Analysis: Peruvian economy grows 10.3% during the 1st half of 2008

The Peruvian Central Bank raised its benchmark interest rate on Thursday (September 11th) by 25 basis points to 6.5%.

On the surface international investors are increasingly starting to view Peru as a safe region for commodity plays and “alternative investment strategies.”

- Standard & Poor's and Fitch Ratings upgraded Peru's foreign debt to one level below investment grade. (click here for article)

- In May Peru entered talks with the Paris Club to re-nogciate its foreign debt and for the first time, Peru's international reserves are expected to exede foreign debt. (click here for article)

- Peru has achieved relative political and economically stability, successfully passing power from one democratically elected president (Toledo) to another (Garcia) and producing healthy economic growth the past few years.

- Generous macro-economic incentives have helped to attract FDI from abroad, particularly in Peru's mining and energy sectors.

- According to this article from MercoPress, which quotes the INEI: Peru's National Institute of Statistics (click here to visit) the Peruvian economy grew at a rate of 10.3% in the first half of 2008, making it the fastest growing economy in the region.

Lets think about this for a second...

Until the recent retreat/collapse/correction in commodity markets, for the majority of 2008, commodity prices have been sky-rocketing, setting records as arguably one of the strongest bull markets the commodity sector has ever experiences.

Peru, a major producer and exporter of copper, zinc, and other metals has naturally benefited a great deal from soaring commodity prices. However, now that commodity prices have come back down to reality it will become increasingly more difficult for Peru to produce such great numbers. The bright side is commodity prices may rise once again once global growth and confidence pick up, but with the recent developments in the US financial markets it is looking as if the global economy has a long way to go until recovering from the recent credit and banking crisis.

Investors should always research the bad and the good. Some factors which come to mind are as follows:

- The recent replacing of Finance Minister Luis Carranza with Luis Valdivierso, who aside from a more impressive resume having worked for the IMF... is really not much different that Mr. Carranza. It's a pity the main reason Carranza even stepped down was for “family reasons.” Stating, as the Minister of Finance he was over-worked, had little family time and could not adequately support his family.

- Protests and strikes from local communities and unions will remain a obstacle for many companies operating in the remote regions of Peru.

- The population and satisfaction of the Peruvian people with their current president Alan Garcia, and other Peruvian politicians whom are not of the radical left such former presidential candidate Ollanta Humala, have whitnessed their approval ratings shrink a great deal in the past 1-2 years... Meanwhile Humala has managed to remain in the spot light, maintain his friendship with Hugo Chavez and will probably will run for President once again in Peru's next election. Expect great changes if he wins.

News Line: Peru

1) Peru, Singapore to become hubs of Asia Pacific Regions, says Giampietri

Lima, Sep. 11 (ANDINA).- Peru and Singapore, considered an important economy in Asia, are about to become the most important hubs in the Asia Pacific Region, which will allow foreign investments access to this region and vice versa, noted the President of the Extraordinary High Level Commission APEC 2008 (CEAN) Luis Giampietri, who said both countries are in a privileged geographical position and have a perfect port and airport infrastructure to facilitate businesses.....

Luis Giampietri - Vice President of the Republic of Peru

Click here to access the full article from Andina

2) ChinaTel Group to bis for wireless 2.5gHz spectrum licenses in Peru
Lima, Sep. 14 (ANDINA).- ChinaTel Group, a business entity seeking to acquire and operate WiMAX networks in key markets throughout the world, plans to participate in an upcoming auction to bid for wireless 2.5GHz spectrum licensing for Peru... Click here to access the full article from Andina.

3) Canadian and Australian investors explore business opportunities in Amazonas, Peru Amazonas, Sep. 14 (ANDINA).- A group of business people from Canada and Australia has visited the Peruvian department of Amazonas to explore various investment opportunities and tour the several local tourist attractions....

Canadian ambassador Geneviéve des Riviéres and the Australian consul were pleased by the warm welcome they have received from local residents and businesses.

The delegation flew over the Pongo de Manseriche, located in the Condorcanqui province, to observe the potential of this watershed as well as appreciated the magnificent Gocta Waterfall, the third highest in the world.

They also visited on Sunday the Kuélap Fortress, which is the most extensive monument of the Peruvian ancestral past.....

Click here to access the full article from Andina

4) Analysts predict British Direct Investment in Peru likely to surpass 2007 record of $2.9 billion

Lima, Sep. 14 (ANDINA).- British direct investment in Peru would increase this year, surpassing 2007's record $2.9 billion, the third largest foreign investment in the country last year, said the British Ambassador to Peru, Catherine Nettleton.......

"In December last year, the major foreign investors in Peru were Spain with 3.7 billion dollars (23.25 pct), the United States with 2.9 billion (18.54 pct) and the United Kingdom with 2,9 million (18.14 pct)", she detailed......

Among British companies operating in Peru are HSBC, Standard Chartered Bank, Royal of Scotland, SAB Miller, Rio Tinto, Anglo American, Monterrico Metals, BHP Billiton, Xtrata, Minera IRL and Menzies Aviation.

Other companies are Orient Express, Emissions Trading, Icecap, Ecosecurities, Unilever, British American Tobacco, GlaxoSmithKline, AstraZeneca, Willis Insurance, PWS, Jardine Lloyd Thompson, WPP, Cadbury Schweppes, CSM Logistics, Gold Oil, Pan Andean Resources and Shell......

Click here to access the full article from Andina

5) Korea interested to explore possible investments in development related projects

Bagua Grande, Sep. 14 (ANDINA).- The director of Korea International Cooperation Agency (Koica) in Peru, Woo Chae-Suk will visit this Tuesday the northern city of Bagua Grande in the Utcubamba province (Amazonas) to assess and explore a variety of business opportunities in the area.

"Koica volunteer program coordinator, Kweon Ok Hee, will accompany Chae Suk on his visit in which they will get to know the economic, social, educational, agricultural, health and environmental situation of local residents," Amazonas municipal representative Edwin Hidalgo Ocampo announced today.

Click here to access the full article from Andina

News Line: US financials enter a dark era (Reuters Video)

Lehman files for Bankruptcy -- Courtesy of Reuters




(Reuters) Employees from U.S investment bank Lehman Brothers are seen leaving the office with boxes and Lehman signs.

London financial workers wake up to the news that major American investment bank Lehman Brothers has filed for bankruptcy protection, while another U.S. firm Merrill Lynch agreed to be taken over by Bank of America, as the deepening financial crisis hit even larger victims.

Lehman employees in London are seen coming into their Canary Wharf offices, many unaware of what the move means for them.

The video also shows hundreds of employees of the New York office of Lehman leaving their global headquarters building with their personal belongings.

Reports Reuters

South America in focus:

A few stories from catching up on my news readings I though i'd share.


1) Peru attracts $22.7 billion dollars of investment in mining projects according to the cover page over at www.andina.com. More good news for Peru in the international media you might say, but probably of little interest to the poorer people of Peru who are becoming and more frustrated by the lack of Peru's steller economic growth reaching their end of society.


2) Peru-Chile cooperation, "not just a slogan," says Chilean senator Jamie Orpis. For the past years i've been quite interested in how Peru and Chile have been mending century old rifts to work together. One must understand, South-South Cooperation and the entire notion of emerging markets / developing countries working with one another and establishing a cooperative setting in which to conduct business and help spur development is one thing...

Asking countries like Peru and Chile to work together, both of which have historically not thought very kindly of one another is a bit hard when there are issues looming in the background. Sensitive issues for both countries and their proud peoples such the War of the Pacific, faught over a century ago between Chile and the allied forced of Peru and Bolivia in which Chile adquired two of Peru's most southern provinces which ended up being home to tremendous amounts of copper. Or the more recent international dispute of "who invented Pisco?"

The bottom line from the way I see it is, these two countries realize they have alot of the resources Asia needs, they are both strategically located on the Pacific coast and can be seen as a sort of gateway into South America for China and both countries officially have governments with whom are not considered part of the "Chavez Club" by the US government.

The two in other words, have found good reasons to set aside some past differences and begin to work together.

Click here to access the full story on this topic from Andina Press.


3) Petroperu may sell stock by year-end

Lima, Aug. 31 (ANDINA).- Petroleos del Peru SA probably will sell shares in Lima by yearend as state and private companies offer equity to tap rising wealth in South America's fastest growing economy, the stock exchange's chief executive said.

Petroperu and other state companies such as Electricidad del Peru are planning initial public offerings after a government decree this year that requires public companies to sell at least 20 percent on the market, Federico Oviedo said in an interview. .......

Click here to access the full article from Andina Press.

4) Colombian Oil Minister reports domestic output hits 585,000 b/d, allowing Colombia to extend energy self-sufficiency to 2015 from 2011. Colombia's domestic oil production hit 585,00b/d in June, allowing the country to extend its oil self-sufficiency to 2015 from 2011, mining and energy minister Hernán Martínez Torres said in a webcast annual presentation.

The country produced an average of 531,000b/d in 2007.

Torres highlighted increased E&P activity in the country and said 54 new oil contracts had been signed with state hydrocarbons regulator ANH in 2007 with an additional 21 new contracts signed in the first six months of 2008.

While 70 new wells were drilled in 2007, 63 new wells had been drilled in the first half of 2008. The country already has met its goal to acquire 32,000km of seismic data from 2006-2010......

Click here to access the full article courtesy of BNAmericas.

One Disaster after the next -- Hurricanes, Earthquakes, Monsoons and more...

It's been a hectic week for anyone paying attention to world news. This week, Financial markets began with the typical up one day and down the next scenario that has been playing out for the past few weeks now. Adding to it all, even more problems have emerged concerning slowing economies around the world (the US actually being an exception this time), more credit woes and a bunch of other wonderful developments that are not really helping bring back market confidence.

Add to this mix... (apologies if I miss a natural disaster affecting some region of the world, but Western media is now being dominated by the news on the hurricane front in the gulf coast)

- Two hurricanes passing over poor Cuba on route to the coasts of Louisiana and Texas. Click here to access a full article covering the storm from Reuters.

- Yet another earthquake in Sichuan province of China... yes the same province that suffered the horrible quake earlier this year in May. Click here to read more on yesterdays quake from Xinhua.


Residents gather around campfire to evade earthquake in Yinlu Village, Datian Town, Renhe District of Panzhihua City, southwest China's Sichuan Province, August 31, 2008. Twenty-two people were dead after an earthquake measuring 6.1 on the Richter scale hit Panzhihua City on Saturday. As of 9 p.m., 17 people were reported dead and about 100 others injured in Sichuan, and five people dead and 35 others injured in neighboring Yunnan Province. The quake struck the juncture of Renhe District of Panzhihua and Huili County of the Yi Autonomous Prefecture of Liangshan at 4:30 p.m. (Beijing time). (Xinhua/Chen Haining)

- Flooding in India... massive flooding, click here to read the full updated story from AFP

You might have noticed how earlier in the week India was dominating headlines in Western press, then suddenly a tropical storm goes nasty and New Orleans takes over... leaving the quake hit region (2nd time this year now), little sympathy from the West.

I think CNN, MSNBC and Fox News are having a panic attack right about now (that is if they where living beings) because its just too darn hard to cover Obama vs McCain and all these juicy rating grabbing disasters...

Overall-- things look gloomy. More updates to come concerning Commodities, South-South Cooperation and Colombia's Oil Industry