54
Peru’s fundamentals and economic perspectives Julio Velarde Governor Central Bank of Peru March 2014
Peru’s fundamentals and economic perspectives
Julio Velarde
Governor
Central Bank of Peru
March 2014
1. Peru’s growth is based on strong fundamentals
2. Recent economic developments and prospects
3. Monetary Policy Framework
4. Closing remarks
Agenda
2
Peru’s GDP growth is expected to be among the highest in the region in 2014
3
Peru: 6,0%
World GDP : 2014(percentage change)
Source: WEO and BCRP.
GDP growth was the highest among the region’s leading economies
4
Source: WEO – IMF.
* Gross domestic product at constant prices
6,2
5.2
4.5 4.44.1
3.4 3.2
2.3
Peru Argentina Colombia Chile Uruguay Brazil Venezuela Mexico
GDP in Latin America : 2002-2013 *(average percentage change)
Higher capital accumulation contributes to sustainable output growth
5
* Forecast
Source: WEO – IMF
18.6 19.2
23.7 24.0 24.225.7 26.8 27.1 27.6
30,0
34.6
Total Investment: 2013 *(percentage of GDP)
11.8 12.5 12.9 13.315.9
20.526.8
32.3 34.5
43.0
51.2
63.4
74.5
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Foreign Direct Investment(Stock in billions of US$)
Foreign direct investment increased by 6 times in the last decade
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Annualgrowthrate
7,0 6,0 2,6 3,4 19,4 28,9 30,9 20,6 6,7 24,5 19,2 23,9 17,4
6
In 2012, FDI flows increased by 49 percent, whereas they increased27 percent in the first half of 2013
Countries 2012 I Sem. 2013Growth rate
2012 I Sem. 2013
Peru 12, 2 6,9 49% 27%
Chile 30,2 10,4 32% -26%
Argentina 12,6 5,2 27% -32%
Paraguay 0,3 n.a. 27% -
Bolivia 1,1 n.a. 23% -
Colombia 15,8 8,3 18% 5%
Uruguay 2,7 1,6 8% 8%
Brazil 65,3 39,0 -2% -10%
Ecuador 0,4 n.a. -13% -
Venezuela 3,2 2,7 -15% 44%
Mexico 15,5 23,8 -34% 158%
Foreign Direct Investment Flows by Country
(in billions of US$)
Source: ECLAC7
Higher FDI flows mainly in the mining and hydrocarbon sectors
Foreign Direct Investment Flows by Sector(millions of US$)
Sector 2001 2013 Number of
times
Hydrocarbon 22 1 254 57
Mining 134 4 981 37
Financial sector 162 851 5
Non-financial
services323 2 548
8
Manufacturing 184 122 1
Energy and others 320 417 1
TOTAL 1 144 10 172 9
8
Continuous increase in employment rates, even during the2008-2009 financial crisis
9
7.2
8.3 8.3
1.3
4.2
5.4
4.0
2.8
2006 2007 2008 2009 2010 2011 2012 2013
Urban Employment1/
( Percentage change)
1/ Enterprises with 10 or more workers Source: Ministry of Labor and Promotion of Employment
Permanent increase in payroll due to sustained economic growth
10
5.5
7.77.1
3.6
10.7
6.7
5.5
2007 2008 2009 2010 2011 2012 2013
Payroll – Lima(Real % change)
Source: INEI
After hyper-inflation in 1990, monetary policy was reformed and inflation was reduced
Inflation Rate 1970 – 2013 (End of period)
0.1
1
10
100
1000
10000
19
71
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
Inflationtarget
7 649,5%
11
Source: WEO – IMF
* Inflation, consumer price index, end of period
** Excludes food and energy
20.8
9.37.9
6.04.6 4.1
2.9 2.3 2.0
Venezuela Argentina Uruguay Brazil Colombia Mexico Chile Peru Peru**
Inflation in Latin America: 2001-2013 *(%)
Average inflation of 2,3 percent in the last 13 years
12
49 4945
3936 35
3128 26
2004 2005 2006 2007 2008 2009 2010 2011 2012
Peru: Poverty Rate(as percentage of population)
Poverty is at its lowest level of the last 25 years
Source: ECLACa/ Percentage change 2007-2011, b/ Percentage change 2006-2010, c/ Percentage change 2006-2011, d/ Percentage change 2005-2010
1-2
-3-4
-5-6
-7-8
-10-11-11
-13-16
-21
-24 -19 -14 -9 -4 1
Mexico d/Costa RicaChile c/Honduras b/Dominican RepublicPanamaParaguayVenezuelaLatin AmericaColombiaUruguay a/EcuadorBrazilPeru
Latin America: Poverty reduction 2005-2011(in percentage points)
13
Significantly lower financial dollarization, despite still being an importantsource of risk for the financial sector
7472
6967
61
5554
49
4543
45 45
41 40
25
35
45
55
65
75
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Jan. 2014
Credit to the private sector: Dollarization ratio (%)
14
Preventive accumulation of international reserves is fundamental to reduce the risks of financial dollarization
15
8,403 8,179 8,613 9,598 10,19412,631
14,09717,275
27,688
31,19633,135
44,105
48,816
63,99165,663
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Peru: Net foreign exchange reserves(in millions of US$)
High reserve adequacy ratio compared to other emergingeconomies …
Reserves relative to other emerging economies 1/
16
South Africa
Colombia
Mexico
ChileIndonesia
Brazil
Poland
Romania
Russia
Hungary
Peru
50
100
150
200
250
300
350
400
450
500
550
0 10 20 30 40
in p
erc
en
to
f ad
eq
uac
ym
etri
c
in percent of GDP
1/ The composite adequacy metric Is a weighted sum of exports, short-term debt, portfolio liabilities, and broad money (FMI, 2011).
… and its public debt stock is among the lowest in the region
17
* Forecast
68.3
57.0
50.447.1
44.041.2
35.732.3
26.2
19.2
12.9
Brazil Malaysia Vietnam Thailand Mexico Philippines Korea Colombia Indonesia Peru Chile
Gross public debt: 2013* (% GDP)
Net public debt is expected to fall to 2,1% in 2015
46.9
32.3
19.7 19.217.3 16.4
38.5
23.9
4.8 3.5 2.3 2.1
2003 2006 2012 2013 2014* 2015*
Gross Debt
Net Debt
NON FINANCIAL PUBLIC SECTOR DEBT STOCK: GROSS AND NET DEBT(percentage of GDP)
* Forecast
18
1. Peru’s growth is based on strong fundamentals
2. Recent economic developments and prospects
3. Monetary Policy Framework
4. Closing remarks
Agenda
19
Improvement in the majority of indicators of macroeconomic
expectations
MACROECONOMIC EXPECTATIONS SURVEY RESULTS
November DecemberJanuary
2014
1. CURRENT BUSINESS SITUATION 60 61 62
2. SALES 56 57 54
3. INVENTORIES (COMPARED TO PREVIOUS MONTH) 55 53 50
4. SALE ORDERS (COMPARED TO PREVIOUS MONTH) 56 55 50
5. FINANCIAL SITUATION 61 62 65
6. ACCESS TO CREDIT 65 65 68
7. 3 MONTH FINAL PRODUCT DEMAND EXPECTATIONS 59 61 62
8. 3 MONTH NEW HIRINGS EXPECTATIONS 52 53 54
9. 3 MONTH MACROECONOMIC EXPECTATIONS 54 59 59
10. 3 MONTH INDUSTRY EXPECTATIONS 58 59 61
20
Consumer Confidence Index showed an optimistic level of 57
points in January.
+
=
January 2013 (Index value: 57)Percentage
%
Better 27
Unchanged 59
Worse 14
-
Better
Worse
21
Unchanged 60
57
0
10
20
30
40
50
60
70
80
90
100
E.1
0 M M
J S N
E.1
1 M M
J S N
E.1
2 M M
J S N
E.1
3 M M
J S N
E.1
4
Consumer Confidence Index
Worse Unchange Better Index
-
=
+
Fuente: Apoyo Consultoría.
Investors Confidence Index increased to 64 points in
January
Source: Apoyo Consultoría
+
=
January 2013(Index value: 64)
Percentage%
Increase investment 29
Remain constant 69
Reduce 2
-
Increase
Remainconstant
Reduce
22
Investor’s Confidence Index
ÍNDICE DE INVERSIÓN A 6 MESES
Respecto de proyectos de inversión: ¿Qué medidas realizará su empresa
en los próximos seis meses?
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
J.12 J A S D M.13 M J J A S N D E.14
Reducir Mantener Acelerar Índice
Peru’s GDP is expected to grow 6,0 percent in 2014
23
Source: Consensus Forecast, February 2014 and BCRP
6.0
5.3
5.0
4.6
4.1
3.9
3.6
3.4
2.0
0.2
-1.0
Peru
Bolivia
Paraguay
Colombia
Ecuador
Chile
Uruguay
Mexico
Brazil
Argentina
Venezuela
GDP growth rate 2014(annual percentage change)
GDP growth in Peru is expected to be among the highest in the world in the next 10 years
24
Source: Consensus Forecasts (Oct. 2013).
7,0
6,7
5,5 5,45,3 5,2
4,7 4,74,5 4,4 4,4 4,3
3,9 3,9 3,8 3,7 3,7 3,6 3,6 3,5
India China Indonesia Peru Philippines Malaysia Turkey Thailand Chile Lithuania Colombia Singapore Latvia Ukraine Mexico Estonia Poland Taiwan Hong Kong
South Korea
GDP Growth 2014-2023(Annual average, %)
The recovery of the primary sectors will be associated with the start-up of investment projects …
25
GDP Growth(Real % change)
2008-2013 2014 – 2016*
Agriculture and livestock
4,4 3,7
Fishing 1,5 4,4
Mining and hydrocarbons
2,0 11,9
Manufacturing 3,9 5,0
Electricity and water 5,8 6,0
Construction 11,0 7,6
Commerce 7,2 6,1
Other services 6,8 6,4
GDP 6,2 6,3
*Forecast
… consistent with the behavior of private investment
26
GDP Growth(Real % change)
2008-2013 2014 – 2016*
Private Consumption 5,8 5,3
Private fixedinvestment
9,3 6,7
Public expenditure 10,5 8,8
Exports 3,5 10,3
Imports 7,6 7,0
GDP 6,2 6,3
*Forecast
2014 - 2015
September
IR
December
IR%
Mining 13 880 14 110 49
Hydrocarbons 3 797 4 036 14
Electricity 2 813 3 293 12
Industrial 1 671 1 991 7
Infraestructure 1 133 1 133 4
Other Sectors 3 431 3 952 14
Total 26 725 28 515 100
PRIVATE INVESTMENT PROJECTS ANNOUNCEMENTS(in millions of US$)
Source: Specialized Media and Newspapers
US$ 28,5 billion of private investment announcements for thenext two years
Stock of Announced Investment Projects
(in millions of US$)
September
IR
December
IR
Total 67 383 69 684
27
Source: Specialized Media and Newspapers
1,1981,281
1,511
1,996
2,577
2012 2013 2014* 2015* 2016*
COPPER PRODUCTION(in thousands of metric tons)
*Forecast
Copper production would double in 2015
28
Investment in the mining sector increased 14,3% in 2013
29
INVESTMENT IN THE MINING SECTOR: JANUARY - NOVEMBER
(in millions of US$)
2012 2013 Var. %
Las Bambas XSTRATA LAS BAMBAS S.A. 880 1 590 81
Cerro Verde SOCIEDAD MINERA CERRO VERDE S.A.A. 516 926 80
Toromocho MINERA CHINALCO PERÚ S.A. 949 919 -3
Antapaccay COMPAÑIA MINERA ANTAPACCAY S.A. 348 537 54
Antamina COMPAÑIA MINERA ANTAMINA S.A. 575 462 -20
Constancia HUDBAY PERU S.A.C. 5 429 8 031
Toquepala / Cuajone SOUTHERN PERU COPPER CORPORATION SUCURSAL DEL PERU113 330 192
Conga MINERA YANACOCHA S.R.L. 984 285 -71
La Arena LA ARENA S.A. 229 182 -20
Planta de Óxidos EMPRESA ADMINISTRADORA CERRO S.A.C. 43 175 302
Pindo y Parcoy CONSORCIO MINERO HORIZONTE S.A. 130 155 19
Colquijirca SOCIEDAD MINERA EL BROCAL S.A.A. 78 151 93
Quellaveco ANGLO AMERICAN QUELLAVECO S.A. 19 149 697
Lagunas Norte MINERA BARRICK MISQUICHILCA S.A. 159 144 -10
Río Tinto RIO TINTO MINERA PERU LIMITADA SAC 53 120 127
Others 2 383 1 979 -17
TOTAL 7 466 8 532 14
Source : MINEM
PROJECT FIRM
JANUARY - NOVEMBER
Trade balance would be positive due to newmining projects starting in 2014
30
-0.4
0.0
2.2
5.7
2013 2014* 2015* 2016*
Trade Balance(Billion US$)
2013 2014* 2015* 2016*
% Change Volume
Exports -2,1 8,0 12,9 14,6
Imports 5,5 4,4 7,7 7,2
% Change Price
Exports -7,3 -5,1 0,0 0,9
Imports -2,7 -2,8 0,2 1,6
* Forecast
Current account deficit financed by long-term capital inflows
1/ Includes net foreign investments, portfolio investment and private sector’s long-term disbursement.* Forecast
31
7.9
11.3
3.8
6.16.5
5.1
7.2
4.7
1.9 2.2
3.0
2006 2007 2008 2009 2010 2011 2012 2013 2014* 2015* 2016*
CURRENT ACCOUNT PLUS LONG - TERM EXTERNAL CAPITAL INFLOWS OF PRIVATE SECTOR 1/ : 2006-2016
(% GDP)
Indicators of Financial Vulnerability
32
Unit 2003 2008 2013
1 Dollarization of credit to the private sector % 69 49 41
2 Dollarization of public debt % 85 62 44
3 NIR/ST liabilities + amortization on external debt times 7,4 3,7 7,9
4 ST banks´foreign liabilities/banking credit % 4,9 5,3 2,7
5 ST banks´liabilities (deposits + credit lines)/RRs times 3,1 2,5 1,7
6 Non-residents holdings of local public debt/Public sector deposits % 0,0 11,9 21,5
7 Average maturity of the public debt years 7,6 11,2 12,5
8 NIR/GDP % 16,6 24,5 31,6
9 Domestic Currency Deposits/CB FX Position % 0,6 0,6 0,9
Indicators of Financial Vulnerability
0
0.5
1
1.5
2
2.5
Ko
rea
Ind
on
esia
Ru
ssia
Thai
lan
d
Mex
ico
Arg
enti
na
Bra
zil
Turk
ey
Ph
ilip
pin
es
Ven
ezu
ela
Ukr
ain
e
Po
lan
d
Ro
man
ia
Cze
ch R
epu
blic
Hu
nga
ry
Sou
th A
fric
a
Isra
el
Ch
ile
Kas
akh
stan
Egyp
t
Ind
ia
Taiw
an
Co
lom
bia
Mal
aysi
a
Ch
ina
Per
u
IMF: STXD/Reserves (1997) DB: STXD/Reserves (2013)
Sho
rt t
erm
exte
rnal
deb
t /
fo
reig
n r
ese
rves
EM stress metric: short - term debt / reserves
Source: IMF, Haver Analytics, Deutsche Bank
33
Peru has a low level of external vulnerability compared tothe region
0.0
20.0
40.0
60.0
80.0
100.0
120.0
Chile Uruguay Argentina Mexico Colombia Peru Brazil
2013F
2014F
Moody's External Vulnerability Indicator
Source: Moody’s, November 2013.The indicator is calculated as (Short-Term External Debt + Currently Maturing Long-Term External Debt + Total Nonresident Deposits Over One Year)/Official Foreign Exchange Reserves
34
BrazilChile
Colombia
Mexico
Argentina
PeruHungary
Poland
Russia
Turkey
China
India
Israel
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
-8.5 -7.5 -6.5 -5.5 -4.5 -3.5 -2.5 -1.5 -0.5 0.5
Forex Reserves / GDP
Fiscal Balance
Economic Indicators for Emerging Countries
Peru is among the least vulnerable emerging economies with a high level of foreign exchange reserves and fiscal surplus
35
BrazilChile
Colombia
Mexico
Argentina
PeruHungary
Poland
Russia
Turkey
China
India
Israel
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
-8,5 -7,5 -6,5 -5,5 -4,5 -3,5 -2,5 -1,5 -0,5 0,5
Forex Reserves/GDP
Fiscal Balance
Economic Indicators for Emerging Countries
HIgher than average
Higher than average
Lower than average
Lower than average
BrazilChile
Colombia
Mexico
Argentina
PeruHungary
Poland
Russia
Turkey
China
India
Israel
0,0
5,0
10,0
15,0
20,0
25,0
30,0
35,0
40,0
-8,5 -7,5 -6,5 -5,5 -4,5 -3,5 -2,5 -1,5 -0,5 0,5
Forex Reserves/GDP
Fiscal Balance
Economic Indicators for Emerging Countries
HIgher than average
Higher than average
Lower than average
Lower than average
2.3
2.9
2.4
-1.3
-0.2
2.0 2.1
0.8
0.1 0.0
2006 2007 2008 2009 2010 2011 2012 2013* 2014* 2015*
The fiscal balance is expected to be near zero in 2014 and 2015
36
* Forecast
FISCAL SURPLUS(as percentage of GDP)
Peru’s fiscal surplus is among the highest in the region
37
1.81.3
0.6
-1.1 -1.2 -1.3-1.7
-2.6
-3.5 -3.8-4.3
Korea Peru Chile Thailand Indonesia Philippines Colombia Brazil Vietnam Mexico Malaysia
Overall balance: average 2010 - 2012(% GDP)
1.40.8
-0.7 -0.8 -1.0
-2.2-2.7 -3.0
-3.8 -4.0-4.3
Korea Peru Chile Philippines Colombia Indonesia Thailand Brazil Mexico Vietnam Malaysia
Overall balance: 2013*(% GDP)
* Forecast
1. Peru’s growth is based on strong fundamentals
2. Recent economic developments and prospects
3. Monetary Policy Framework
4. Closing remarks
Agenda
38
4.00
4.84
0.50
1.50
2.50
3.50
4.50
5.50
6.50
7.50
8.50
jun/0
8
oct/0
8
ma
r/09
ag
o/0
9
en
e/1
0
jun/1
0
no
v/1
0
ma
r/11
ag
o/1
1
en
e/1
2
jun/1
2
oct/1
2
ma
r/13
ag
o/1
3
en
e/1
4
% Central Bank policy interest rate vs 90 day corporate interest rate(In percentage points)
Policy interest rate 90 day corporate interest rate
The Central Bank of Peru lowered its monetary policy interest
rate to 4,0 percent in November
39
Output growth is expected to remain close to its potential
level
40
Output gap
-3
-2
-1
0
1
2
3
4
5
6
7
2008 2009 2010 2011 2012 2013 2014 2015
Output gap
Policy interest rate
Feb. 2014: 4,0 %
Macroprudential policies to keep sustainable credit growth
and to support the dedollarization process
41
25,0
30,0 30,0 30,0
25,0
20,0
16,0 16,015,0
14,013,0 12,5
05
10
15
20
25
30
35
Ap
r 1
2
May
12
Jun
12
jul-
12
Au
g 1
2
Sep
12
Oct
12
No
v 1
2
De
c 1
2
Jan
13
Feb
13
Mar
13
Ap
r 1
3
May
13
Jun
13
Jul 1
3
Au
g 1
3
Sep
13
Oct
13
No
v 1
3
De
c 1
3
Jan
14
Feb
14
Mar
14
Domestic Currency Reserve Ratio(As percentage of total obligations subject to legal requirements)
Average required DC Marginal DC%
Jun.13:
Establishment of maximum average rate of reserve
requirement of 20%
Liquidity provided:
S/. 480 mill.
Aug.13:
Reduce maximum average rate of reserve
requirement to19%
Liquidity provided:
S/. 567 mill.
Sep.13:
Reduce maximum
average rate of reserve
requirement to
17%.
Liquidity provided: S/. 2 026 mill.
Oct.13:
Reduce maximum
average rate of reserve
requirement to16%.
Liquidity provided: S/. 1 064 mill.
Dec.13:Reduce maximum average rate of reserve requirement to 15%.
Liquidity provided:S/. 1 086 mill.
Feb.14:
Reduce maximum
average rate of reserve requirement
to 13%.
Liquidity provided: S/. 1 086 mill.
Jan.14:
Reduce maximum average rate of reserve requirement
to 14%.
Liquidity provided: S/. 1 091 mill.
Mar.14:
Reduce maximum average rate of reserve requirement
to 12,5%.
Higher preference for credit in domestic currency since the
second quarter of 2013
42
CREDIT TO THE PRIVATE SECTOR(yoy percentage change)
23,4
2,1
13,7
feb12 mar12 abr12 may12 jun12 jul12 ago12 sep12 oct12 nov12 dic12 ene13 feb13 mar13 abr13 may13 jun13 jul13 ago13 sep13 oct13 nov13 dic13 ene14
Soles Dólares Total
feb-13 mar-13 apr-13 may-13 jun-13 jul-13 aug-13 sep-13 oct-13 nov-13 dec-13 jan-14
Stock in millions of S/. 176 624 178 334 179 576 181 082 184 279 186 643 189 806 191 960 194 364 198 012 199 167 199 740
Soles 97 020 98 768 100 503 101 866 104 184 106 157 108 699 111 374 113 501 116 592 117 882 118 706
Dollars (millions of US$) 28 430 28 417 28 240 28 292 28 605 28 745 28 967 28 780 28 879 29 079 29 030 28 941
Monthly flows (millions of S/.) 1 026 1 710 1 242 1 506 3 196 2 365 3 163 2 154 2 404 3 648 1 155 573
Soles 807 1 748 1 735 1 363 2 318 1 973 2 542 2 675 2 127 3 091 1 290 824
Dollars (millions of US$) 79 -13 -176 51 314 140 221 -186 99 199 -48 -90
Annual percentage change 14,8 14,1 13,6 13,1 12,8 12,7 13,3 12,8 13,4 14,2 13,1 13,7
Soles 15,4 15,9 16,8 17,3 17,6 18,2 19,2 20,3 21,6 23,1 22,4 23,4
Dollars 14,0 11,8 9,8 8,0 7,1 6,2 6,1 3,8 3,5 3,5 2,0 2,1
feb-13 mar-13 apr-13 may-13 jun-13 jul-13 aug-13 sep-13 oct-13 nov-13 dec-13 jan-14
Stock in millions of S/. 176 624 178 334 179 576 181 082 184 279 186 643 189 806 191 960 194 364 198 012 199 167 199 740
Soles 97 020 98 768 100 503 101 866 104 184 106 157 108 699 111 374 113 501 116 592 117 882 118 706
Dollars (millions of US$) 28 430 28 417 28 240 28 292 28 605 28 745 28 967 28 780 28 879 29 079 29 030 28 941
Monthly flows (millions of S/.) 1 026 1 710 1 242 1 506 3 196 2 365 3 163 2 154 2 404 3 648 1 155 573
Soles 807 1 748 1 735 1 363 2 318 1 973 2 542 2 675 2 127 3 091 1 290 824
Dollars (millions of US$) 79 -13 -176 51 314 140 221 -186 99 199 -48 -90
Annual percentage change 14,8 14,1 13,6 13,1 12,8 12,7 13,3 12,8 13,4 14,2 13,1 13,7
Soles 15,4 15,9 16,8 17,3 17,6 18,2 19,2 20,3 21,6 23,1 22,4 23,4
Dollars 14,0 11,8 9,8 8,0 7,1 6,2 6,1 3,8 3,5 3,5 2,0 2,1
Mortgages and credit to households reduced their pace of
growth, whereas credit to firms keeps its dynamism
43
Credit to the Private Sector
(Annual growth rates)
Dec.12
Dec.13
Jan.14
Credit to Firms 13,3 13,0 14,0
Credit to Households 19,4 13,4 13,3
Consumption 15,3 11,4 11,6
Car Loans 25,2 14,5 12,9
Credit cards 13,4 8,2 8,8
Others 15,6 12,9 13,0
Mortgage 25,7 16,2 15,6
TOTAL 15,1 13,1 13,7
Housing prices increased by 14 percent in 2013
44
200
400
600
800
1000
1200
1400
1600
1800
2000
IV 9
8
IV 9
9
IV 0
0
IV 0
1
IV 0
2
IV 0
3
IV 0
4
IV 0
5
IV 0
6
IV 0
7
IV 0
8
IV 0
9
IV 1
0
IV 1
1
IV 1
2
IV 1
3
Median sale price of apartments by m2La Molina, Miraflores, San Borja, San Isidro and Surco
Average price1998 I - 2013 IV
US$ 817US$ 670
US$ 1800
2010 - IVT 2011 - IVT 2012 - IVT 2013 - IVT
La Molina 16,1 15,8 11,6 16,4
Miraflores 13,3 15,7 15,0 15,9
San Borja 14,7 17,2 18,2 16,7
San Isidro 13,8 16,7 18,4 17,7
Surco 14,7 16,3 15,0 16,6
Average 14,1 15,2 15,8 16,1
PER: SALE PRICE / ANNUAL RENT IN US$ by m2 1/
1/ These ratios were calculated using the median of sale prices in each district.
Since May 2013, the Central Bank intervened to reduce
volatility in the foreign exchange market
Millionsof US$
Net Purchases
2010 8 963
2011 3 537
2012 13 179
2013 5
Jan – Apr2013
5 210
May – Dec2013
-5 205
2014* -1 470
2010 – 2014 24 214
45
-600
-450
-300
-150
0
150
300
450
600
2.515
2.556
2.597
2.638
2.679
2.719
2.760
2.801
2.842
Mil
lio
ns o
f U
S$
So
les
pe
r U
S$
Exchange rate and foreign exchange intervention
Net dollar purchases Exchange rate
* As of February 21.
Long term interest rates are consistent with recent developments
in the world economy and macroeconomic fundamentals
46
Source: Bloomberg
10-year Treasury bond yield
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
14.0
jul/
10
ago
/10
sep
/10
oct
/10
no
v/1
0
dic
/10
ene/
11
feb
/11
mar
/11
abr/
11
may
/11
jun
/11
jul/
11
ago
/11
sep
/11
oct
/11
no
v/1
1
dic
/11
ene/
12
feb
/12
mar
/12
abr/
12
may
/12
jun
/12
jul/
12
ago
/12
sep
/12
oct
/12
no
v/1
2
dic
/12
ene/
13
feb
/13
mar
/13
abr/
13
may
/13
jun
/13
jul/
13
ago
/13
sep
/13
oct
/13
no
v/1
3
dic
/13
ene/
14
feb
/14
Yield (%)
LATAM 10-year Treasury Bond Yield
Perú Colombia Mexico Brasil
Peru
Colombia
Mexico
Brazil
Dec 12 Apr 13 Dec 13 Feb 24 2014Pol icy
Rate
Brazi l 2023 9,57 9,70 13,21 12,79 10,50
Colombia 2024 5,73 4,91 6,79 7,29 3,25
Mexico 2023 5,55 4,59 6,54 6,38 3,50
Peru 2023 4,10 4,11 5,60 6,67 4,00
Country
Tasa (%)
Non-resident Treasury bond holdings
47
17,258
19,691
18,021
17,602
16,870
15,000
15,500
16,000
16,500
17,000
17,500
18,000
18,500
19,000
19,500
20,000
Dec 12 Apr 13 Dec 13 Jan 14 Feb 14*
Non-resident Treasury bond holdings(in millions of S/.)
* As of February 24
Prudential accumulation of foreign exchange reserves in order tolower exposure to financial dollarization risks
48
32
17
1513
12
Peru Brazil Chile Mexico Colombia
International Reserves*(as percentage of GDP)
* Information as of December 2013.Source: Central banks and IMF – World Economic Outlook 2013.
Inflation rate fell to 2,86 percent in December
49
-2
-1
0
1
2
3
4
5
6
7
dec-02 dec-03 dec-04 dec-05 dec-06 dec-07 dec-08 dec-09 dec-10 dec-11 dec-12 dec-13
INFLATION AND INFLATION EXPECTATIONS(YoY % Change)
Maximum
Minimum
Inflation
target
Inflation
Inflation
expectations
YoY % Chg. December 2013:Inflation: 2,86%Inflation expectations (Nov): 2,7%
Inflation expectations are below 3 percent for 2014 and 2015
50
Sep. 13 IR* Dec. 13 IR* Jan. 14
Financial System
2014 2,5 2,6 2,6
2015 2,5 2,6 2,5
Economic Analysts
2014 2,5 2,6 2,7
2015 2,4 2,5 2,6
Non-financial Sector
2014 3,0 3,0 2,9
2015 3,0 3,0 3,0
* IR: Inflation Report
Expectations from
(in percentage)
END OF PERIOD INFLATION RATE
MACROECONOMIC EXPECTATIONS SURVEY
Inflation forecast, 2014 - 2015(annual percentage change)
Inflation is expected to stay in the inflation target range throughout
2014-2015.
51
-1
0
1
2
3
4
5
-1
0
1
2
3
4
5
2010 2011 2012 2013 2014 2015
1. Peru’s growth is based on strong fundamentals
2. Recent economic developments and prospects
3. Monetary Policy Framework
4. Closing remarks
Agenda
52
Closing Remarks
End of cyclical desceleration and beginning of economic recoveryin the global economy.
Despite uncertainty about the speed of the tapering process, thisoccurs amidst a gradual recovery of the American economy.
Peru’s good economic position among emerging economies due tostrong macroeconomic fundamentals and fast reaction ability.
Opportunity to move forward through an agenda of structuralreforms to boost potential output growth.
53
Peru’s fundamentals and economic perspectives
Julio Velarde
Governor
Central Bank of Peru
March 2014
