June 2007 PERU “Projected GDP growth of 7% until 2010”

June 2007

PERU

“Projected GDP growth of 7% until 2010”

Sustainable economic growth with annual forecasted rate around 8%

0

2

4

6

8

80 82 84 86 88 90 92 94 96 98 00 02 04 06

Source: International Monetary Fund and the Central Reserve Bank of Peru.

Developed

World

GD

P G

row

th(A

nn

ua

l va

riatio

n %

)

6,4

5,2

3,9

5,2

Peru8,03

Source: Central Reserve Bank of Peru.

* Forecasted

6 955 7 026 7 7149 090

17 336

23 750

18%

37%35%41%

10%2 000

7 000

12 000

17 000

22 000

2000 2001 2002 2003 2004 2005 2006

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

Exports in millons US$" % Exports Growth (base 2000)"

Private Investment

Private Investment grew

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

01 02 03 04 05 06

Private Investment

Private Investment grew 20,1% in 2006*

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

01 02 03 04 05 06

Annual Exports growth greater than 30% Accompanied by private investment growth

(average annual % variation)

12 809

Increase in the imports of capital goods

( Millions of US$)

Rise in the commercial exchange

(Millions of US$)


0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Total Exports (US $ mill.) Total Imports (US $ mill.)

0

500

1000

1500

2000

2500

3000

3500

4000

4500

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Capital goods for the Industry

Transport Equipment

Others

... in a framework of macroeconomic stability...

Exchange rate in Latin America(Index January 2001=100)

Source: Bloomberg and Central Reserve Bank of Peru.

85

105

125

145

165

185

205

E-0

1

A-0

2

A-0

3

N-0

4

M-0

6

N-0

6

Peru

Brasil

Chile

Colombia

Mexico

Inflation in Latin America(Annual var. %)

Peru

Argentina

Brasil

Chile

Mexico

Peru

Argentina

Brasil

Chile

Mexico

Source: Central Reserve Bank of Peru, Brasil, Chile, Mexico and Argentina.

-5

0

5

10

15

20

25

30

20

00

20

01

20

02

20

03

20

04

20

05

Source Central Reserve Bank of Peru.

* Forecasted by the Ministry of Economics and Finance

Source: SUNAT

Peru is progressively reducing its fiscal deficit

(overall balance; % of GDP)

0,5

By increasing its central government tax revenues

-3,3

-2,5 -2,3

-1,7

-1,1

-3,5

-3,0

-2,5

-2,0

-1,5

-1,0

-0,5

0,0

-0,4

2,0

0.0

2000 2001 2002 200320042005 2006 2007*

8 038

6 9687 501 7 696 7 821

8 915

10 247

12 123

13 134

31,1%

1,6%7,7% 2,6%

14,0%

14,9%18,3%

-13,3%

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

1998 1999 2000 2001 2002 2003 2004 2005 2006

-0,2

-0,15

-0,1

-0,05

0

0,05

0,1

0,15

0,2

0,25

0,3

0,35

Central Government Tax Revenues (in US$ MM)

% Annual change in the Central Government Tax Revenues

1,0

1,5

2,0

2,5

With increasing Net International Reserves that represent more than 12

months of imports

JP

Mo

rga

n I

nd

ex

EM

BI+

**

The careful and responsible management of our economic program has allowed us to keep our

country risk index among the lowest in the region.

Source: Bloomberg

Updated 23 March, 2007

100

150

200

250

300

350

Mar-07

Ene-07

Dic-06Oct-06Ago-06

Jul-06May-06

Mar-06

Feb-06

Dic-05Nov-05

EMBI+ Peru Latinamerica


Ne

t In

tern

ati

on

al

Re

se

rve

s

(Mili

ons

of d

olla

rs)

8 180 8 6139 59810 194

12 68114 097

17 275

5,3%

11,4%6,2%

24,4%11,2%

22,5%

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

2000 2001 2002 2003 2004 2005 2006

00,050,10,150,20,250,30,350,40,450,5

Net International Reserves (in US$ Millions)"

Annual Variation

Free and preferential market access to: United States European Union Mexico Chile Andean Community

of Nations MERCOSURThailand*

Peru has concluded the negotiations for the

Trade Promotion Agreement (TPA) with

the United States

Trade Agreements under negotiation or consideration:

Singapore

EFTA

Canada

China

European Union

South Korea

Peru offers a favorable legal framework for foreign investment

Legal Framework: Constitutional provisions, “Law for the Promotion of Foreign Investment”, Legislative Decree N° 662, “Framework Law for Private Investment Growth”, Legislative Decree N° 757, “Law for the Promotion of Private Investment in Infrastructure and Public Service Works”, Approved by Supreme Decree N° 059-96-PCM

Non discriminatory treatment.

Irrestrictive access to most economic sectors.

No performance requirements.

Free transfer of capital.

Free competition.

Guarantee for Private Property.

Freedom to purchase stocks from locals.

Freedom to access internal and external credit.

Freedom to pay royalties.

Network of investment agreements and member of ICSID and MIGA

Just one step away from the Investment Grade

Source: Bloomberg

Peru close to the investmentgrade

S&P/Fitch

Moody's Characterstic

InvestmentGrade

AAA Aaa Risk freeAA+ Aa1AA Aa2 Superior

AA- Aa3A+ A1A A2 High capacity of

repaymentA- A3BBB+ Baa1BBB Baa2

Moderate capacity of repayment

BBB- Baa3BB+ Ba1BB Ba2 Some capacity of

repaymentBB- Ba3B+ B1B B2

High uncertainty in the capacity of repayment

B- B3CCC+ Caa1CCC Caa2

Highly vulnerable to default

CCC- Caa3

DefaultCaD

AAA Aaa Risk freeAA+ Aa1AA Aa2 Superior

AA- Aa3A+ A1A A2 High capacity of

repaymentA- A3BBB+ Baa1BBB Baa2

Moderate capacity of repayment

BBB- Baa3BB+ Ba1BB Ba2 Some capacity of

repaymentBB- Ba3B+ B1B B2

High uncertainty in the capacity of repayment

B- B3CCC+ Caa1CCC Caa2

Highly vulnerable to default

CCC- Caa3

DefaultCaD

Latin American Ranking

S&P Fitch Moody'sMexico BBB BBB Baa1Chile A A A2Peru BB+ BB+ Ba3

Colombia BB BB Ba2Brazil BB BB Ba2Venezuela BB- BB- B2Argentina B+ B B3Bolivia B3 B- B-Ecuador CCC+ B- Caa1

Peru: some economic indicators

Source: Central Reserve Bank of Peru, National Institute of Statistic and Information and SUNAT.

2004 2005 20064,8 6,4 8,039,1 13,9 20,15,7 12,2 13,02,7 4,5 7,3

40,9 35,3 36,919,6 29,6 35,44,7 8,4 14,7

13.6 14.3 27.8

17.5 25.5 41.3

52.3 29.4 168.3

Pensions Funds (var %)

IGBVL General Index of the Stock Exchange Market of Lima

(var %)

Tax Collection (var %)

Exports (var % in US$)Imports of capital goods (var % in US $)

GDP of the construction sector (var %)

Private Investment (var %)Public Investment (var %)Employment in companies with over 10 employees (var %)

GDP (var %)

But institutions need to be reinforced and we still require

a social reform

Populism: a fatal attraction

Source: The Economist.

A dangerous candidate…

…fortunately we didn’t choose him

Composition of the Peruvian Congress

Composition of the Peruvian Congress

• Grupo Parlamentario Especial Demócrata (3)

• Grupo Parlamentario Nacionalista (22)

• Unión por el Perú (20)

Source: Peruvian Congress.

“No society can surely be flourishing and happy, of which the far greater part of the

members are poor and miserable”

- Adam Smith

Poverty

Peru: poverty and extreme poverty

54.3% 52.0% 50.4% 48.9%

54.8%

18.2%19.0%20.7%23.9%24.4%

0%

10%

20%

30%

40%

50%

60%

2001 2002 2003 2004 2005

Poverty Extreme povertySource: MEF.

Malnutrition

Malnutrition prevalence, height for age (% of children under 5)*

6.62.3 1.9 1.4

31.8

25.8 25.4 24.1

05

101520253035

1992 1996 2000 2005Chile Peru

*Data for Chile: 1992 (1993), 2000 (1999), 2005 (2004).Source: INEI, World Bank.

A country with a great historic tradition;

Home of the Inca Empire, a great civilization,

Fotografía: Vera Lentz / Diario La República.

It has experienced

difficult circumstances

of violent terrorist acts

from which it is recovering

Although its economy has grown thanks to the excellent metal prices,

Fot

o: J

osé

Loo

/Arc

hivo

“La

Rep

úblic

a”

Peru is still a country where

half of its population

lives in poverty

and a fifth in extreme poverty

Fotografía: Marianna Mindreau Puente.

Foto: Jhony Laurente /Archivo “La República”

Without access to basic needs such as water supply

Without access to basic needs such as water supply

electricity


health services


And where half of the population does not have an adequate job,

Foto: Christian Salazar /Archivo “La República”

Where malnutrition

affects 25% of the child

population

And 50% of the children under five years of age is affected by anemia,


However, things can change.However, things can change.

Fot

o: M

artin

Pau

ca/A

rchi

vo “

La R

epúb

lica”

We need investments that provide formal jobs, abiding by the laws,

training

And for that,

We need marketsWe need markets

The Free Trade Agreement with the United States

demanded a great effort by the negotiators of both countries

With it, both countries agree to make temporary and unilateral

preferences, long term commitments for both sides.

This would let Peruvians overcome poverty

This would let Peruvians overcome poverty


With formal jobsWith formal jobs

With better employment conditionsWith better employment conditions

Fot

ogra

fía: V

era

Lent

z / D

iario

La

Rep

úblic

a.

Without room for terrorist violence and drug trafficking

Without room for terrorist violence and drug trafficking

Juan Manuel Vilca / Diario La República

For better countries living in democracy; for a better American continent…

For better countries living in democracy; for a better American continent…


Support the Free Trade Agreement with Peru

Support the Free Trade Agreement with Peru

June 2007 PERU “Projected GDP growth of 7% until 2010”

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