The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.

We believe the Peruvian economy will decelerate in 2012, a view which has been reinforced by Q211 GDP data. Perus growth trajectory will be supported by a growing private sector and a likely uptick of public spending in 2012, although uncertainty surrounding the outlook for fiscal expenditure poses risks to our growth projections beyond 2012.

While public expenditure should pick up, we still see private consumption being the main driver of growth as incomes rise and consumer credit becomes more widespread, boosting import volumes at ports. Private consumption grew by 6.4% y-o-y in Q211 and added 4.3 percentage points to the headline growth rate. Thus, consumers do not seem to have been significantly affected by the decline in government spending in Q211. Furthermore, we see strong potential for growth in private consumption 2011 and 2012 as Humala focuses on boosting the disposable income of the poorest segments of Peruvian society.

Headline Industry Data

- We expect growth of 8.6% in total tonnage throughput at the port of Callao, to 20.2mn tonnes.
- We predict air freight volume to increase 8.7%, to 266,000 tonnes in 2012.
- We expect rail freight carried (volume x distance) to grow an impressive 8.0%, to 1.3bn tonnes/km in 2012.

Key Industry Trends

Future Looks Bright For Peruvian Ports As They Position Themselves As Gateway To Asia

BMI notes upside risk to our forecasts for the Peruvian port of General San Martín, due to the governments announcement that it would concession the port before the end of 2011. BMI believes the port is well placed to take advantage of Asian demand for Perus natural resources, particularly copper, and as such we expect the concession to attract plenty of international interest.

Peru Aims To Close Port Investment Gap, Improvement Needed Across Freight Sector

BMI maintains its view that Peru is well placed to position itself as a gateway to Asia for Latin American exports. However, efforts to do so may be stymied by the lack of investment in infrastructure.

It seems the government is now trying to close the gap in funding to improve competitiveness and efficiency, with a US$2bn investment in the port sector. The news bolsters our view that Peru has the potential to become a regional logistics centre, providing strong growth opportunities for shippers and shipping lines.

Push To Become Gateway To Asia Continues

Perus push to position itself as South Americas gateway to Asia continues. Private investment promotion agency Proinversión was expected to award a tender for the much-feted transcontinental railway project in Q411. The news bolsters our view that Peru has the potential to become a regional logistics centre, providing strong growth opportunities for shippers and shipping lines. BMI believes that when completed the railway will allow Peru to take advantage of Brazils rapidly increasing raw material exports to China.

Key Risks To Outlook

BMI believes risks to our Peruvian port and shipping forecasts are mainly on the upside, with increased private consumption possibly leading to greater demand for containerised goods. Despite concerns during the presidential campaign, we expect consumption to benefit from President Ollanta Humalas economic policies. Humalas new economic plan does not include increasing taxes on consumers. In fact Humala will seek to reduce VAT in the coming years, supporting consumer demand.

Downside risks come in the form of a possible slowdown in Chinese demand, which would hit shipments of copper and other raw materials from Peru.