As of December 2011, foreign direct investment (FDI) in Peru was up 2.54% over the year prior. While Spain topped the charts as a lead investor in 2011 and mining activities were the primary recipient of FDI, going forward leaders from both the public and private sectors hope to attract a growing number of international investors to participate in Peruvian stocks and bonds, and several organisations have been established to promote the country’s capital markets abroad.
One organisation working to promote investment in Peruvian equities and other financial instruments is the recently formed association, inPERÚ. It is supported by an array of private sector participants, including the Lima Stock Exchange (Bolsa de Valores de Lima, BVL), the Association of Pension Funds and the National Confederation of Private Businesses. Together these groups are developing a series of international road shows with public leaders from the Central Reserve Bank, the Ministry of Economic and Finance, ProInversión, and the Ministry of Tourism and Foreign Trade.
ON THE ROAD: InPERÚ’s first road show took place on April 16-18, 2012 in London. Additional road shows are scheduled in New York City, Singapore, Hong Kong and Shanghai. Each event will focus on providing potential investors with information about how to invest in Peru’s capital markets through stocks, bonds and private equity, as well as other investment opportunities. Leaders from the business community and regulatory officials will also be on hand to address questions concerning tax law, market regulation and the political climate.
Melvin Escudero, CEO of El Dorado Investments, said, “Normally an international investor with his or her eyes on Peru would have to fly to Lima for a week and schedule four-five meetings a day in order to understand the market and the scope of opportunities. With inPERÚ, we are essentially bringing this experience to investors in the comfort of their own surroundings.”
Escudero commented that fixed-income assets are one of the investment opportunities that inPERÚ hopes to highlight. “Due to the economic crisis, fixed-income assets in the US and Europe are performing poorly, with 5-10 year rates of 2-3%. In Peru, the economy is growing, debt is under control and internal demand is increasing. These factors have allowed our 5-10 year rates on fixed-income assets to grow to around 5-8%. This represents an opportunity for European pension funds, for example, to diversify their holdings with safe assets that offer interesting returns.”
Further, Peru’s equity market has shown exciting growth over the last several months. While most emerging market equities were negatively impacted by the economic crisis, Peru’s included, the BVL has since recovered. As of mid-March 2012, the BVL’s General Index (IGBVL) was up 19.1% year-to-date, according to Inteligo SAB’s weekly report published on March 16. “When you look at price-to-earnings ratios adjusted for growth, Peruvian equities are very attractive in comparison to US and European stocks,” said Escudero.
MARKET IMPROVEMENTS: Procapitales, a member of inPERÚ and a trade association of participants in the Peruvian capital markets, takes a slightly different approach to promoting investment in the country’s capital markets. Procapitales’ participants include Peru’s largest pension funds, banks and mutual funds, among others. Its mission is to become a leading promoter of private investment in Peru, by focusing primarily on issues concerning corporate governance. Aldo Ferrini, chief investment officer for the Integra pension fund and Procapitales participant, explained to OBG, “Procapitales works closely with regulators to create a unified vision and implementation plan for good corporate governance.” The organisation hopes market improvements such as this will attract greater capital flows to the country in the long run.
“Investment is key to maintaining growth rates above 6%,” announced Luis Miguel Castilla, the minister of economy and finance, at a local press conference in March 2012. To this end, the efforts of inPERÚ and Procapitales will be crucial in promoting the country’s capital markets and ensuring steady growth.
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