Why invest in Peru

51
Peru: Endless investment opportunities Carlos Herrera Executive Director

description

Presentation made by Mr. Carlos Herrera, CEO, Proinversion at the India LAC Investment Conclave. The conclave was organised by FICCI in New Delhi. More details at indialacconclave.com

Transcript of Why invest in Peru

Page 1: Why invest in Peru

Peru:Endless

investment opportunities

Carlos Herrera Executive Director

Page 2: Why invest in Peru

2. Friendly investment environment

3. Open trade and market access policy

1.Internationally acknowledged macroeconomic soundness

4. Attractive sectors to Invest

WHY INVEST IN PERU?

Page 3: Why invest in Peru

MACROECONOMIC SOUNDNESS

Real GDP (US$ billion)

Source: Central Reserve Bank of Peru and IMF / * Estimated figures of BCRP (Inflation report as of July 2014) and IMF

2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

2

4

6

8

10

3.52.9

7.0 7.4

PeruLAC

IPC, 2004-2013 (Annual variation %)

Exports (US$ billion)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

12,809.217,367.7

23,830.128,093.8

31,018.526,961.7

35,564.7

46,268.046,228.041,829.039,836.0

Public Debt (% of GDP)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

39.3

32.328.5

25.9 26.023.5

21.4 20.4 19.6 19.2

Peru’s macroeconomic performance over the last decade 2005 – 2014*

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* 2015*

61.4 69.779.4

92.3107.3

126.9 127.0

153.8176.6

199.6 206.5216.7

235.7

Page 4: Why invest in Peru

Total investment 2003-2015* (% of GDP)

Source: Central Reserve Bank of Peru * Estimated figures CRB Source: IMF and Central Reserve Bank (CRB)

Total investment – LATAM 2013 (% of GDP)

Peru Chile Mexico Colombia Brazil2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

*

2015

*

13.9 13.8 14.5 15.116.8

19.517.6

19.2 19.2 20.4 20.822.5 22.5

3.0 2.93.1 3.2

3.5

4.55.7

5.9 4.85.4 5.8

5.8 6.0Inversión PrivadaInversión Pública

MACROECONOMIC SOUNDNESS

More than 20% of GDP

Public investment

Private investment

Page 5: Why invest in Peru

Peru maintains a healthy level of debt…

Public Debt– Peru 2003-2015*(% of GDP)

1. MACROECONOMIC SOUNDNESS

Source: Central Bank of Reserve of Peru *Estimated figures, CBRP (Inflation report July 2014)

Public Debt– Latin America 2013(% of GDP)

Source: FMI and BCRP

Chile Perú Colombia México Argentina Venezuela Brasil

12.9

19.2

32.3

44.047.8

53.4

68.3

Chile Peru Colombia Mexico Argentina Venezuela Brazil

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

*

2015

*

46.9

42.639.3

32.3

28.525.9 26.0

23.521.4 20.4 19.6 19.2 18.6

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1. MACROECONOMIC SOUNDNESS

Source: Central Reserve Bank of Peru*Up to August 1, 2014

Net International Reserves ( US$ Billion)

...and has accumulated international reserves for a third of the GDP

2004 2009 2014*

NIR ( % of GDP) 19.2 27.2 31.9

NIR / GDP (Short-term Foreign Debt) 171.8 292.2 821.9

NIR /GDP Short-term Foreign Debt plus Current Account deficit) 173.2 281.6 365.8

Source: BCRP. Inflation report July 2014*Projection

NIR Adequacy Indicators

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

*

9,598.110,194.312,631.014,097.1

17,274.8

27,688.831,195.933,135.0

44,105.148,815.9

63,991.465,663.164,554.0

Page 7: Why invest in Peru

Peru: Middle and Emerging middle class

2005 -2012 (% population)

Total poverty: Latin America and Peru 2005 -2012 (% population)

Source: INEI – ENAHO 2004-2012,ENDES 2012, IDB - Technical note. Middle Class in Peru: quantification and recently evolution.

Source : CEPAL – Social Outlook 2012.

2005 2006 2007 2008 2009 2010 2011 2012

55.649.1

42.437.3

33.5 30.827.8

25.839.736.2 34.0 33.2 32.8 31.0 29.4 28.8

Perú LA

Poor Emerging Population

Middle class High class

48.7

24.8 25.9

0.6

27.8

21.2

48.9

2.1

2005 2011

MACROECONOMIC SOUNDNESS

Peru

Page 8: Why invest in Peru

Source: Standard & Poor`s, Fitch Ratings and Moody´s. Updated as of July 2014

Peru earned the investment grade and investor`s confidence by practicing a responsible economic policy

Investment gradeLatin America benchmarking

Country S&P Fitch Moody´s

Chile AA- A+ Aa3Peru BBB+ BBB+ A3Mexico BBB+ BBB+ A3Brasil BBB- BBB Baa2Colombia BBB BBB Baa3Bolivia B- BB- Ba3Ecuador B B Caa1Venezuela B- B Caa1Argentina CCC- CC Caa1

MACROECONOMIC SOUNDNESS

Page 9: Why invest in Peru

Based on the “national treatment” principle. Unrestrictive access to most economic sectors. Free movement of capital. Free competition. Guarantee for private property. Special Regimes: Legal Stability Agreements and VAT Anticipated Recovery. Investment Chapter in FTAs and member of ICSID and MIGA. To come: Peru – India FTA negotiations Peru participates in the OECD Investment Committee and has initiated the

process for its future incorporation as a member economy.

FRIENDLY INVESTMENT ENVIRONMENT

Peru offers a favorable legal framework for foreign investment

Page 10: Why invest in Peru

Peru ranks second in the region in the improvement of business regulations.

.

Doing Business 2014

2. FRIENDLY INVESTMENT ENVIRONMENT

Continuous effort to facilitate the establishment and operation of business

Position Country

1 Chile

2 Peru

3 Colombia

4 Uruguay

5 Paraguay

116

162

88

126

161

115

43

135

34

42

181

Argentina

Uruguay

Bolivia

Brasil

Surinam

GuyanaVenezuela

Colombia

Perú

Chile

Ecuador

109Paraguay

Page 11: Why invest in Peru

A steady tax regime

Tax Applicable Rate

INCOME

Corporate profits

30.0%

Agriculture and agribusiness 15%

Dividends 4.1%

Royalties 30.0%

Interest rate on loans from abroad

4.9%

Value Added Tax (VAT) 18%

Financial Transactions Tax 0.005%

Temporary to net assets, applicable to the excess of S/. 1 000 000

0.4%

FRIENDLY INVESTMENT ENVIRONMENT

Page 12: Why invest in Peru

OPEN TRADE AND MARKET ACCESS POLICY

An open trade policy sustained over time

Evolution of nominal and effective tariff; and tariff dispersion 1993 – 2013

Source:MEFNotes: 1) Affective Tariff= (Amount of total revenue Ad valoren CIF / Total Amount of CIF Imports)*100.2)Tariff Dispersion= Standard Deviation

Page 13: Why invest in Peru

OPEN TRADE AND MARKET ACCESS POLICY

Working to become a globalized economy, with preferential access to the world’s largest markets

These countries stand for enlarged market of over 4 billion people with a joint GDP over US$ 56 billion

96% of Peruvian exports

Page 14: Why invest in Peru

ATTRACTIVE SECTORS TO INVEST

MINING ELECTRICAL ENERGY

FISHERY AGRO-INDUSTRY

TEXTILE- CLOTHING

HYDRO-CARBONS

Comparative Advantages

TOURISM

Page 15: Why invest in Peru

Health 0.5%

Educatión 0.4%

Telecom22%

Water/sanitation 6%

Hydraulic Infrastructure 10%

Transport24%

Electrical Energy

37%

Hidrocarbons 1%

AND KEEP GROWING …

Source: Association for the Promotion of National Infrastructure - AFIN (by its Spanish acronym)

Challenge: to reduce the US$ 88 billion infrastructure gap

Page 16: Why invest in Peru

PROMOTING INVESTMENT THROUGH PPP

PPP are mainly implemented in the form of a concession and generally, the concessionaire is expected to be responsible for the design, financing, construction, operation and maintenance of public infrastructure works or public service provision.

It can be promoted from a state initiative or an unsolicited proposal. Self sustainable / Co-financed. It is not necessary for the companies interested in participating in the

bidding to be stablished in Peru. Only when awarded they will have to set up a company for the purpose of the concession.

Open and transparent international bidding process. Interaction with the market.

Page 17: Why invest in Peru

PROMOTING INVESTMENT THROUGH PPP

Inve

stm

ent

com

mitm

ent U

S$

MM

PPP Evolution 2005- 2014

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

0

2

4

6

8

10

12

14

16

18

20

1,342744

291912

1,563 1,902

3,663

701

4,543

9,983

54

5

1112

18

9

5

1211

Investment US$ MM ( No VAT) PPP processes

Source: ProInversión. Updated as of Oct, 2014

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MAIN PRINCIPLES TO PROMOTE PRIVATE INVESTMENT IN PUBLIC INFRASTRUCTURE

SOCIAL AND ENVIROMENTAL ACCEPTABILITY

TECHNICAL AND ECONOMIC FEASIBILITY OF THE PROJECT

BANKABILITY

GENERATOR OF COMPETITION

TRANSPARENCY

MAXIMUM EFFICIENCY IN THE SERVICE TO GIVE

TECHNICAL, FINANCIAL AND LEGAL REQUIREMENTS ON THE BIDDERS

Page 19: Why invest in Peru

Discover a rich and generous land

Discover its opportunities

Peru is a country that grows and bui lds i ts future

Page 20: Why invest in Peru

TRANSPORTINFRASTRUCTURE

Page 21: Why invest in Peru

PPP are promoted to accelerate the development of transport infrastructure, in order to improve connectivity and competitiveness levels.

We intend to consolidate the country as a Business Hub in the South American Pacific.

The implementation of the Metro for Lima and Callao will give more fluidity, innovation and safety to an urban transport system in this city with more than 10 million people.

The Longitudinal de la Sierra Highway will promote social inclusion and market development in the Andean regions.

INFRASTRUCTURE HIGHLIGTHS

Page 22: Why invest in Peru

LINES 3 AND 4 - THE METRO OF LIMA AND CALLAO

Concession, through two independent bids, of two lines of the network of the metro of Lima and Callao for the design, financing, construction, equipment, operation and maintenance of 62 Km of this transportation system, which serves a city of more than 10 millions of inhabitants.

Estimated Investment: Under evaluation Type of concession: Co-financed Concession period: 35 years

Line 3 Line 4

32 Km 30 Km

2016 2016Estimated date of award

Approximated length

TO BE CALLED

Lima and Callao

Page 23: Why invest in Peru

FAST MONORAIL MASS TRANSPORTATION SYSTEM - AREQUIPA

An unsolicited proposal for the design, construction, electromagnetic equipment, systems, rolling stock, financing, operation and maintenance of a 14 Km fast mass transportation system (on elevated track) in the Arequipa Metropolitan Area.

Estimated Investment: Studies in progress

Type of concession: Co-financed

Estimated date of award: Q3 2015

UNDER EVALUATION

Arequipa

Page 24: Why invest in Peru

Concession, through two independent bids, of the improvement, restoration, initial periodical maintenance, operation and maintenance of more than 1,300 Km on two sections of this major highway across the Peruvian highlands, in order to improve ease of transit.

LONGITUDINAL OF THE SIERRA HIGHWAY, SECTION 4 AND 5

Estimated investment: US$ 720 million Modality: Co-financed

ApproximateLength

Estimate award date

Section 4 965 km Q3 2015

Secton 5 422 km Q4 2015

TO BE CALLED

Page 25: Why invest in Peru

LOGISTIC PLATFORM AND TRUCK CENTER OF PORT OF CALLAO

The project comprises the design, financing, construction, operation and maintenance of a logistics and outer harbor area of Callao port to be located 2 km away from the port and 1 km from Jorge Chavez international airport, in an area of approximately 33.5 ha.

The logistics platform will attend the port cargo and concentrate the main logistics freight operators by placing them in a zone near the port and the airport, in order to increase competitiveness and reduce costs thereof logistics and transport.

Truck center to parked freigth vehicules. It will have a management system moves in and out of vehicles and a truck center.

Estimated investment: Under evaluation Type of concession: Self –sustaining

Estimated award date: 2015

TO BE CALLED

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The expected growth of Peruvian economy and its future sustainability require the continuous development of the energy sector.

Water and natural gas are the most important sources of electricity generation.

Our electricity production rates have increased by 6.62% in average over the last 10 years.

The need to secure electricity supply levels in the medium and long terms creates a wide range of investment opportunities in the energy sector.

Restructuring of the energy matrix will generate new investment opportunities.

ENERGY HIGHLIGTHS

Page 28: Why invest in Peru

220 kV NEW CÓRPAC SUBSTATION AND 220 kV INDUSTRIALES - CÓRPAC TRANSMISSION LINES

Concession for the design, financing, construction, operation and maintenance of the following projects: New Córpac Substation (underground)220 kV Industrial Transmission Lines - Córpac (underground)

The upgrade of electric power supply will allow to meet the increasing demand in the districts of Ate, Cercado de Lima, La Victoria, Miraflores, San Isidro, San Borja (particularly in commercial and financial areas in the latter three districts) and San Luis. Estimated investment: US$ 148 million Type of concession: Self-sustained Concession period: 30 years plus the construction period

(about 25 months)

Estimated date of award: Q2 2015

Industrial Substations

Industrial TLs - Córpac

Av. Javier Prado

Pana

mer

icana

Nor

te

High

way

Panamericana Sur

Highway

Circunvalación

Lima

San Borja

Ate

New Córpac

Substation

CALLED

Page 29: Why invest in Peru

Contract for the purchase of 1,200 Mw of power in years 2020 and 2021, to be generated by new hydroelectric power generation projects that will be incorporated to the National Electric Power Grid (SEIN).

Estimated Investment: US$ 2.7 billion Type of concession: Self-sustained

Estimated date of award: Q2 2015

ELECTRIC POWER SUPPLY FROM NEW HYDROELECTRIC POWER PLANTS

TO BE CALLED

Nationwide

Page 30: Why invest in Peru

QUILLABAMBA THERMAL POWER PLANT

Concession for the design, financing, construction, operation and financing of a 200 Mw thermal power plant to be located in Quillabamba (department of Cusco) which shall begin operations in 2017 and be connected to The National Electric Power Grid (SEIN)

Estimated investment: US$ 200 million Type of concession: Self sustained

Estimated date of award: Q2 2015

TO BE CALLED

Page 31: Why invest in Peru

LNG SUPPLY SYSTEM FOR THE DOMESTIC MARKET

CALLED

Concession to provide with natural gas (NG) supply system to be used in emergency situations (failure in NG production in the forest, or in its transportation from the forest to the Peruvian coast). The system comprises back-up storage capacity for 130,000 m3 and facilities of regasification and shipping of 400 MMSCFD of NG, in order to guarantee the supply of fuel to users in Lima and Callao for up to seven days.

Estimated investment: US$ 250 million Type of concession : Self-sustained Concession period: 20 years plus the construction

period (30 months)

Estimated date of award: 2015

Page 32: Why invest in Peru

LPG SUPPLY SYSTEM FOR LIMA AND CALLAO

CALLEDConcession for the design, financing, construction, operation and maintenance of a LPG transportation system from the producer, located in the province of Pisco, Ica to the storage (300,000 barrels) and shipping (50,000 barrels/day) plant at the south of Lima.

Estimated investment: US$ 250 million Type of concession : Self-sustained

Estimated award date: 2015

Page 33: Why invest in Peru

SANITATIONAND HEALTH

Page 34: Why invest in Peru

A growing drinking water and sanitation infrastructure, particularly in rural areas, is a crucial goal to improve the health and well-being of more Peruvians.

Sanitation services are currently provided by companies owned by local governments (EPS).

The Government is promoting new laws for the modernization of water and sanitation services, including the promotion of private investments for the development of the sector.

SANITATION SECTOR HIGHLIGTHS

Page 35: Why invest in Peru

MAIN WORKS AND CONDUCTION OF DRINKING WATER SUPPLY FOR LIMA

TO BE ANNOUNCEDConcession for the design, financing, construction, operation and maintenance of the following infrastructure projects in the departments of Lima and Junín: Re-enlargement of the Pomacocha and Huallacocha Bajo dams

(about 90 MCM) Trans-Andean tunnel (about 10 Km) New drinking water plant (5 m3/s) South branch pipeline (about 26 Km), including six reservoirs

(total storage volume: 24,000 m3) and works for the interconnection with the current drinking water supply system.

The concession also includes the operation and maintenance of the following facilities: Current drinking water plant (5 m3/s) North branch pipeline (27.1 Km), including four compensation

reservoirs (total storage volume: 23,000 m3 )

Estimated investment: US$ 400 million Modality: Self-sustained Concession period: 30 years

Estimated date of award: Q1 2015

CALLED

Page 36: Why invest in Peru

REGULATION WORKS OF THE CHILLÓN RIVER

Concession for the design, financing, construction, operation and maintenance of the following infrastructure projects, intended to ensure drinking water supply to the districts of North Lima. Jacaybamba dam (about 28 million m3) located in the

province of Canta, northeast of Lima. Pipeline (about 30 Km) for an average flow rate of

about 1.5 m3/s, from the projected water intake on the Chillon River to the current Chillon drinking water plant.

Estimated investment: US$ 70 million Type of concession: Self-sustained Concession period: 20 to 30 years

Estimated date of award: 2015

TO BE CALLED

Page 37: Why invest in Peru

Health services are provided by the Ministry of Health’s (MINSA) network of health facilities, the independent hospital network of Peru’s Social Security System (ESSALUD) and private hospitals.

The sector offers a high growth potential (continuous economy growth, increasing GDP per capita, a large young population).

Private investments are sought to improve hospital infrastructure and increase the coverage and quality of health services.

HEALTH SECTOR HIGHLIGTHS

Page 38: Why invest in Peru

Concession of the design, construction, equipment, operation and maintenance of complementary services (blue-collar services) in high-complexity hospitals in the Peruvian Social Security System (ESSALUD): a new one in the city of Lima (Instituto de Salud del Niño y Adolescente) and two in provinces (Piura and Chimbote)

Estimated Investment: Studies in progress

Estimated date of award: Q3 2015

TO BE CALLED

THREE NEW HIGH-COMPLEXITY HOSPITALS

Page 39: Why invest in Peru

SOLID WASTE MANAGEMENT IN HEALTH FACILITIES UNDER THE MINISTRY OF HEALTH IN METROPOLITAN LIMA

An unsolicited proposal that comprises the construction, operation and maintenance of a modern solid waste treatment plant (hazardous bio-contaminated/hazardous special/common) for the project’s integral management.

Estimated Investment: Pre-investment studies in progress

Type of concession: Co-financed

Estimated date of award: 2016

UNDER EVALUATION

Lima and Callao

Page 40: Why invest in Peru

CORRECTIONALSYSTEM

Page 41: Why invest in Peru

The government proposes the restoration, re-location and/or modernization of the existing correctional facilities as a part of its efforts to improve our correctional system.

The sector provides new opportunities aiming to decongest prisons and improve related services.

CORRECTIONAL SYSTEM HIGHLIGTHS

Page 42: Why invest in Peru

Re-location of four correctional facilities that are currently in the urban areas of Metropolitan Lima and the department of Cusco. The project is intended to promote the participation of the private sector in the construction of new replacement correctional facilities in more appropriate areas, under high-quality safety standards1.Chorrillos Women’s Facility (ordinary) and annex.2. Lurigancho 3. Miguel Castro Castro.4. Cusco and Cusco Women’s Facility

Estimated investment: Under evaluation

Estimated date of award: Q2 2015

TO BE CALLED

RE-LOCATION OF CORRECTIONAL FACILITIES

Lima and Cusco

Page 43: Why invest in Peru

An unsolicited proposal for the construction of a shopping center, houses, warehouses and parking lots on the current location of the San Jorge Prison (Historic center of Lima). Additionally, it includes the construction and equipping of a new correctional facility where the San Jorge inmates will be transferred.

Estimated investment: Under evaluation Type of concession: Self-sustained

Estimated date of award: Q3 2015

UNDER EVALUATION

CORRECTIONAL INFRASTRUCTURE AND URBAN RENEWAL: “TINKUY PLAZA PROJECT”

Lima

Page 44: Why invest in Peru
Page 45: Why invest in Peru

The national bandwidth expansion plan is underway, including the promotion of PPPs to enhance Internet services throughout the country (optic fiber and mobile data).

The National Optical Fiber Backbone Network Project (13,000 Km of optic fiber), granted in concession in 2013, will take these services to the interior of the country, increasing the efficiency of the 22 regions involved in the project and support their economic development.

The next step is awarding the processes that will progressively take these services to their final users in the regions that will benefit from the NOFBN Project.

TELECOMMUNICATIONS HIGHLIGTHS

Page 46: Why invest in Peru

BROADBAND INTERNET ACCESS FOR FOUR PERUVIAN REGIONS

Concession, through four independent bids, to implement broadband internet access in four Peruvian regions (Apurímac, Ayacucho, Huancavelica, Lambayeque). The project involves the implementation of a high-capacity fiber optic network and an access network (microwaves).

Region Location Required fiber length

Estimated investment USD million

1.Ayacucho Central-Southern highlands

1,900 Km 54.9

2.Apurímac Southern highlands 1,400 Km 42.3

3.Huancavelica Central-Southern highlands

1,330 km 46.8

4.Lambayeque Northern coast 570 Km 19.0

Type of concession: Self sustained Estimated award date: IV Q 2014

12

3

4

Page 47: Why invest in Peru

700 MHZ 4G BAND

Concession of three 698–806 MHz band blocks to provide nationwide 4G broadband internet access services. The band is initially expected to be channeled in 15 MHz + 15 MHz blocks

Estimated investment: Under evaluation Type of concession: Self sustained

Estimated date of award: Q2 2015

Page 48: Why invest in Peru

MINING

Page 49: Why invest in Peru

The notable increase in mining investment in Peru has lead to an historical record the year 2013: more than US$ 9,720 million.

There are about 400 mining units under

exploration and some more in early prospecting.

Exploration investments in Peru have sustained its growth for over six years and the last four year it has shown significant development.

Peru remains among the main investment destinations for exploration budgets worldwide.

MINING HIGHLIGTHS

Page 50: Why invest in Peru

05 MINING EXPLORATION PROSPECTS IN THE NORTH AND CENTRAL REGIONS IN THE SOUTH OF PERU

TO BE CALLED

Investment projects under transfer option contracts for a term of three to four years for the exploration and the feasibility study.

04 prospectus in Apurimac: • Colca: Cu, Mo, Ag, Au, Pb 2016

14,100 ha• Jalaoca: Cu, Mo, Ag, Au, Pb 2016

6,400 ha• Antabamba: Cu, Mo, Au, Zn 2017

19,200 ha• Suparaura: Cu, Fe 2017

2,000 ha

01 prospectus in La Libertad • Pampa Grande: Au, Ag 2017

8,700 ha

PROJECTS AWARD AREA