC OF PERU
Private investment is no longer falling and is expected to recover in the upcoming quarters
• Private investment grew 4.5% year on year in the third quarter, after falling for 8 consecutive quarters on the same basis; correspondingly, credit to the private sector is also recovering
• The incentives in place are expected to increase private investment by 1% in the whole of 2002 and 4.5% in 2003
-15.3
-2.0-5.6
1.04.5
6.7
-3.1 -4.6
4.1 4.5
-20
-15
-10
-5
0
5
10
1999 2000 2001 2002E 2003P
Private Investment Credit to Private Sector
Private Investment and Credit to the Private Sector(%, yoy)
Source: Banco Central de Reserva
REPUBLIC OF PERU
Higher mining and non-traditional exports are pushing the trade balance into surplus…
Source: Banco Central de Reserva5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
1997 1998 1999 2000 2001 2002E
Exports Imports
Imports and Exports Evolution(US$ BN)
REPUBLIC OF PERUP
ub
lic S
ec
tor-
Co
ns
olid
ate
d E
co
no
mic
R
es
ult
s o
f(A
s a
% o
f G
DP
)
Fiscal policy is aimed at reducing fiscal deficit
Source: Central Reserve Bank (2002)
-3,0-3,2
-2,3 -2,3-1,9
-4,0
-3,0
-2,0
-1,0
0,0
1,0
1999 2000 2001 2002 2003
REPUBLIC OF PERU
… the ongoing efforts to boost tax collection are yielding impressive results
• The tax measures implemented earlier this year seek to widen the tax base, and curb evasion by strengthening the tax collection agency (SUNAT)
• As a result of tax reform, revenues are expected to increase by 1% of GDP on an annual basis
12.2
-3.4
14.4
3.57.1
24.2
-19.3
-13
-1-4.4
9.8
-5.6
14.412.4
14.5
-20
-15-10
-50
510
15
Jul-01
Aug-0
1
Sep-0
1
Oct-
01
Nov-0
1
Dec-0
1
Jan-0
2
Feb-0
2
Mar-
02
Apr-
02
May-0
2
Jun-0
2
Jul-02
Aug-0
2
Sep-0
2
Oct-
02
Internal Tax Collection (% change, yoy)
Source: MEF
REPUBLIC OF PERU
Long-term flows cover all of the current account deficit
Peru’s dependence on market financing is relatively low
Multilateral27%
Bilateral2%
Bank Loans17%
US$ Bonds34%
Multilateral22%
Bilateral9%
Other8%
Eurobonds53%
Bilateral40%
Multilateral33%
MexicoUS$BN
ColombiaUS$BN US$BN
Peru
Bilateral6%
Other17% Multilateral
23%
BrazilUS$BN
Total = $23.1 Total = $19.8
Total = $97.7 Total = $77.9
Other Bonds16%
Export Credits4%
Brady Bonds14%
Global Bonds7%
CommercialBank Loans 1%Supplier 5%
Brady Bonds8%
Brady Bonds15%
Global Bonds39%
Source: JPMorgan
REPUBLIC OF PERU
The macroeconomic framework 2002-2005 points to a consolidation of the economic recovery
Source: MEF
Macroeconomic Framework 2002E 2003P 2004P 2005P
GDP growth rate 3.7 4.0 5.0 5.5
Investment (% of GDP)
Public 3.0 3.1 3.3 3.3
Private 14.7 15.0 16.4 16.9
Inflation Target 2.5 2.5 2.5 2.5
Exports of Goods and Services (%-change, yoy) 5.6 6.4 6.8 9.0
Consolidated Fiscal Deficit (% of GDP) -2.3 -1.9 -1.4 -1.0
REPUBLIC OF PERU
The countries of
MERCOSUR, specially
Brasil and Argentina
2. Strategic regional
positionPERU holds the key so that
Asian partners of APEC can
trade with:
REPUBLIC OF PERU
.. And the Andean Community
of Nations that include
Venezuela, Colombia,
Ecuador and Bolivia...
PERU is the only country in
the Andean Community that
belongs to APEC; the Andean
Community is a market of
more than 100 million
inhabitants with a combined
GDP of US$ 250 billions.
REPUBLIC OF PERU
3. Clear framework for foreign investment
Stable and predictable investment environment
Basic principle
Same treatment for domestic and foreign
investors
Restricted activities
None
Performance requisites None
REPUBLIC OF PERU
Legal framework for investment
Constitutional principles Equal treatment for domestic and foreign investors Expropiations are prohibited, unless it is for national interest or national
security
Foreign Investment Law Access to the best exchange rate for profit remission Free remissión of profits and royalties
Stability contracts For concessions and investments spannning more than 10 years Protects the investors in case of policy changes