LatinFinance - September/October 2013 - 76

cope with external shocks.”
Reflecting its bullish view, Standard &
Poor’s raised the country by one notch,
to BBB+, in late august. that makes it
the highest-rated major latin american
economy after chile, which is four levels
higher at aa-. Peruvians cheered the
upgrade, saying it would lower the cost
of financing and open the way for further
investment.
President ollanta Humala’s government
has also been legislating to speed up
pledged investment and making it easier
to attract more. laws passed between may
and July will drastically reduce the time
state agencies have to approve permits
for extractive and infrastructure projects.
the administration also ushered a capital
market reform through congress, to make it
easier for small- and medium-sized business
to list. it also put an efficiency-targeting civil
service reform to lawmakers.
a wide array of projects, requiring
more than $12 billion in investment, are
slated to be offered for concessions. those
earmarked for tender by the end of the
year include the $6 billion second line for
the lima metro and more than $2 billion in
electricity projects.
the state needs to speed up concessions
and launch co-financed projects, García
miró says. “there is around $30 billion
in projects that could be freed up if the
government effectively eliminates red
tape.”
confieP and other business groups
estimate that Peru needs at least $70 billion
in infrastructure investment over the rest of
the decade if it is to grow at its potential of
6% annually.
More than Pipe dreams
the colombian government has also
unveiled a series of measures to boost
GDP growth, which is expected to be just
above 4% this year. in april, President Juan
manuel Santos announced an ambitious
plan, known in Spanish as Pipe, to increase
productivity and employment. the
administration has retooled the country’s
infrastructure agenda, which has been
launched and re-launched several times.
infrastructure investment, between public
and private sectors, is pegged to reach at
least $20 billion in the coming five years,
with high-end estimates suggesting $100
billion by the end of the decade.
the plan has already had a positive
impact having lowered interest rates for
middle-class housing, says Juana téllez,

76 l atinfina nce.com - September/October 2013

chief economist at BBVa in colombia.
“the effect can be seen throughout the
construction industry,” she says.
téllez is also confident that the
infrastructure plan will contribute to
growth, though not in the short term. “it is
a much better plan, but the implementation
will be slow. We will not begin to see an
impact until the end of 2014, but more likely
in 2015 and 2016,” she says.
the bank estimates GDP growth for this
year at 4.1% and foresees a stronger 4.7%
growth in 2014.
Besides its stimulus programs, the Santos
government has aggressively pursued freetrade agreements, implementing major
pacts with the US in 2012 and the european
Union this year, though the full impact on
colombia will likely not be felt until a global
recovery gains pace.
colombia is also attempting to follow
chile and Peru by focusing on asia: it is
looking to sign a free-trade agreement
with china after completing negotiations
with South Korea. congress is concerned,
though, that the fta with South Korea
could have a devastating effective on carmakers.
colombia’s prospects, however,
remain uncertain given elections next
year — first in march for congress, then in

CROWD PLEASER: Colombia’s government, led by Juan Manuel Santos, has
unveiled measures to increase GDP
growth this year

may for president. Santos is expected to
run for a second four-year presidential
term. the race will likely be focused on
two issues: peace negotiations with the
Revolutionary armed forces of colombia
(faRc) guerrillas to end a half-century of
internal conflict which has killed more
than 220,000 people; and the economic
slowdown.
the government and faRc negotiators,
who have been meeting in Havana since late
last year, announced the first agreement,
on land and rural economy, in may. the
negotiations entered a new phase in late
august, when the government proposed
that a potential agreement be put to
referendum next year.
Noisy process
chile is also gearing up for presidential
elections, with the initial round of voting
scheduled for november 17. While there
are nine candidates in the race, the contest
is widely expected to come down to a race
between Socialist Party candidate and
frontrunner michele Bachelet, who was
president from 2006 to 2010, and evelyn
matthei, of the right-wing independent
Democratic Union. matthei stepped down
as labor minister under President Sebastián
Piñera to run.
Gonzalo Reyes, an economist with
imtrust, an investment firm in chile,
says the elections are not likely to have an
impact on the economy. “there is political
noise, but this will not influence economic
performance, because we would already
have started to see it,” he says.
While chile’s economy will slow from the
5.6% reached in 2012, imtrust and other
analysts expect the economy to pick up in
the second half of this year. imtrust expects
growth around 4.6% for the year, in line
with long-term expectations, says Reyes.
GDP was 4.1% in the second quarter, the
slowest in three years.
“there is going to be a deceleration from
2012, but the drop is not going to be as
pronounced as in other countries because
exports are pointing to more dynamic
growth,” says Reyes.
the central bank has held interest rates
at 5% for 19 months, a stance Reyes expects
will continue as long as inflation stays low
and job creation continues apace. inflation
picked up in mid-2013, with consumer
prices in July 2.2% higher than a year
earlier. Unemployment in June was 6.2%,
one point below the rate recorded the
previous June and the lowest in 18 years. LF
http://www.LATINFINANCE.COM
LatinFinance - September/October 2013

Table of Contents for the Digital Edition of LatinFinance - September/October 2013
