11
Perú Perú Macroeconomic Performance and Macroeconomic Performance and
PerspectivesPerspectives
Luis Carranza UgarteLuis Carranza UgarteMinistry of Economy and FinanceMinistry of Economy and Finance
April, 2009April, 2009
Ministerio de Economía y Finanzas Ministerio de Economía y Finanzas
Global Economic EnvironmentGlobal Economic Environment
3
Source: Bureau of Labor Statistics
The international scenario worsens…The international scenario worsens…
Source: Conference Board
8
10
12
14
16
18
20
22
mar
-00
mar
-01
mar
-02
mar
-03
mar
-04
mar
-05
mar
-06
mar
-07
mar
-08
mar
-09
Light-Weight Vehicle SalesLight-Weight Vehicle Sales (Millions)(Millions)
Source: US Department of Commerce
50
60
70
80
90
100
110
mar
-00
mar
-01
mar
-02
mar
-03
mar
-04
mar
-05
mar
-06
mar
-07
mar
-08
mar
-09
Consumer Confidence Index Consumer Confidence Index University of MichiganUniversity of Michigan(January 1966 = 100)
-700
-500
-300
-100
100
300
mar-
05
jun-
05
sep-
05
dic
-05
mar-
06
jun-
06
sep-
06
dic
-06
mar-
07
jun-
07
sep-
07
dic
-07
mar-
08
jun-
08
sep-
08
dic
-08
mar-
09
Non-Farm PayrollsNon-Farm Payrolls(Thousands)
90
110
130
150
170
190
210
230
ene-
00
ene-
01
ene-
02
ene-
03
ene-
04
ene-
05
ene-
06
ene-
07
ene-
08
ene-
09
Case-Shiller IndexCase-Shiller Index
Spurce: Standard and Poors
4
Standard & Poors 500 Index(Monthly Percent Change)
In the middle of a fast and pronounced stock-exchange In the middle of a fast and pronounced stock-exchange fall….fall….
meses
1929-1932
2007-2008
1972-74
2000-2002
1980-1982
Recesión 73-75
Recesión 2001
Recesión 1981
Crack 1929
-90
-70
-50
-30
-10
10
1 4 7 10 13 16 19 22 25 28 31 34meses
1929-1932
2007-2008
1972-74
2000-2002
1980-1982
Recesión 73-75
Recesión 2001
Recesión 1981
Crack 19291929-1932
2007-2008
1972-74
2000-2002
1980-1982
Recesión 73-75
Recesión 2001
Recesión 1981
Crack 1929
-90
-70
-50
-30
-10
10
1 4 7 10 13 16 19 22 25 28 31 34-90
-70
-50
-30
-10
10
1 4 7 10 13 16 19 22 25 28 31 34Source: Bloomberg
Months
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09
Fuente: Bloomberg
15
25
35
45
55
65
75
85
Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09
Fuente: Bloomberg
5
With uncertainty in markets…With uncertainty in markets…
Volatility Index (VIX)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09
Fuente: Bloomberg
Baltic Dry Index - BDI (BALDRY) TED Spread
Impact of Financial Crisis in PeruImpact of Financial Crisis in Peru
Through lower commodity pricesThrough lower commodity prices
Source: MEF
2007 2008 2009 2010
Terms of Trade 3.6 -9.8 -10.0 -1.0
Export Price Index 14.0 5.9 -25.0 4.0
International Prices
Gold 697.4 872.7 857.0 866.6
Copper 322.9 315.5 143.3 147.2
Zinc 147.1 85.0 54.4 57.5
Import Price Index 10.0 16.5 -15.0 5.0
International Prices
Oil 72.3 99.6 50.1 60.3
Wheat 231.2 293.1 225.5 230.6
Impact of global crisis on the Peruvian economyImpact of global crisis on the Peruvian economy
Financial Impact: stable exchange rateFinancial Impact: stable exchange rate
Currency Devaluation in Latin America(Annual percentage change of daily data)
Source: Bloomberg
Chile 34.2Brasil 31.1
México 35.5
Perú 12.1
Argentina 16.3
Colombia 28.5
-30
-20
-10
0
10
20
30
40
50
M-0
8
A-0
8
M-0
8
J-08
J-08
A-0
8
S-0
8
O-0
8
N-0
8
D-0
8
E-0
9
F-0
9
M-0
9
• Sound Stability of the Exchange Rate
Financial Impact: Country Risk performing wellFinancial Impact: Country Risk performing well
100
200
300
400
500
600
700
800
M-0
8
J-0
8
J-0
8
A-0
8
S-0
8
O-0
8
N-0
8
D-0
8
E-0
9
F-0
9
M-0
9
EMBI spread in Latin America(Spread above the US Treasury, in basis points)
Panamá 475
Brasil 428
México 369
Perú 399
Colombia 475
Source: Bloomberg
Source: LatinFocus
Regional Growth(Annual percentage change, in real terms)
Regional Inflation (Annual percentage change of CPI)
Consensus: Peru outperforms in the real sectorConsensus: Peru outperforms in the real sector
-1.7
-0.5
1.2
0.7
1.5
1.1
1.0
1.4
3.4
4.4
2.3
2.1
0.6
2.1
2.7
3.4
3.5
3.5
3.4
5.0
-3.0 -1.0 1.0 3.0 5.0 7.0
Mexico
Argentina
Venezuela
Ecuador
Colombia
Chile
Brazil
Paraguay
Bolivia
Peru
2010
2009 2.8
3.2
4.1
3.7
4.5
4.3
9.0
9.1
34.3
3.0
2.9
2.8
4.0
4.7
4.9
6.6
9.1
10.1
36.1
5.6
0 10 20 30 40
Peru
Chile
Ecuador
Mexico
Brazil
Colombia
Paraguay
Argentina
Bolivia
Venezuela
2010
2009
Impact on Domestic DemandImpact on Domestic Demand
Private Consumption
-113579
111315
4T
03
2T
04
4T
04
2T
05
4T
05
2T
06
4T
06
2T
07
4T
07
2T
08
4T
08
Public Consumption
-113579
111315
4T
03
2T
04
4T
04
2T
05
4T
05
2T
06
4T
06
2T
07
4T
07
2T
08
4T
08
Private Investment
0
14
28
42
56
70
4T
03
2T
04
4T
04
2T
05
4T
05
2T
06
4T
06
2T
07
4T
07
2T
08
4T
08
Public Investment
0
14
28
42
56
70
4T
03
2T
04
4T
04
2T
05
4T
05
2T
06
4T
06
2T
07
4T
07
2T
08
4T
08
Exports
0
7
14
21
28
35
4T
03
2T
04
4T
04
2T
05
4T
05
2T
06
4T
06
2T
07
4T
07
2T
08
4T
08
Imports
0
7
14
21
28
35
4T
03
2T
04
4T
04
2T
05
4T
05
2T
06
4T
06
2T
07
4T
07
2T
08
4T
08
Overall Demand(Annual percentage change, in real terms)
Source: BCRP
Impact on laborImpact on labor
Employment in Lima(Average annual percentage change)
-4
0
4
8
12
16
Lim
a
Ext
ract
ion
Act
ivit
ies
Ind
ust
ry
Co
mer
ce
Tra
nsp
,S
tora
ge
&C
om
m.
Ser
vice
s
Last year
Last quarter
Dec-08
-4
0
4
8
12
16
Res
tU
rban
Ext
ract
ion
Act
ivit
ies
Ind
ust
ry
Co
mer
ce
Tra
nsp
,S
tora
ge
&C
om
m.
Ser
vice
s
Last yearLast quarterDec-08
Employment in Rest of Urban Cities
(Average annual percentage change)
Source: BCRP
Inflation is starting to fallInflation is starting to fall
CPI: Food Products(Annual percentage change)
PPI Agricultural Products(Annual percentage change)
Source: INEI
ImportedDomestic
-10
-5
0
5
10
15
20
F-0
5
A-0
5
F-0
6
A-0
6
F-0
7
A-0
7
F-0
8
A-0
8
F-0
9
-4
0
4
8
12
16
F-0
5
A-0
5
F-0
6
A-0
6
F-0
7
A-0
7
F-0
8
A-0
8
F-0
9
ImportedDomestic
Peru’s Economic StrengthsPeru’s Economic Strengths
Devaluation since 01/09/08
Reserves / GDP 2008
Because of our macroeconomic strengthBecause of our macroeconomic strength
6.9
15.420.7 22.8
36.639.2
0
9
18
27
36
45
N. S
ol
(Per
)
Pes
o(C
hi)
Pes
o(A
rg)
Pes
o(C
ol)
Pes
o(M
ex)
Rea
l(B
ra)
0
5
10
15
20
25
Pe
rú
Ch
ile
Arg
en
tin
a
Ve
ne
zue
la
Bra
sil
Co
lom
bia
Ec
ua
do
r
Mé
xic
o
Source: BCRP
Outstanding performance of the capital expenditureOutstanding performance of the capital expenditureNon Financial Expenditures of Central Government
(Annual percentage change, in real terms)
1Q08 1Q09 Var. %
Current Expenditure 9,088 10,593 10.4%
Wages and Salaries
3,465 3,604 -1.5%
Good and Services 1,914 2,426 20.0%
Tranfers 3,709 4,563 16.5%
Pensions 1,041 1,065 -3.1%
Socials Charges 237 282 12.7%
Foncomun 790 680 -18.5%
ONP 420 473 6.5%
Others 1,221 2,063 60.0%
Capital Expenditure 927 1,638 67.4%
Gross Capital Formation
712 1,112 47.9%
Other 215 526 132.1%
Total 10,015 12,231 15.7%
Low interest rates favor investment Low interest rates favor investment
Source: Bloomberg
0
2
4
6
8
10
12
14
1 2 3 4 5 6 7 8 9 10 11 12 13
PerúBrasilColombiaMéxico
Domestic Currency Sovereign Yield Curve(Percentage)
Aggressive monetary easingAggressive monetary easing
Reference Rates(%)
Source: Bloomberg
Inflation(%)
Chile USA Colombia Euro Brasil Mexico Peru
Inflation (F09) 5.5 0.2 6.47 1.2 5.9 6.2 5.5
Starting Rate 8.25 5.25 10.00 4.25 13.75 8.25 6.50
Start of Easing Dic-08 Ago-07 Nov-08 Sep-08 Dic-08 Dic-08 Ene-09
Actual Rate 2.25 0.25 7.00 1.25 11.25 6.75 6.00
Size of Easing -6.00 -5.00 -3.00 -2.75 -2.50 -1.50 -0.50
-1
01
23
45
67
89
10
F-0
6
M-0
6
A-0
6
N-0
6
F-0
7
M-0
7
A-0
7
N-0
7
F-0
8
M-0
8
A-0
8
N-0
8
F-0
9
0
2
4
6
8
10
12
14
M-0
7
M-0
7
J-07
S-0
7
N-0
7
E-0
8
M-0
8
M-0
8
J-08
S-0
8
N-0
8
E-0
9
M-0
9
Financial System StructureFinancial System Structure
Big Size
Banks
Medium Size
Banks
SmallSize
Banks
Rural S&Ls
Financial Companie
s
Assets 39,218 3,989 2,381 219 433 384 291
Share of total 84% 9% 5% 0% 1% 1% 1%
Liquid Assets 37% 24% 22% 16% 21% 10% 7%
Net Loans 56% 67% 68% 77% 71% 82% 83%
Deposits
- With the public 66% 57% 55% 63% 62% 0% 0%
- Financial System 6% 7% 5% 3% 2% 0% 10%
Due to Banks 12% 17% 14% 12% 17% 72% 52%
Bonds 4% 3% 3% 0% 0% 0% 15%
Saving and Credit Cooperativ
e
Local Governmen
t S&Ls
Source: SBS, September 2008
Source: WEF
Peru: Competitiveness Indicators
(ranking)
Competitive AdvantagesGood economic
performance andadequate economic policy
CompetitiveDisadvantag
esLegal and
social issues
Peru’s strengths and weaknesesPeru’s strengths and weaknesesMacroeconomics is OK, but infrastructure and education are the long-run
challenges.
0 20 40 60 80 100 120 140
Quality of educational system
Burden of government regulation
Efficiency of legal framework
Quality of infrastructure
Rigidity of employment
Primary enrollment
Restrictions of Capital Flows
Fiscal Position
Inflation
Strength of investor protection
Peru’s Economic PlanPeru’s Economic Plan
Plan ObjectivesPlan Objectives
Main features of the economic planMain features of the economic plan
Infraestructure Construction
Retraining Labor programs
Uncertainty
Liquidity shortage
Infrastructure Financing
Credit Lines
Public Guarantee
Funds
Credit CrunchUnemployment
Lines of action: Execution StrategyLines of action: Execution Strategy
Project Portfolio Selection
Support Cells Formation SC
Project Diagnosis
Formation of External Advisory
Group AG
Project Production
Line Development
Execution plan for each project along with the execution unit
SC and AG accompany
the execution constantly
Lines of action: Project SelectionLines of action: Project Selection
Nº S ec tors Nº P royec ts Amount (S /. MM) %S ec tor 1: Trans portation & C ommunic ations 22 2,743 67.1%S ec tor 2: Ag ric ulture 17 374 9.2%S ec tor 3: Hous ing , C ontruc tion & S ewag e 6 302 7.4%S ec tor 4: S oc ial Ac tivities 8 146 3.6%
E ducation 6 119 2.9%L abor & E mployment promotion 1 21 0.5%Women and S ocial Development 1 5 0.1%
S ec tor 5: E nery, produc tion & Touris m 12 246 6.0%E nergy and mines 6 194 4.7%International trade & tourism 5 17 0.4%P roduction 1 35 0.9%
S ec tor 6: Ins titutional 11 276 6.7%P rimer Minster C abinet 1 12 0.3%J ustice 5 104 2.5%E conomy and F inance 1 10 0.2%Defense Minis try 4 150 3.7%Total 76 4,087 100.0%
Infraestructure 7,780 Construction 250 Labor Force 1,459 Credit Crunch 1,120
Priority list of investment proyects
2,040Accelerated depreciation for buildings and constructions
ndLabor retraining program
100Non Traditional Exporters
660
Indebtness facility for regional governments
2,600 Social housing (Mi Techo) 150 Real Income Rise 500Tax refund ("Drawbak") rate from 5% to 8%
360
Continuity of investments 1,285Mortgage loans to public workers
50Supplementary credit to oil stabilization fund
500Non-traditional exporters Guarantee fund (FOGEM)
300
IIRSA SUR – Peru and Brazil access road project concession
773Guarantee fund for mortgage loans
50 Social Programs 859 Small Business 460
Supplementary credit to basic infraestructure
418Bonus payment for schooling to public workers
300Small business credit lines to small financial institutions
100
Infraestructure investment fund
320Quality of education investment
390Guarantee fund for small agricultural producers
210
National road system mantainance
300 Equality fund execution 105State school purchases from Mypes through Foncodes
150
Reabilitation of Nazca-Puqui-Chalhuanca road
naNutritional program continuity
64
Widening of Santiago de Chico - Shorey road
20
Costa Verde project 16
South rebuilding plan (2007 Earthquaque)
8
Amounts contained in the planAmounts contained in the plan
Forecasts and Long TermForecasts and Long Term
Sustainable external accounts balanceSustainable external accounts balance
2007 2008 2009 2010
Terms of Trade 3.6 -13.3 -14.6 2.4
Current Account Balance 1.2 -4.2 -4.1 -4.3
Trade balance 8.3 3.1 -1.4 -0.4
Exports 27.9 31.5 23.6 26.7
Traditional 21.5 23.8 16.7 19.5
Non Traditional 6.3 7.5 6.7 7.1
Imports -19.6 -28.4 -24.9 -27.1
Consumer goods -3.2 -4.5 -4.5 -5.0
Intermediate goods -10.4 -14.6 -10.9 -11.9
Capital goods -5.9 -9.2 -9.4 -10.1
Services -1.2 -1.9 -1.7 -1.9
Investment income -8.4 -8.1 -3.7 -4.9
Current transfers 2.5 2.8 2.7 2.8
Financial Account 17.1 9.8 1.6 3.7
Private sector 9.1 7.7 4.4 4.4
FDI 5.4 4.1 2.8 4.0
Long Term Loans 3.3 2.4 2.3 1.3
Portfolio Inv. & Short-Term Capital 3.0 2.3 -3.4 -1.3
Public sector -2.5 -1.4 0.3 -0.3
Balance of Payments 10.4 3.5 -3.0 -0.5
Forecasts
Public investment important rolePublic investment important role
Source: MEF
Overall Demand and Supply(Annual percentage change, in real terms)
2007 2008 4T08 2009 2010
Global Demand 10.5 12.3 8.1 6.7 6.1
Domestic Demand 11.5 12.7 9.3 7.0 5.7
Private Consumption 8.3 8.3 8.0 4.5 5.0
Public Consumption 4.8 3.6 -0.3 6.9 6.7
Gross Fixed Investment 22.8 30.3 22.5 16.5 15.1
Private 23.4 25.5 23.3 9.0 10.0
Public 19.7 45.8 19.7 51.7 32.1
Exports 5.4 10.3 2.1 5.0 8.0
Global Supply 10.5 12.3 8.1 6.7 6.1
GDP 8.9 9.8 6.7 5.0 6.0
Imports 18.8 23.7 14.1 13.5 6.4
Forecasts
Operations of the Non-Financial Public Sector(As a percentage of GDP)
2007 2008 2009 2010
Primary Balance 5.1 3.5 0.8 1.4Central Government 3.6 3.4 1.3 1.7
Current Revenues 18.9 17.0 16.3 17.0Tax Revenues 16.3 14.6 14.2 14.8Non-Tax Revenues 2.6 2.4 2.1 2.1
Non-Financial Expenditure 15.4 13.7 15.2 15.3Current 13.1 11.5 11.7 11.4Capital 2.2 2.2 3.5 3.9
Capital Income 0.1 0.1 0.1 0.1Rest of the Public Sector 1.5 0.1 -0.5 -0.4
Interests 1.9 1.5 1.5 1.5
Overall Balance 3.3 2.0 -0.7 -0.2
Financing -3.3 -2.0 0.7 0.2(In US$ MM) -3,496 -2,546 1,000 250External -2.0 -1.1 1.2 0.7Internal -1.4 -0.9 -0.6 -0.5
Forecasts
Anti-Crisis Plan(US$ 2,500MM)
Financing Plan
Fiscal stimulus: public investment Fiscal stimulus: public investment
3232
Perú Perú Macroeconomic Performance and Macroeconomic Performance and
PerspectivesPerspectives
Luis Carranza UgarteLuis Carranza UgarteMinistry of Economy and FinanceMinistry of Economy and Finance
March, 2009March, 2009
Ministerio de Economía y Finanzas Ministerio de Economía y Finanzas
