LatinFinance - January/February 2013 - 29

Peru

All night long
By Lucien Chauvin and Taimur Ahmad

Peru’s prospects have never looked so good. But much work is
needed if the economy is to maintain its recent momentum

©REUTERS

P

eru ended 2012 on a high note.
Christmas retail sales in Lima shot
up by 20% from the year before
to over $2 billion, feeding an already
upbeat mood over prospects for the year
ahead.
In a year-end survey by polling firm
Ipsos Apoyo, 45% of respondents said
their family situation would be ‘better/
much better’ in 12 months’ time, while
41% said they expected things to be the
same and only 7% said they would be
worse off.
In a survey of businesspeople by
Global Research Marketing, 55% reckoned
the economy would perform ‘better/much
better’ in the coming year.
The government expects GDP to
expand by more than 6% in 2012 – the
highest among Latin America’s larger
economies – while inflation, at 2.6%,
remains the lowest in the Andean region.
Robust domestic consumption, improved
trade revenue and strong foreign direct
investment flows are all set to contribute
to this performance.
Yet in the same breath as the country’s
praises are sung, caveats are almost
always issued, by authorities and business
leaders alike. If the economy is to continue
its surge forward and investment targets
are to be met, they say, bottlenecks must
be broken across all major sectors.
Luis Miguel Castilla, Peru’s finance
minister, tells LatinFinance in an interview
that while he expects that growth can
be sustained at a high level, this will
depend in part on the state’s ability
to move aggressively on four fronts:
improving competitiveness, guaranteeing
appropriate use of natural resources,
strengthening institutional structures and
closing the gaps between developed and
underdeveloped areas.
“The combination of all four will

Upbeat in Peru: the sky’s the limit
enable us to maintain growth rates at least
6%-7% even with a less positive external
environment. Those are the four main
areas where the government is working
and pursuing a series of reforms,” he says.
Talk of the country’s vast natural
resources is a moot point. Peru is the
world’s second largest producer of
copper, after neighboring Chile, and in
the top six in gold, lead, molybdenum,
tin, silver and zinc production. The
government forecasts $54 billion in
mining investment in the coming years,
but that sum is being questioned. Pedro
Martínez, head of the National Mining,
Petroleum and Energy Society (SNMPE),
an umbrella organization for companies
in the three sectors, tells LatinFinance

that approximately $7 billion in planned
investment this year failed to materialize
due to social conflicts and burdensome red
tape in securing permits.
He estimates that another $4 billion
could be delayed in 2013. “There is an
appetite for investment, but the state
needs to do its part to make it happen.
It takes far too long for projects to be
approved and when they are the state does
not follow through to let the population
know the benefits, letting protests get out
of control,” Martínez says.
Castilla says the Humala
administration understands that part
of the conflict over extractive industries
is due to insufficient state involvement.
“If you go to the places where the main

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