Peru Business Forecast Report Q3 2012

Executive Summary
Core Views
Major Forecast Changes
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
No End To Humala's Challenges
President Ollanta Humala has managed a difficult political situation relatively well since his July 2011 inauguration
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Mining Disputes Main Threat To Stability
Peru's long-term political stability is undermined by key structural risks, most prominently associated with mining and hydrocarbon
exploration in the Amazon region
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Growth Outlook Strong, But Risks Loom
Our growth outlook for Peru over the next few years remains relatively strong owing to robust infrastructure and mining sector project
pipelines and a growing consumer story
TABLE: ECONOMIC ACTIVITY
Balance Of Payments
External Accounts Stable, Some Risks Remain
Peru's current account will remain in deficit for the foreseeable future, as a rising income account deficit offsets the substantial trade
surplus
TABLE: CURRENT ACCOUNT
Monetary Policy
Rates To Remain Low Through 2013
We forecast Peru's central bank holding the policy rate at 4 25% until 2014 This comes as disinflationary pressure reduces the need for
a hike in the short term, and persistent global macroeconomic threats inform our view for rates to remain low through to end-2013
TABLE: MONETARY POLICY
Fiscal Policy
Back To Red For The Fiscal Accounts
As revenue growth moderates and spending picks up, we forecast Peru's fiscal accounts to return to deficit this year
TABLE: FISCAL POLICY
Exchange Rate Policy
PEN: Strong For Now, Weakness In 2013
Since our last update, the Peruvian nuevo sol has weakened 1 6% after hitting a new 15-year high in early May (see our online service,
March 19, 'PEN: Strong Until 2013')
TABLE: EXCHANGE RATE
Banking Sector
Strong Banking Sector Growth To Continue
After a rapid recovery in 2010, Peru's commercial banking sector appears to have shifted onto a more stable growth trajectory as of late
2011, as we argued would be the case in our Q411 update
Regional: Sovereign Risk Ratings
More Relative Value Ahead
The gap between our sovereign risk ratings and investors perceptions of regional sovereign risk has increased since our last update
This implies significant potential for relative value plays over the coming quarters
LATIN AMERICA SOVEREIGN RISK RATINGS – EVOLUTION OF ABILITY TO PAY
LATIN AMERICA SOVEREIGN RISK RATINGS – EVOLUTION OF WILLINGNESS TO PAY
Regional Economic Activity
Are The Good Times Over?
Political and economic risks to Latin America's investment profile are combining with bearish technical moves in financial markets,
suggesting the region could be on the brink of a sizeable deterioration in investor sentiment
Chapter 3: 10-Year Forecast
The Peruvian Economy To 2021
Solid And Sustainable Growth Ahead
Economic growth in Peru will moderate to an average growth rate of 4 8% over the next 10 years However, we believe that the
economy is well positioned to avoid a painful correction, although some imbalances need to be addressed to shift the economy onto a
more sustainable growth trajectory
PERU LONG-TERM MACROECONOMIC FORECASTS
Chapter 4: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings
Business Environment Outlook
Introduction
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS
TABLE: BMI LEGAL FRAMEWORK RATING
Infrastructure
TABLE: LABOUR FORCE QUALITY
Market Orientation
TABLE: LATIN AMERICA, ANNUAL FDI INFLOWS
TABLE: TRADE AND INVESTMENT RATINGS
Operational Risk
Chapter 5: Key Sectors
Freight Transport
TABLE: RAIL FREIGHT, 2008-2016
TABLE: AIR FREIGHT, 2008-2016
TABLE: MARITIME FREIGHT – THROUGHPUT, 2008-2016 ('000 TONNES)
Power
Executive Summary
TABLE: PERU TOTAL ELECTRICITY GENERATION DATA AND FORECASTS, 2008-2016
Other Key Sectors
TABLE: AUTOS SECTOR KEY INDICATORS
TABLE: FOOD AND DRINK SECTOR KEY INDICATORS
TABLE: INFRASTRUCTURE SECTOR KEY INDICATORS
TABLE: OIL AND GAS SECTOR KEY INDICATORS
TABLE: PHARMA SECTOR KEY INDICATORS
TABLE: TELECOMS SECTOR KEY INDICATORS
Chapter 6: BMI Global Assumptions
Global Outlook
World Slows As Euro Crisis Simmers
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES REAL GDP GROWTH FORECAST
TABLE: REAL GDP GROWTH CONSENSUS FORECASTS
TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST 55