Interview: Francis Stenning
The BVL is dominated by mining companies. How can other industries be encouraged to list?
FRANCIS STENNING: Peru has traditionally been a mining country, so it is only natural that the exchange has a strong presence of mining firms. As the economy develops and diversifies, we see it as an equally natural process that the exchange will develop and diversify as well. And while we see this as a natural evolution, we also realise it is our responsibility to facilitate the listing of companies from other sectors. This means working to ensure companies are aware of the benefits of listing, working to lower the barriers to entry and structuring new products to allow these sectors to look at listing as a real possibility. There are several sectors particularly poised to capitalise on Peru’s growing capital markets sector.
For example, owing to the tremendous growth in the economy over the past decades, we have seen a lot of development in the retail and consumption-related sectors. Given the country’s demographics, these sectors are expected to continue to exhibit strong growth and thus be strong contenders for listing on the exchange. Additionally, we are looking to provide access to the market for the cajas (savings banks) and other medium-sized enterprises to help them grow.
Finally, we are still exploring the listing of state companies and know the exchange would be a valuable tool for their growth, but certain political and corporate governance rules would have to be ironed out to make this a possibility. Still, there has been success in other markets and we think the same could be seen here.
Peru is a relatively small market with generally small businesses. How can the listing of small and medium-sized companies be facilitated?
STENNING: In Peru, as in many other markets, there is a perception that the stock exchange is just for mega-enterprises or multinational corporations. There is a lack of a capital markets culture in the corporate sector and we are working to change this so that companies see the exchange as a tool, not only in terms of access to the market but also as a means to add value to their companies. There is definitely a growing awareness in the market that to capitalise on the breakneck growth that has been seen and is expected in future years, companies should start to consider tapping capital markets to assist with their development and expansion plans.
To facilitate this, we have created an alternative segment for which certain costs and requirements are lowered, as has been instituted in many other markets. This segment is characterised by a bit more risk, not because of the viability of these companies, but because of their size and liquidity. Additionally, through the Avanza BVL programme, we work with identified companies that have the most potential to list over the long term and provide these companies with guidance and a sort of roadmap with listing as the end goal.
To what extent will the capital markets reform passed in June 2013 most benefit the exchange?
STENNING: The immense growth of the finance sector in general and the economy as a whole has not translated to equal growth in the capital markets. Given the huge liquidity in the banking system, companies continue to use the banks as their primary funding mechanism. However, the maturity of a country’s economy is reflected in the strength of its capital markets sector, and we see it as imperative to encourage more companies to view capital markets as viable alternatives to traditional funding mechanisms.
The measures approved in the recent stock market reform will simplify access to the market for possible entrants by eliminating some bureaucracy. In addition to this, we want to lower costs, not only in the areas of listing and trades, but also certain taxes that are undermining the BVL’s competitiveness. Finally, as the Integrated Latin American Market continues to expand, Peru needs to commit itself more strongly to this project by opening the market up a bit more as well as by encouraging more competition. Such steps will certainly benefit the finance sector in the long run.
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