Category: Peru

Peru’s Central Bank left the benchmark interest rate unchanged at 4.50% for the second month in a row, in line with market expectations. Meanwhile, preliminary figures showed economic growth for the first half of the year slowed to 6%, down from 6.8% recorded in the first quarter.

Gerdau, Latin America’s largest steelmaker, bought a 52 percent stake Siderperu for $62.7 million from the Peruvian government, fending off India’s Global Steel Holdings Ltd. The government acquired the stake in the company based 422 kilometers north of Lima last March in lieu of money owed. The price was a 25 percent premium over the current stock market value of the company’s shares.

Peruvian legislators overwhelmingly approved a free trade agreement with the United States that would boost the economy through increased exports. The government now hopes the U.S. Congress will do the same before the summer recess, although even ministers admit this may not be easy.

Peru has picked a UK-Spanish consortium to build and operate a major new port terminal – known as Muelle Sur – at Callao, the country’s most important port just south of the capital, Lima. Terminal Internacional de Contenedores del Callao, which comprises P&O Dover of the UK (70%) and Uniport of Spain (30%), has committed to invest $357 million in the project.

Peru’s GDP grew by only 3.63% in April, compared with the same period in 2005. This compares with year-on-year growth of 10.7% in March and 4.9% in February. Declining output of manufacturing, fishmeal and natural gas were behind the slowdown. Annual inflation for the four months to April was 5.94%. Growth for the year is forecast at over 5%.

Alan García, former president and unlikely comeback kid, appears to be the winner of Sunday’s voting in Peru’s second-round presidential elections. Exit polls Sunday evening indicated that García had won 58.2% of the vote against 47.2% garnered by Humala. García’s first time in office, between 1985 and 1990, saw Peru default on its debt and annual hyperinflation of 8,000%. However, voters have obviously forgiven or forgotten García’s record of economic management or perhaps are simply voting against the alternative: former coup leader and ex-military man, nationalist Ollanta Humala. García polled 24.3% of the vote against Humala’s 30.6% in the first-round poll on April 9. He narrowly beat off market favorite, conservative Lourdes Flores, who gained 23.8% of the votes.

Peru’s Central Bank decided to hold its benchmark interest rate unchanged yesterday, Thursday, for the first time in six months, keeping it at 4.50%. A rise of 25 basis points had been expected by economists to help cool domestic demand, which is driving Peru’s continued economic growth. GDP expanded by 6.8% in the first quarter of the year, compared with the same period in 2005. Internal demand rose by 9.9%, driven mainly by capital investment. Meantime, the rate of inflation in May declined for the first time since September last year, falling 0.53%. Annual inflation slowed to 2.2%, within the government’s target range of 1.5% to 3.5%.

Peru’s fiscal surplus rose in April to just over $1 billion, almost double its level at the same time last year, according to the country’s Central Bank. The increase has been driven by the improvement in tax collection, the Bank said.

Peru is contemplating placing 30-year bonds in the local market, making them the longest maturing local-currency bonds issued by the sovereign to date. (Peru sold 20-year sol-denominated bonds on May 2, raising $40 million.) The government is considering issuing the longer-term paper to cover debt incurred from agrarian reform in the 1960s. Almost $1.5 billion of debt is still owed to landowners whose land was expropriated by the state. The bonds would be denominated in local currency and carry a fixed interest rate. No possible date was revealed for the offering.

Swiss mining company Xstrata has agreed to pay $750 million to Anglo-Australian firm BHP Billiton for its Tintaya copper mine in the south of Peru to consolidate its presence in the mining sector in Latin America. Xstrata is already developing a copper project in Peru – Las Bambas – in the south at Apurimac. It also has an important copper and gold operation – Alumbrera – in the northwest of Argentina.