Carlos Oliva Neyra. Minister of Economy and Finance

“PERU: LEADING GROWTH ACROSS THE REGION”

PERUMacroeconomic overview

September 14th., 2018

2

Macroeconomic fundamentals1

Content

Current economic situation2

Economic policy measures3

Debt management4

3

Three reasons why to invest in Peru

Macroeconomicstability

Investment-friendly

environment

Openness to the world

4

Macroeconomic stability: healthy balances

International reserves(% of GDP, 2017)

Country risk(bps, average 2017)

Inflation(%, average 2000-2017)

Public debt(% of GDP, 2017)

Source: International Monetary Fund (World Economic Outlook, April 2018).

264

194

256

130145

Bra Col Mex Chi Per

18.014.7 14.3 13.7

28.2

Bra Col Mex Chi Per

84.0

49.454.2

23.6 23.3

Bra Col Mex Chi Per

6.75.2 4.6

3.3 2.8

Bra Col Mex Chi Per

5

Macroeconomic stability: strong economic institutions

Autonomous and independent central bank. Monetary policy is conducted under an inflation targeting scheme with foreign exchange flexibility.

The macro-fiscal framework is based on rules that seek a predictable, responsible, and transparent management of public finances, following best practices in developed countries.

Under a market-oriented economy that promotes openness and a legislation that gives the same treatment to local and foreign investors.

6

Openness to the world

USD 8.1 billion

North America

(19,2 %)

USD 6.9 billion

LAC

(14,7%)

USD 8.5 billion

Europe

(20.3%)

USD 0.3 billion

Africa

(0.7%)

USD 0.3 billion

Oceania

(0.9%)

USD 19.1 billion

Asia

(44.2%)

Peru has implemented Free TradeAgreements (FTA) with 21 countriesthat represent 75% of the world GDP and90% of total world trade.

The Pacific Alliance, which includesChile, Colombia, and Mexico, is aplatform to jointly promote investmentand financial integration.

Accession process to the OECD willsupport continuity of importantstructural reforms on institutions,informality, innovation, among others.

Peru: total exports(US$ billion and % of exports to the world, 2017)

Source: Sunat and Mincetur.

7

Macroeconomic fundamentals1

Content

Current economic situation2

Economic policy measures3

Debt management4

81/ Inventories are not included.

Source: BCRP, INEI.

Domestic demand1

(Real % annual change)

Fiscal stimulus

Private investment

GDP(Real % annual change)

4.6

3.9

4.7

3.1

2.32.6

2.7

2.3

3.1

5.4

16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 18Q1 18Q2

3.8

1.7

1.1

-2.1

-1.1

0.7

3.3 3.33.8

5.0

16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 18Q1 18Q2

Current economic activity upturn is driven by domestic demand

9

Public and private investment(Real % annual change)

1/ Information based on Sunat’s electronic payrolls.

Source: BCRP, MEF.

Formal employment1

(% annual change)

3.6

4.5

0

1

2

3

4

5

16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 18Q1 18Q2

Total Private sector

6.1

0.3

-13.8

-17.4

-5.7

5.5

1.6

5.5

9.0

-5.1

-7.7

-4.5-5.3

-2.6

5.5

3.15.3

8.5

16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 18Q1 18Q2

Public investment

Private investment

Total investment has fostered the upturn of employment

10

-0.3

-2.0

-2.5

-3.1

-2.1

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

Dec-14 Dec-15 Dec-16 Dec-17 Aug-18

S&P

Perú

Chile

Colombia

México

Brazil

BBB+ A3 BBB+

A+ A1 A

BBB- Baa2 BBB

BBB+ A3 BBB+

BB- Ba2 BB-

Moody’s Fitch

Latin America: credit ratings and outlooks

Stable outlook Negative outlook

Stable outlook but recent

downgrade in the last 12 months

Fiscal balance1

(% of GDP, 12-month rolling sum)

1/ Non-financial public sector overall balance.

Source: S&P, Moody’s, Fitch, BCRP, MEF.

Peru continues as one of the few economies with no credit rating changes

11

-2.4

3.0

3.3

5.6

13.2

13.5

19.7

24.6

25.5

69.6

103.8

Mexico

Peru

Colombia

China

Chile

India

Russia

South Africa

Brazil

Turkey

Argentina

35

9

12

36

20

69

66

101

96

258

390

Macroeconomic strength is important in financial turbulence periods

1/ As of September 11th., 2018.

Source: Bloomberg.

Emerging markets: MSCI equity index1

(Index)

Peru has a strong external position recognized by global investors: low level of short-term debt, high net international

reserves and current account financed by long-term investment.

2018: Financial indicators1

Exchange rate(% change, YTD)

Sovereign risk(Diff. pbs., YTD)

1,000

1,050

1,100

1,150

1,200

1,250

1,300

Jan-18 Feb-18 Apr-18 May-18 Jul-18 Sep-18

12

Peru will continue to lead regional growth with sound fiscal fundamentals

Latin America: GDP forecasts(Real % annual change, average 2018-2022)

Source: LatinFocus Consensus Forecast - august 2018, MEF forecasts.

4.5

3.4

3.2

2.5

2.4

Peru

Chile

Colombia

Brazil

Mexico

Peru: fiscal balance(% of GDP)

-3.1

-3.5

-2.9

-2.1

-1.0

-3.0

-2.7

-1.9

-1.0

2017 2018 2019 2020 2021

MMF 2018-2021

Current forecast

13

Macroeconomic fundamentals1

Content

Current economic situation2

Economic policy measures3

Debt management4

14

Strengthengrowth

Modernizationof the public

sector

Foster competitiveness

Source: MEF.

1

2 3

The government has designed guidelines to increase potential growth

15

Improve country’s

general welfare

Underpin potential

growth

Source: MEF.

Achieve growth rates of

5% in the coming yearsReduce poverty

The goals are to promote economic growth and increase citizens’ welfare

16

Macroeconomic fundamentals1

Content

Current economic situation2

Economic policy measures3

Debt management4

17

The sources of financing come from asset management and internal and external liabilities

Fiscal Stabilization Fund

Local Market

CAF BID BIRF Otros

Soberanos Bonds

International Market

Global Bonds

Stock as of July 31, 2018

USD 9,336 mn

EUR 2100 mn

Contingency loans

As of July 31, 2018

Secondary Liquid Reserve

National Emergency

International CrisisSavings

Mechanism

Assets Liabilities

USD 6,388 million

Fund size as of July 31, 2018

USD 4,000 million

Debt Capital Markets

Multilateral and Bilateral LoansOther Non Financial Public Sector Financial Assets

Sources of

Funds

Lines of defense to finance Economic Growth

18

“solarize” Debt and develop local debt capital markets

6457

4634

530 49

59

31

145 7

2004 2009 2014 2018*

Dollars Soles Other

Composition of Public Debt by Currency(% of total debt)

Liability Management (LM) 2014-2017(Millions of dollars)

2 115

500

1 303

545

1 250 1 2321 120

3 042 3 084

BS 24 BG 50 BS 31 BG 50 BG 27 BG 26 BG 30 BS 28 BS 32

LM 2014 LM 2015

LM 2016 LM 2017

USDEURsoles • No USD paper

• No New money

* Jun. 2018

19

Peru has significantly increased its Soberanos debt stock by focusing on international format debt issuances (GDNs and Euroclear)

Soberanos

USD Global Bonds

Debt Capital Markets

linkers Treasury bills

EUR Global Bonds

Local Market

International Market

Development of the debt market through sovereign

bond issues in soles

Taking advantage of Windows of opportunity to

maintain liquidity/efficient yield curves

Local GDN’s

Since 2005, Peru has successfully increased its

Soberanos (PEN) debt stock by 10.9x compared to a

growth of 1.8x for its Global Bonds (USD and EUR) debt

stock…Sovereign bonds and Global bonds

(soles MM, USD/EUR MM, nominal)

6 513 8 571 9 458 11 440 11 548

11 548

8 092

26 008

32 961

44 849

86 399 88 270

dec-05 dec-10 dec-13 dec-15 dec-17 aug-18

Global Soberanos

10.9x

1.8x

Euroclear

20* Aug. 2018

The solarization strategy has been successful in improving market Liquidity in primary and secondary markets

Secondary Market Activity(PEN million)

-

3 500

7 000

10 500

14 000

Jan

Ma

r

Ma

y

Jul

Se

p

Nov

Jan

Ma

r

Ma

y

Jul

Se

p

Nov

Jan

Ma

r

Ma

y

Jul

Se

p

Nov

Jan

Ma

r

Ma

y

Jul

2015 2016 2017 2018

+42%

+56%

Monthlyaverage

4,853

Monthlyaverage

6,906

Monthly average10,760

Monthlyaverage14,211

+32%

Primary Market Activity(PEN million)

0

2 000

4 000

6 000

8 000

10 000

12 000

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8*

21* Aug. 2018

Diversification of non- resident investor base for local bonds

30%

33%

36%

39%

42%

45%

48%

51%

7.840% Aug 2020s

S/ 4,196 millions

Date.; Nov 10

5.700% Aug 2024s

S/ 7,128 millions

Date; Nov 14

55%

6.950% Aug 2031s

S/ 4,392 millions

Date; Mar 15

6.350% Aug 2028s

S/ 10,251 millions

Date; Sep 16

Sovereign Bonds: Non- resident investors (% of total investors)

45%52%

47%

Issuances Benchmark Issuance of S/ 10.3 billion

6.35% Sovereign Bonds 2028

(One of the largest local

currency issues in emerging

markets, the same that

reduced liabilities in USD)

6.150% Aug 2032s

S/ 10,000 millions

Date; Jul 17

Issuance S/ 10 billion 6.15%

Sovereign Bonds 2032

(Issuance that had a demand

exceeding 30bn and that was

settled through Euroclear)

* 41.9%

70%

22

However, while the Republic has focused on “Solarization”, it remains committed to both its USD and EUR curves

Provide better liquidity

Lower risk of funding by diversifying

markets

Diversify currencies looking for natural

hedges

Continue to grow the depth and breadth of

its high quality investor base

Increase investor pool

Windows of opportunity in USD and EUR

Carlos Oliva Neyra. Minister of Economy and Finance

“PERU: LEADING GROWTH ACROSS THE REGION”

PERUMacroeconomic overview

September 14th., 2018