South America News

Peru Sells $1.1 Billion of Bonds Overseas Eight Months After Shelving Deal

2012-01-25T14:04:00.000-08:00

Peru sold $1.1 billion of bonds in the country’s first overseas offering since 2010.

The Andean nation sold $500 million more of its 5.625 percent dollar bonds due in 2050 to yield 5.37 percent, or 225 basis points more than similar-maturity U.S. Treasuries, according to a person familiar with the transaction. It also issued $600 million more of its sol-denominated debt due 2031 to yield 6.875 percent, said the person, who asked not to be identified because he’s not allowed to speak publicly.

The sale comes eight months after Peru first shelved plans to tap international markets because the country’s presidential elections and turmoil in European financial markets curbed investor demand. Brazil, Colombia and Mexico have also sold bonds overseas this month as growing demand for emerging-market securities pushed down borrowing costs.

“Latin America continues to be in a very positive investment light,” Enrique Alvarez, head of fixed-income research at IdeaGlobal, said by phone from New York. “As matters worsen in Europe, that accelerates the trend of investors looking for what are perceived to be higher yields in safer sovereigns.”

Peru sold $1 billion of notes due in 2050 in November 2010. The yield on the securities rose four basis points, or 0.04 percentage point, to 5.34 percent at 3:47 p.m. in Lima, leaving it up 22 basis points in the past month.

‘Additional Supply’

Yields rose on longer-maturity Peruvian bonds “mostly because of the additional supply” from today’s issue, said Daniel Chodos, a New York-based strategist with Credit Suisse AG, in an e-mail.

The sol weakened 0.1 percent to 2.6940 per U.S. dollar, from 2.6920 yesterday, according to Deutsche Bank AG’s local unit.

Fitch Ratings raised Peru’s foreign-debt rating to BBB, the second-lowest investment grade, from BBB- on Nov. 10, citing moves by President Ollanta Humala to negotiate an increase in mining royalties and maintain economic policies that fueled a decade of region-beating economic growth.

Rising public and private investment will spur 5.5 percent growth in Peru this year, the fastest in the region, after a 6.8 percent expansion last year, central bank President Julio Velarde said Dec. 16.

Humala’s Cabinet

South America’s sixth-largest economy has grown an average 6.4 percent annually in the past decade as rising demand for the country’s copper, gold and natural gas reserves lured foreign investment.

Humala, a former army officer who took office July 28, revamped his cabinet last month as he seeks to speed up the resolution of social conflicts slowing investment in new mines. Peru is the world’s number three copper and zinc producer and sixth in gold.

“It would have been unthinkable six or seven years ago that Peru would be able to sell 40-year bonds,” said Aldo Ferrini, the head of investments at AFP Integra, the country’s second-largest private pension fund. “It shows Peru’s an issuer that respects the rules of the game and is striving to become a more developed country.”

The government probably offered 2031 sol-denominated bonds payable in dollars as it seeks to increase the proportion of public debt in local currency while averting a surge in demand for soles from investors participating in the offering, Ferrini said. Integra is among the bidders in today’s offering, he said.

“Peruvian papers are as sought after by locals as they are by foreign investors,” he said.

To contact the reporters on this story: Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net; John Quigley in Lima at jquigley8@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

Peru Port Operator Andino Investment Halts IPO for Second Time on Price

2012-01-19T09:16:00.000-08:00

Port of Paita

Andino Investment Holding SA (AIHC1) delayed its stock trading debut in Lima for a second time as the port operator makes changes to the initial public offering’s proposed price.

A new date and price for the IPO will be set “in coming days,” Andino said in a statement posted on the Lima securities exchange’s website yesterday.

Andino planned to raise about $60 million in Peru’s first IPO in more than a year to help prepay part of an $85 million loan from Goldman Sachs Group Inc. (GS) and invest in a $250 million expansion of the northern coastal port of Paita.

The company, based in Lima, had registered to sell 15 million to 35 million shares at a reference price of 4.70 soles, according to the prospectus published on the Lima exchange’s website. Andino was scheduled to stop taking orders for the shares at 2 p.m. local time today.

The IPO would be Peru’s first since fishmeal producer Pesquera Exalmar SAA (EXALMAC1) sold $100 million of stock in November 2010, according to data compiled by Bloomberg.

Peru’s port operators will invest $3 billion in expansion projects over the next four years to handle rising metals, gas and fishing exports according to the country’s port authority.

Mining, construction and agricultural companies may sell shares for the first time this year to fund expansion projects, Francis Stenning, chief executive officer of Bolsa de Valores de Lima, which operates the exchange, said in a Dec. 20 interview.

To contact the reporter on this story: Alexander Emery in Lima at aemery1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

Peru to promote garments at Magic Show Las Vegas

2012-01-17T06:51:00.000-08:00

Promperu, the export and tourism promotion agency of Peru, will participate in the Magic Show Las Vegas to promote the country’s garment sector.

Magic Show Las Vegas is the biggest and comprehensive trade event for the world fashion industry, which is famous for the variety and quality of products presented there.

Each edition of the event attracts about 70,000 visitors, which includes representatives of retailers, chain outlets and boutiques.

Along with Promperu, a delegation comprising of 10 representatives of small and medium-sized enterprises (SMEs) from Peruvian garment industry would also participate in the event slated to take place in Las Vegas, Nevada, US from February 12 to 15, 2012.

The 10 enterprises are the ones covered under the project ITC Peru/Alpaca- Access to the US market for enterprises led by Women, which aims to promote garment manufacturing businesses to cater to the demands of the world market.

Promperu said it would present the world with an idea about Peru’s garment industry at the Magic Show Las Vegas, Fibre2fashion reported today. (Andina)

Corn Crops Will Lose 11 Million Tons in South America Because of Drought

2012-01-12T15:12:00.000-08:00

Corn crops in Brazil and Argentina, which produce 30 percent of the world’s exports, will lose 11 million metric tons of output after a drought caused “irreversible” damage, forecaster Agroconsult said.

Growers in Argentina will harvest 20 million metric tons of the grain in the current harvest, compared with 27 million tons estimated last month, Andre Pessoa, head of Agroconsult, said in Sao Paulo today. Brazil’s corn forecast was cut to 61 million tons from 65 million tons, he said.

Corn has jumped 12 percent in a month in Chicago trading as dryness and heat caused by the La Nina weather pattern harm crops in South America. Brazil is the third-largest producer of corn after the U.S. and China. Argentina is the second-largest exporter of the grain after the U.S.

“The situation in the countryside is very bad,” Pessoa said. “Losses in corn crops in Rio Grande do Sul and Santa Catarina are irreversible,” he said, referring to Brazil’s two southernmost states.

In Mexico, the world’s fourth-largest corn producer, growers are also expected to lose production because of a drought. The country will likely produce between 22 million and 23 million tons of the grain this year, less than the 24.5 million tons previously forecast, Agriculture Minister Francisco Mayorga said on Dec. 16.

La Nina

The recurring La Nina event may have caused more damage this season than in 2009, when South American corn production slumped after the worst drought in 70 years parched Argentine crops, the Argentine Association of Regional Consortia for Agricultural Experimentation, a farming group, said on Jan. 6.

Potential yields in Argentine corn crops that were planted early will drop 20 percent, forecaster Commodity Weather Group LLC said yesterday.

The U.S. Department of Agriculture cut its forecast for corn production in Argentina today to 26 million tons from 29 million estimated in December. It kept the forecast for Brazil’s corn crop at 61 million tons.

Soybean output in South America will also be harmed by the dry spell, Pessoa said. Agroconsult cut its forecast for soybean production in Argentina to 49 million tons from 53.5 million tons, while reducing the outlook for Brazil to 73.5 million tons from 75.2 million tons estimated last month.

Corn futures for March delivery rose 0.9 percent to $6.575 a bushel at 8:45 a.m. in Chicago. Soybean futures rose 0.3 percent to $12.06 a bushel.

To contact the reporter on this story: Lucia Kassai in Sao Paulo at lkassai@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

Peru to become the 26th largest economy in the world by 2050

2012-01-11T19:55:00.000-08:00

Peru will become the 26th largest economy in the world by 2050 reporting the second fastest growth among emerging economies in the next four decades, HSBC predicts.

According to its report “The World in 2050”,Peru will jump 20 places to become the 26th largest economy by 2050 helped by demographics and rising education standards.

HSBC projects Peru should average annual growth of 5.5 percent over the same period while the Philippines economy is poised to grow by an average of 7 percent annually over the next 40 years.

The Philippines will register the fastest growth among emerging countries and will leapfrog 27 places to become the 16th largest economy by 2050.

The bank expects China to overtake the United States as the world's biggest economy by 2050, and says strong growth rates in other developing countries will help drive the global economy.

"Plenty of places in the world look set to deliver very strong rates of growth. But they are not in the developed world, which faces both structural and cyclical headwinds. They are in the emerging world," the bank said in its report.

It based its forecasts on fundamentals such as current income per capita, rule of law, democracy, education levels and demographic change. (Andina)

Exxon Mobil delegation visits Peru this week

2012-01-10T20:07:00.000-08:00

A delegation from U.S. based Exxon Mobil will visit Peru around midweek to enquire about the country's oil potential, Aurelio Ochoa, the president of the state licensing agency for hydrocarbon exploration, Perupetro said.

Exxon Mobil, one of the main oil companies worldwide, operates in more than 40 countries. Its activities include the exploitation, production and marketing of oil products and natural gas, as well as the chemical, plastics and fertilizers manufacturing.

"This week we will welcome Exxon Mobil's vice-president of exploration, who has made an appointment in Petroperu to address the issue," Ochoa said in statements to Andina.

He commented that the visit of top executives from Exxon Mobil is the result of a promotion campaign, carried out by Petroperu in October 2011, which highlighted Peru's geological potential through a virtual office in Houston (United States).

Likewise, Ochoa pointed out that a Chinese firm, which mainly operates in Asia, has arranged an appointment with Petroperu's technicians to find out the hydrocarbon potential of the Andean country. (Andina)

Chile Swap Rates Surge as Inflation Unexpectedly Exceeds Central Bank Goal

2012-01-06T09:17:00.000-08:00

Foto: Sanhattan - Centro Financiero de Santiago de Chile

Chilean interest-rate swap yields (YCSW0193) rose the most in 10 weeks after a report showed prices rose at their fastest pace in almost three years, exceeding estimates and the central bank’s inflation target.

The one-year swap rate soared 17 basis points, or 0.17 percentage point, to 4.68 percent as of 10:50 a.m. in Santiago. The two-year swap rate climbed 13 basis points to 4.56 percent.

Chilean consumer prices (CNPINSMO) jumped 0.6 percent last month, triple the median forecast of economists surveyed by Bloomberg and double the pace predicted in the inflation forwards market. Annual inflation was 4.4 percent, the highest since April 2009.

The readings mean the central bank won’t reduce borrowing costs at its next meeting, as had been forecast by 50 of the 58 investors in a central bank survey Dec. 20, said Juan Pablo Castro, an economist at Banco Santander Chile.

“There is an almost zero probability that the central bank will cut rates in January,” Castro said from Santiago. “The central bank forecast was off by 50 basis points in just one month. That’s a warning signal that the bank will be more cautious in observing whether this inflation phenomena reverses or not.”

The bank, which targets inflation of 2 percent to 4 percent over two years, has kept its key interest rate at 5.25 percent for six months after raising it five times in 2011.

Policy makers said less than three weeks ago that they expected inflation to end this year at 3.9 percent. The median estimate of 12 economists surveyed by Bloomberg was for consumer prices to climb 4 percent in the year.

Inflation Outlook

The bank forecast 2012 inflation of 2.7 percent and growth slowing to between 3.75 percent and 4.75 percent from 6.2 percent this year. That scenario still seems reasonable, said Dalibor Eterovic, chief economist at Banco Security in Santiago.

“It’s hard to think that Chile is going to decouple from the rest of the world and maintain its dynamism and inflation,” he said. “We still think a 25 basis point cut is more likely, but the risks to that forecast have risen. The higher inflation could lead the committee to consider that, while the conditions are there, they can afford to wait another month.”

Brazilian consumer prices rose 0.5 percent in December, slower than the 0.55 percent median forecast of 47 analysts.

Implied Inflation

Inflation-linked swap rates plunged. The six-month swap fell 45 basis points. Six-month break-even inflation, which measures the likely future average rate of price rises discounted by the swaps market, rose 55 basis points to 2.86 percent, the highest since July, according to prices compiled by Bloomberg. One-year break-even climbed 35 basis points to 3.13 percent, breaching 3 percent for the first time in almost two months.

The two-year nominal swap rate has climbed 31 basis points in a week since data showed manufacturing grew faster than forecast in November.

Offshore investors in the Chilean peso forwards market lowered their short position in the currency against the U.S. dollar to $5.7 billion on Jan. 3 from $6.1 billion on Dec. 30. That is a $407 million bet on the Chilean peso in the first two days of the year.

Core consumer prices, which exclude fuel and produce, increased 0.7 percent in December from November.

To contact the reporter on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net or Randall Woods in Santiago at rwoods13@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

Entry into Thai market to strengthen Peruvian position in Asia

2012-01-04T18:56:00.000-08:00

The free trade agreement signed between Peru and Thailand –which came into effect on December 31- will allow for the diversification of Peruvian exports in Asian markets and become an option to what is happening in Europe and the United States, said the Peruvian Exporters' Association (Adex).

The head of said institution, Juan Varilias, pointed out that even if the trade balance for Peru was negative in 163.7 million dollars between January and October 2011, there is an interesting evolution over the last years thanks to new products such as natural gas and others with value added.

Varilias went on to say that the Early Harvest Protocol signed between Peru and Thailand, which seeks to speed up liberalization of trade in goods and its additional protocols also contributes to turn Peru into a hub between eastern Asia and South America.

Eighty-eight percent of Peruvian exports to Thailand between January and October were mainly traditional products such as natural gas, zinc and copper.

Furthermore, there is an increase in the exports of non traditional products, mainly from the Fishery, Agricultural and Agribusiness sub-sectors.

Moreover, Varilias said Peru must keep working to be more competitive on an international scale, promote technological development and innovation in order to win a position in an international context.

“We have a significant availability of raw materials and natural resources which are important to promote said development,” he said. (Andina)

Colombia joined Peru, Panama, Chile, Brazil and Mexico as investment-grade countries

2011-12-28T09:51:00.000-08:00

Dollar bonds of Latin American nations from Panama to Uruguay provided the best returns in emerging markets this year, a rally that may extend into 2012 as lower debt and higher foreign reserves limit the effects of the European debt crisis.

Panama’s notes advanced 16 percent this year with annual volatility of 4.5 through Dec. 27, giving them a risk-adjusted return of 3.5 percent, according to data compiled by Bloomberg and JPMorgan Chase & Co. Uruguay’s notes returned 20 percent with volatility of 6.3 for a 3.2 percent risk-adjusted return. Seven of the top 10 bond markets were in Latin America, while debt from Pakistan and Egypt fell the most, the data show.

Latin American nations won 12 credit-rating or outlook upgrades as Panama’s $13.5 billion infrastructure investment plan boosted growth, Colombia pledged to cut its budget gap in half and Uruguay boosted foreign reserves 27 percent in a year. Shrinking debt ratios and higher ratings make the region’s bonds less susceptible to a slowing global economy while Europe’s recession may keep Hungarian and Turkish bonds lagging behind, according to Aviva Investors and Aberdeen Asset Management Plc.

“Latin America, despite the global slowdown expectations next year, is an area of relative calm,” said Jeremy Brewin, who helps manage about $4 billion as head of emerging-market debt at Aviva in London. “It feels like a safe haven.”

Stocks Plunge

The region’s bonds gained 13 percent this year on average, outpacing the 2.1 percent advance in emerging Europe and 8.7 percent increase in Asia, according to JPMorgan’s EMBI Global Index. Latin American bond yields fell 45 basis points, or 0.45 percentage point, on average to 6.53.

Their return to volatility ratio was 2.3 percent, compared with 0.3 percent in developing European nations and 1.7 percent in Asia. The same risk-adjusted return ratio for Latin America debt was 2 percent in 2010 and 3.2 percent in 2009.

Dollar debt handed investors the highest returns with the smallest price swings among developing-country assets this year. Dollar bonds gained an average 8.2 percent with volatility of 4.8, according to data compiled by Bloomberg and JPMorgan. Emerging-market stocks (MXEF) lost 20 percent with volatility of 23, while local-currency bonds lost 1.1 percent in dollar terms with volatility of 11, according to Bloomberg, JPMorgan and MSCI Inc. data.

Debt Reduction

Latin America is the only region that has reduced government debt as a percentage of gross domestic product in the past two years as countries including Brazil cut fiscal stimulus to contain inflation after economic growth quickened. Gross debt declined on average to 50 percent of GDP from 51 percent in 2009, according to the International Monetary Fund. Eastern Europe’s debt-to-GDP rose to 46.7 percent from 45.4 percent while Asia’s climbed to 35 percent from 31 percent.

Brazil’s debt equaled 65 percent of GDP, down from 68 percent in 2009, according to the IMF, as President Dilma Rousseff cut 50 billion reais ($27 billion) from this year’s budget to help the central bank rein in the fastest inflation in six years. Hungary’s ratio rose to 80 percent from 78 percent in 2009 as slower growth reduced revenue, according to the Economy Ministry. Poland’s increased to 56 percent of GDP from 51 percent, the IMF data shows.

Latin America’s foreign-currency reserves are set to increase 18 percent this year to a record $772 billion, compared with an increase of 13 percent in Eastern Europe, including Russia, according to the IMF.

Chile Upgrade

Improved credit ratings have allowed Latin America’s debt to benefit the most from a rally in U.S. Treasuries, the benchmark for emerging-market assets, as investors shun riskier securities in Eastern Europe, according to Viktor Szabo, who helps manage about $7 billion in emerging-market debt at Aberdeen in London. Colombia won an investment grade rating from all three major rating companies this year while Chile was raised by Fitch Ratings in February to A+, the fifth-highest level.

“The tendency is for Latin America to continue to improve,” said Szabo, who has an overweight position in Latin America debt and underweight in European securities. “There will be more capital flight from Eastern Europe to Latin America.”

Paul McNamara, who oversees $7 billion at GAM Investment Management, said Eastern Europe’s higher yields will make countries such as Poland more attractive than Brazil next year as European policy makers move to contain the debt crisis.

‘Cheap’ Europe

At 4.87 percent, yields on Poland’s dollar bonds due in 2021 were 148 basis points higher than similar-maturity Brazilian notes. The gap has increased 87 basis points since April, when Poland issued the bonds. Poland is rated A- at S&P, two steps above Brazil’s BBB rating.

“You don’t get a lot of upside in Latin American credit,” McNamara said in a telephone interview from London. “It’s time to start to look at central and Eastern Europe. That’s what looks cheap. Europe will have a pretty nasty recession, but we don’t get a breakup of the euro zone.”

Panama’s dollar borrowing costs fell 107 basis points to 4.17 percent this year, compared with an average decline of 10 basis points among emerging markets, according to JPMorgan indexes.

The $44-billion economy is likely to grow 10 percent this year, the fastest pace since 2008, Finance Minister Frank De Lima said on Nov. 30, fueled in part by an expansion of the Panama Canal. Moody’s raised in August the outlook on Panama’s Baa3 credit rating to positive, citing the country’s “favorable debt dynamics.” The government plans to cut debt to 40 percent of GDP by 2014 from 43 percent this year.

Colombia’s Budget

Yields on Uruguay’s benchmark bonds due in 2022 fell 148 basis points this year and reached a record low of 3.81 percent on Dec. 21, after stronger trade with Brazil, Latin America’s largest economy, helped the government reduce debt to the equivalent of 44 percent of GDP from 50 percent in 2008.

Colombia’s bonds rose 14 percent this year, based on JPMorgan’s EMBI Global Index, following a gain of 11 percent in 2010 and 17 percent in 2009. The nation’s debt handed investors a risk-adjusted return of 2.6 percent in 2011, according to data compiled by Bloomberg.

Colombia joined Peru, Panama, Chile, Brazil and Mexico as investment-grade countries after lawmakers passed legislation that targets a central government deficit of no more than 2.3 percent of GDP in 2014, down from an estimated 4 percent this year.

Pakistan, Egypt

“This is an environment where fundamentals prevail,” said Enzo Puntillo, who oversees $1.5 billion of assets as head of emerging-market fixed income at Swiss & Global Asset Management AG in Zurich. “These countries are all higher quality converged or are converging to full investment-grade status. They are at lower risk of Europe banking contagion risk.”

Pakistan’s bonds were among the worst performers in emerging markets this year, falling 9.5 percent with volatility of 8, for a risk-adjusted return of -1.2 percent, as floods and terror attacks slowed foreign investment. Egypt’s debt was the next worst, slumping 11 percent with swings of 11 for a risk- adjusted return of -1 percent, as the popular revolt that toppled President Hosni Mubarak in February shut the country out of international bond markets.

Debt issued by Belize, a Central American country with a population of fewer than 200,000, was the biggest decliner, losing 24 percent with volatility of 16 for a risk-adjusted return of -1.5 percent.

Scarcity Value

Latin American countries including Brazil are reducing overseas debt sales as demand grows for their local bonds. Brazil’s foreign-currency debt fell to 80.9 billion reais ($43.5 billion) in November from 204 billion reais at the end of 2004, while its real-denominated bonds rose to 1.8 trillion reais from 810 billion reais, according to the Treasury.

Latin America’s foreign debt fell to 20 percent of GDP this year from 37 percent in 2004 while Asia’s dropped to 15 percent from 23 percent, according to the IMF data. Eastern Europe’s foreign debt rose to 66 percent of GDP from 50 percent.

The cutback in Latin American overseas offerings is creating a shortage of the region’s dollar bonds that’s helping drive up their prices, said Carlos Legaspy, who manages about $300 million at San Diego-based Precise Securities.

“Diminishing supply, good fundamentals, relatively good liquidity with yields not that low,” Legaspy said. “All these reasons have made it attractive for a fixed-income investor.”

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net Nathan Gill in Quito at ngill4@bloomberg.net.

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

Standard & Poor's announces Peru's top 20 companies

2011-12-27T19:38:00.000-08:00

Standard & Poor's (S&P) Ratings Services presented the "Top 20 Peruvian companies" report that focuses on a selected group of entities which S&P considers to be among those with the best credit quality in the country.

According to associate director of said rating agency Diego Ocampo, the position of each of the firms making up the list reflects the country's economy. Thus, the leading firms belong to the mining, energy and telecommunications sectors, as well as retailers.

The “Top 20 Peruvian companies” report includes Alicorp, Buenaventura, Corporacion Lindley, Edegel, Edelnor, Enersur, Gloria, Luz del Sur, Barrick Misquichilca, Yanacocha, Minsur, Petroperú, Saga Falabella, Shougang Hierro Perú, Cerro Verde, Supermercados Peruanos, Telefónica del Perú, Telefónica Móviles, Backus and Johnston, and Volcan.

For the selection process, S&P identified those elements that help companies achieve strong business risk profiles, such as size, cost efficiency, management experience, among others.

Aafter having identified those companies with good business risk profiles, the agency searched for the ones with healthy financial risk profiles, evidenced by cash flow stability, conservative debt leverage, prudent financial policies, adequate liquidity and financial flexibility and good access to debt markets.

Bolivia, Peru Discussing Rail Connection, Morales Says in Radio Interview

2011-12-26T19:12:00.000-08:00

Bolivia and Peru are discussing the possible construction of a railroad between the two countries, news service EFE reported today, citing comments by President Evo Morales.

Speaking to Bolivia’s state radio, Morales said he discussed the project of building a railroad with Peru’s President Ollanta Humala in a meeting on Dec. 22.

“We talked a lot, for example, about the construction of a railroad from the border with Brazil,” Morales said in the radio interview, the Spanish news service reported.

The train line would start from the Bolivian cities of Puerto Quijarro or Puerto Suarez, near the border with Brazil, and would end in the port city of Ilo, in southern Peru, according to Morales.

Morales didn’t offer more details about the project.

Jose Enrique Arrioja - Bloomberg

To contact the editor responsible for this story: Sylvia Wier at swier@bloomberg.net

Bolivian president climbs Huayna Picchu on Christmas Day

2011-12-25T19:25:00.000-08:00

Bolivia's President Evo Morales at Machu Picchu in Cusco. ANDINA

Bolivian President Evo Morales celebrated Christmas by climbing up Huayna Picchu, the mountain overlooking the Inca citadel of Machu Picchu in Cusco, Peru.

The Bolivian leader climbed the "young mountain" in a record twenty-five minutes after visiting the UNESCO World Heritage Site and one of the New Seven Wonders of the World for the second time this weekend.

Morales arrived in the Andean city of Cusco on Thursday to spend Christmas with his two sons. On the first day, Morales met with his Peruvian counterpart Ollanta Humala on a range of trade and development issues.

The eternal guardian of the Sanctuary, Huayna Picchu or Wayna Picchu (meaning "young mountain" in Quechua) towers over the Incan city. To conquer its summit is truly an unforgettable experience. Along the route and at the top are sacred structures and eye catching terraces, built right against the slope's edge.

It is possible to begin the ascent from Machu Picchu's main square by way of a path the Incas themselves made. Today, it is well marked and in good condition. The view from Wayna Picchu is remarkable: Machu Picchu spread out in all its glory, the Vilcanota River Canyon, and the surrounding mountains. (Andina)

Peru Bourse Sees End of IPO Drought as Humala Defends Private Investment

2011-12-21T09:21:00.000-08:00

Peru may have its busiest year of initial public offerings in at least a decade as the government’s defense of private investment and growth bolsters investors’ sentiment, according to the head of the country’s main securities exchange.

Companies from the mining, construction and agricultural industries may sell shares for the first time in Peru next year, said Francis Stenning, chief executive officer of Bolsa de Valores de Lima.

“We expect a very active market for IPOs next year,” Stenning said yesterday in an interview from the exchange. “Peru’s expansion is putting pressure on companies to come to the market to fund their growth. We just need to clear a few things from the table.”

Peru’s President Ollanta Humala, who took office July 28, has shown his willingness to preserve policies that fueled the fastest economic growth in Latin America over the past decade by quelling protests against a $4.8 billion gold mine being developed by Newmont Mining Corp., Stenning said. The protests, in a country where mining stocks dominate the market, have added to concern that Europe’s deepening debt crisis would slow growth, he said.

IPOs planned for this year in Peru didn’t proceed because of concern generated by the presidential elections and anti- mining protests, and as Europe’s crisis threatened to crimp global demand for commodities, Stenning said.

Planned IPOs

Port operator Andino Investment Holding SA plans to raise about $70 million in January, in what would be Peru’s first IPO since fishmeal producer Pesquera Exalmar SAA (EXALMAC1) sold $100 million of stock in November last year. State-owned companies including Petroleos del Peru SA probably will proceed with the sale of minority stakes in the first half of 2012, Stenning said.

Rising public and private investment will fuel 5.5 percent growth in Peru next year, the fastest in the region, after 6.8 percent expansion this year, central bank President Julio Velarde said Dec. 16. South America’s sixth-largest economy has grown an average 6.4 percent annually in the last decade.

The Lima General Index (IGBVL) retreated 0.1 percent to 19,358.83 at 11:17 a.m. local time and has slid 17 percent this year. The gauge plunged a record 12 percent June 6 after Humala won the country’s presidential election, sparking concern he would increase state control of the economy. Stocks rose 10 percent in the two weeks after he asked Velarde to remain in his post July 17.

High-Speed Trading

Humala replaced 10 ministers in his cabinet Dec. 11 as he seeks to speed up the resolution of social conflicts slowing investment in new mines. Peru is the world’s top silver producer, number three in copper and sixth in gold.

“The president has sent a clear message that investment is not going to stop,” Stenning said. “The best way to accomplish social inclusion is with more investment and employment.”

Bolsa de Valores de Lima plans to implement a new trading platform to boost volume and allow for further integration with Latin American bourses, Stenning said. The exchange has started talks with prospective providers of a system that would permit high-speed and algorithm trading and may be modeled on a platform created by the Santiago bourse last year.

“We expect to have approved the providers, signed the contract and begun the works for implementation” next year, he said.

The project would help “homogenize” systems used in Mila, the stock market combination formed by Chile, Colombia and Peru, Stenning said, declining to give investment estimates. Mila began allowing investors to buy and sell stocks in the other two countries through their local brokers in May. In a subsequent stage, the member exchanges may form a single trading platform. Mexico is considering joining Mila.

Bolsa de Valores de Lima also plans to introduce direct market access to its current platform in the first half of next year, he said.

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

Mexican Senate approves FTA with Peru on second vote

2011-12-15T19:10:00.000-08:00

Peruvian Minister of Foreign Trade and Tourism Jose Luis Silva and Mexico’s Finance Secretary Bruno Ferrari.

Peruvian Minister of Foreign Trade and Tourism Jose Luis Silva announced that the Mexican Senate on Thursday approved the Free Trade Agreement (FTA) with Peru on second vote after being rejected on Wednesday, and added that it will come into effect in the first quarter of 2012.

“Yesterday, the Mexican Senate's Trade and Industrial Development Committee disapproved the FTA with Peru, but it has been reconsidered,” he told Andina news agency.

He explained that at the plenary session two votes were held; the first to amend the vote of the Committee, and the second to approve the FTA with Peru.

"55 votes were in favor, 47 against and one abstained," said Silva from Geneva (Switzerland), from where he followed the course of the vote in the Mexican Senate together with Mexico’s Finance Secretary Bruno Ferrari.

Silva added that during the plenary session, Ferrari urged the senators to vote in favor of the FTA with Peru. “Minister Ferrari recalled that Peru is a strategic partner for the development of trade and international relations of Mexico," he told Andina.

Humala Pleases Peru Investors in Moves to Save Mines

2011-12-14T19:05:00.000-08:00

Peru’s business community reacted to Ollanta Humala’s election as president in June by dumping mining stocks, triggering the biggest plunge in Lima’s bourse in two decades. Now the one-time ally of Venezuela’s Hugo Chavez may be their best bet for defending $50 billion in mining investment.

The retired army lieutenant colonel, who once vowed to make the state a partner in all natural resource projects, declared a state of emergency on Dec. 4 to quell protests against a $4.8 billion gold mine being developed by Newmont Mining Corp. (NEM) He brought in a former military instructor Dec. 11 to lead a revamped cabinet just four months after taking office.

“Humala showed guts facing down the protesters and removing dissenting voices from his cabinet,” Patricia Teullet, general manager of exporters association Comexperu, said in a phone interview from Lima. “Before that it was like four horses dragging him in four different directions.”

Humala’s determination to maintain policies that fueled the fastest economic growth in Latin America over the past decade is reassuring, said Pedro Olaechea, president of the Lima-based National Society of Industries. Still, the crackdown on protests may backfire by strengthening anti-mining groups, splintering Humala’s party and alienating his rural base, according to the Washington-based political risk firm Eurasia Group.

Runoff, Rally

The 49-year-old Humala won a June 5 runoff over then- Congresswoman Keiko Fujimori after abandoning anti-capitalist rhetoric used during a failed 2006 presidential bid to build support beyond his rural base. He promised to boost spending on the nation’s 8 million poor, a third of the population, while sustaining investment that helped Peru grow an annual average 6.4 percent over the past decade.

Peru’s stocks rose 10 percent, and bonds also rallied, in the two weeks after he asked central bank President Julio Velarde to remain in his post and appointed a cabinet of economists and businessmen. Fitch Ratings increased Peru’s foreign debt rating to BBB from BBB- on Nov. 10, praising the way Humala negotiated tax increases on mining companies without jeopardizing investment.

The strategy unraveled last month as anti-mining protests by villagers concerned that Denver-based Newmont’s mine will deplete their water resources gained momentum. The two-week-long demonstrations exposed ruptures within the government that led to the resignation of two senior officials that voiced support for the protests. Humala at first said almost nothing about the disturbances and refused to meet with protesters.

Commitment to Orthodoxy

On Dec. 4, Humala delivered his response to the unrest and declared a state of emergency in four provinces, sending troops into Cajamarca to suppress the now-illegal marches. Seven days later he fired 10 ministers, replacing them with technocrats and businessmen led by retired lieutenant colonel Oscar Valdes, who was previously interior minister.

“Humala has shown a strong commitment to orthodox policies with no signal that he would abandon his market-friendly agenda,” Felipe Hernandez, an analyst at RBS Securities Inc. in Stamford, Connecticut, said yesterday in a note to investors.

The economic stakes are high for Peru. Mining accounts for about 18 percent of investment in the country over the past 12 months, compared with 5 percent three years ago, according to Bank of America. Mining companies plan to invest $50 billion in the next decade, the government says.

Congressional Gridlock

In the two trading days after Humala overhauled his cabinet, the Lima General Index (IGBVL) fell 2 percent, less than the 3 percent decline of the MSCI EM Latin America Index. The currency was little changed versus the Bloomberg JPMorgan Latin American Currency Index’s 1.8 percent drop. The yield on the benchmark sol-denominated bond due August 2020 rose six basis points.

The willingness to use force to subdue protests may harm Humala’s standing with Peruvians who were critical of previous governments’ use of the army to quell unrest. It could also strengthen the opposition, increasing gridlock in Congress where Humala’s Gana Peru party has only 47 of 130 seats, according to Francisco Rodriguez, an economist at Bank of America.

Former President Alejandro Toledo, who leads the third biggest bloc in Congress, withdrew his support for Humala after the cabinet shake-up, citing concerns about the government’s “militarization” when Valdes was appointed cabinet chief. The Peruvian Workers’ General Union, the nation’s biggest labor confederation, accused Humala of pandering to investors and called for a one-day strike in Cajamarca.

Past Unrest

“There’s a possibility Humala may be seen as excessively friendly to business, which may carry a high political cost,” Rodriguez said by telephone from New York on Dec. 12. “Without the support of his left and without Toledo, it will be increasingly difficult to push for reforms and maintain this centrist line.”

Investors should reduce their holdings of sol-denominated bonds because of the risk yields will climb if deepening social unrest curbs mining investment and economic growth, Barclays Capital Inc. said in a report today.

One option for Humala is to build an alliance with his former opponent Fujimori, according to Rodriguez. The daughter of former President Alberto Fujimori, who shut down Congress in 1992 to gain a stronger hand in his fight against Marxist rebels, said the cabinet shake-up was “positive” and would eliminate past “contradictions” arising from Humala’s unrealistic goal of trying to build consensus.

Political upheaval and social unrest isn’t unusual in Peru. Former President Alan Garcia changed finance ministers four times during his 2006-2011 presidency.

‘Best Hope’

He also left to Humala more than 200 unresolved social conflicts, many of them land disputes between peasants and mining companies, according to a monthly bulletin of unrest prepared by the government’s Ombudsman office.

Humala himself in 2000 led 50 soldiers who seized and occupied for a week a mine owned by Phoenix-based Southern Copper Corp. (SCCO) to protest corruption in Fujimori’s government. That’s also given him some unused capital with his base that even the latest crisis is unlikely to extinguish, said Alvaro Vargas Llosa, a senior fellow at the Independent Institute research organization in Washington.

“Most of the business class in Peru supports the president at this point as they understand he’s their best hope of achieving a modicum of social peace in which to invest,” said Vargas Llosa in a phone interview. “He’s the only one who has some credibility with the protestors.”

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net;

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

Lima Plans First Overseas Debt Sale With $500 Million Issue, Mayor Says

2011-12-08T19:22:00.000-08:00

Lima Mayor Susana Villaran

Lima, Peru’s capital city, plans to sell debt in international markets for the first time by issuing $500 million worth of bonds denominated in soles over the next two years, Mayor Susana Villaran said.

The sale would help finance $1.8 billion in infrastructure projects in the city of 7.5 million people, such as the expansion of a Pacific Ocean beach park called Costa Verde and the building of a highway to better connect commercial and residential areas, Villaran said in an interview at Bloomberg’s headquarters in New York.

“The big picture is how to renew Lima,” Villaran said. “Lima produces almost 50 percent of the national gross domestic product and we have a lack of infrastructure.”

Lima aims to sell bonds maturing in 10 years to 20 years, city Chief Financial Officer Jose Miguel Castro said in the same interview. He and Villaran are in New York to discuss the capital’s financing plans with officials from JPMorgan Chase & Co., UBS AG, Deutsche Bank AG and Morgan Stanley. They are also meeting with potential investors.

“They know Peru, know its potential and are interested in Lima, though it’s still unusual for capital markets to finance bonds issued by municipal governments” in emerging markets, Villaran said. “Lima will be a pioneer in a certain way.”

Fitch Ratings started coverage of Lima’s foreign and local currency debt Sept. 21, assigning a BBB- rating, the lowest investment grade. Fitch rates Peru’s federal-government debt one step higher, at BBB.

Existing Bonds

Lima sold 20 million soles ($7.43 million) of a 7.19 percent bond due 2013 in July 2008, and an additional 40 million soles of the domestic-market notes a year later. Prices for the securities aren’t available. The municipality’s total debt is less than $200 million, Castro said.

Moscow, rated BBB by Standard & Poor’s and Fitch, sold 407 million euros ($543 million) of 10-year bonds to yield 5.064 percent in 2006. The yield on the notes has since declined 23 basis points, or 0.23 percentage point, to 4.83 percent, according to data compiled by Bloomberg.

The city of Buenos Aires sold $475 million of five-year bonds in March 2010. The yield on the 12.5 percent notes has declined 115 basis points to 11.35 percent. The city is rated B2 by Moody’s Investors Service, five levels below investment grade.

Fabiola Moura - Bloomberg

To contact the reporter on this story: Fabiola Moura in New York at fdemoura@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net; Helder Marinho at hmarinho@bloomberg.net

Macusani a Canadian uranium exploration and development company announces higher-grade mineralization at Chilcuno Chico anomaly, Puno Peru

2011-12-06T09:41:00.000-08:00

Canadian-based Macusani Yellowcake reported Monday a higher-grade mineralization at the Chilcuno Chico anomaly on the Kihitian property, located in the province of Carabaya, in Puno, southern Peru.

As aanouncing additional assay results from the ongoing drilling program at the Chilcuno Chico anomaly, it said these results continue to extend both the A zone and deeper Manto B zone.

"We are very pleased with the assay results as they continue to add to the resource base across the zones identified in our current model," President and CEO, Peter Hooper, stated.

The best result was a 9 m intersection from 210 to 219 m that returned a weighted average of 1,238 ppm U3O8 (or 2.476 lbs/ton). This intersection included a higher-grade zone of 2.0 m that averaged 5,296 ppm U3O8 (or 10.592 lbs/ton).

These results are from boreholes drilled towards the south and south west, the company added.

To date drilling within the Chilcuno Chico target inside the Kihitian concession delineates an area of roughly 700m x 400m.

The company is currently operating three drill rigs on the Kihitian property including a recently mobilized rig on the Quebrada Blanca anomaly 2 km NW of Chilcuno Chico.

Macusani Yellowcake is a Canadian uranium exploration and development company focussed on the exploration of its properties on the Macusani Plateau in south-eastern Peru.

It owns a 99.5% interest in concessions which cover over 24,000 hectares (240 km2) and are situated near significant infrastructure.

The company has 107 million 775,714 shares outstanding, and is listed on the TSX Venture Exchange under the symbol YEL and the Frankfurt Exchange under the symbol QG1. (Andina)

Chile, Colombia, Mexico and Peru to sign Pacific Alliance treaty within six months

2011-12-05T17:59:00.000-08:00

Chile, Colombia, Mexico and Peru, members of the Pacific Alliance, have a deadline of six months to sign the Pacific Alliance treaty, taking another step towards becoming an engine of development in Latin America.

During the Second Summit of the Pacific Alliance held Sunday at the Siglo XXI Convention Center in the Mexican city of Merida, the four nations agreed on a number of measures to advance progressively towards the free circulation of goods, services, capitals and people.

A deadline of six months was set for the rulers of Mexico, Felipe Calderon, Chile, Sebastián Piñera, Colombia, Juan Manuel Santos, and Peru, Ollanta Humala, represented by Foreign Minister Rafael Roncagliolo, to sign the treaty establishing the Pacific Alliance.

The summit will be held next June in Chile, where heads of state must sign the framework agreement for the founding of the Alliance, which aims to be at the forefront of development in Latin America and become the main economic partner in the region worldwide.

In the Mérida Declaration, the leaders also instructed their ministers of trade and foreign affairs to start negotiations on Electronic Trade in conjunction with the Free Trade Agreements in force between the countries in the Alliance.

They will also start work on technical obstacles to trade in regard to transparency, regulatory and technical cooperation and good regulatory practices in 2012.

Other objectives include the establishment of a system of certification of electronic origin; the start of work for the implementation of the Authorized Economic Operation and subsequent mutual recognition for the local implementation of Single Desks and the definition of the mechanism for their subsequent inter-operability.

Also, the start of negotiations in 2012 in regard to the universe of goods tariffs and the mechanism for the accumulation of origin, bearing in mind existing sensitivities in both processes, in order to begin their implementation in 2013.

Moreover, the countries agreed to implement sanitary and phytosanitary measures to facilitate trade between countries in 2012, establish and operate a Pacific Alliance visa within a period of three months to facilitate the movement of business persons.

They also aim to advance towards the reduction or exemption of costs of migratory services and rights, initiatives such as vacation and work programs for young travelers, facilitate the movement of passengers in airports and consular cooperation issues.

The four nations are to begin negotiations to establish a platform of academic and student mobility and intensify political dialogue and agreement on the basis of the democratic principles, values and convictions that link them.

Representatives from the four countries will hold a virtual summit on 5 March 2012. (Andina - South America News)

Peru Can Keep Rates on Hold as CPI Slows, Velarde Says

2011-12-04T09:38:00.000-08:00

Peru’s central bank probably will keep its benchmark interest rate unchanged at 4.25 percent next week as growth moderates and inflation is seen slowing from a two-year high, bank President Julio Velarde said.

“We don’t see any reason in principle to change the monetary policy stance,” Velarde said in an interview in Cuzco, Peru. “Inflation expectations are well anchored” within the central bank’s target range, he said.

Consumer prices climbed faster than economists expected last month on rising food and fuel costs, indicating that the central bank has little room to relax monetary policy to mitigate the impact of slower global growth. The annual inflation rate rose to 4.64 percent, the highest since April 2009 and up from 4.2 percent in October. The central bank targets inflation of 1 percent to 3 percent.

Food prices rose as the La Nina weather pattern affected yields of local crops and after imported soybean, corn and wheat prices surged in the first half of 2011, Velarde said. The bank doesn’t expect a rise in grain prices next year.

The central bank increased its benchmark rate five times between January and May, pushing it to a two-year high, to contain inflation expectations. The bank has kept rates on hold since June as the economy slows. The board next meets Dec. 7.

“The pause was initially due to concern about the political context affecting demand and also because of the international situation,” Velarde said. “Looking ahead, we don’t see any demand-related pressures nor any of these pressures from foods” that would cause inflation to accelerate, he said.

Global Question

Private investment spurred by surging metal prices led to an average 7.2 percent growth in Peru in the last five years. Growth slowed for a fifth straight quarter in the July-through- September period as flagging demand for the country’s exports and global market turmoil damped investment.

The economy expanded an annual 6.5 percent in the third quarter, compared with expansion of 7.9 percent in the first half of the year, the national statistics agency said Nov. 28.

“We don’t see a significant slowdown yet,” Velarde said. Growth will slow next year “more because of international uncertainty” he said.

The suspension of the $4.8 billion Minas Conga copper and gold project following anti-mining protests won’t harm growth unless other mine investments are also halted, Velarde said.

Cia. de Minas Buenaventura SAA (BVN) and partner Newmont Mining Corp. agreed Nov. 29 to a government request to suspend work on the project following environmental protests by communities concerned the mine will curtail water supply.

The yield on the nation’s 7.84 percent sol-denominated bond due August 2020 fell two basis points, or 0.02 percentage point, to 5.66 percent at 2:40 p.m. Lima time, according to prices compiled by Bloomberg.

Alex Emery and John Quigley - Bloomberg

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.

Peru's economic growth allows to invest in high-level education

2011-12-01T10:31:00.000-08:00

Distinguished professor of Technological Innovation and Entrepreneurship of the Massachusetts Institute of Technology (MIT), Scott Stern. Photo: ANDINA/Luis Iparraguirre

Peru's growth experienced over recent years allows the country to invest in high-level education and technology transfer, key factors that stimulate economic expansion, the distinguished professor of Technological Innovation and Entrepreneurship and Strategic Management at Massachusetts Institute of Technology (MIT) Scott Stern said Thursday.

"Peru has been blessed with a decade of striking economic growth, which let the country to raise the standard of living and reduce poverty levels; however, there is still much work to do. It's necessary to further invest in education," he said in statements to Andina.

The professor remarked that Peru's investment in education is below the levels of its neighbors in the region and far below the levels of Southeast Asia and India.

He added that the Andean nation should develop an innovation agenda to consolidate economic growth.

Moreover, Stern noted it is not only necessary to invest in resources but that investment should be made properly and with priorities. (Andina)

Peru-China trade to reach US$15 bln. in 2012

2011-11-21T19:17:00.000-08:00

Trade between Peru and China would reach 15 billion in 2012, 15.38 percent higher than the 13 billion expected in 2011, the Minister of Foreign Trade and Tourism, José Luis Silva, said Monday.

"We expect to reach US$15 billion next year, but everything depends on movements of the external market," he said after participating in the 5th China-Latin America Business Summit, being held in Lima.

Trade between Peru and China surpassed 10 billion in 2010 and this year would grow 32 percent.

This increase is largely fueled by the Free Trade Agreement (FTA) signed between the two countries and which entered into force in March 2010 and an increase in the mineral prices.

However, this trade rise depends on the effects of the global international crisis.

Silva said China has become Peru's main trading partner, displacing the United States, and that trade balance is positive for the country in 100 million dollars.

He explained that Peru's main exports to China are minerals and fish products, but it seeks to increase exports of other products such as agro-industrial and apparel.

"We are developing other products in agriculture and apparel that we hope will continue growing. The forestry sector has enormous potential and we can invest in forests," he said.

The 5th China-Latin America Business Summit is sponsored by the China Council for the Promotion of International Trade and the Peruvian Foreign Ministry. At least 1,000 Chinese and Latin American officials and businessmen are participating.

China and Peru signed an agreement on promotion and mutual investment protection in 1994, and a memorandum of understanding on trade and economic relations in 2007.

Current Chinese investments in Peru are worth about 2.2 billion dollars, with the most capital invested in the mining, hydrocarbon and fishing sectors. (Andina)

Investment project portfolio in southern Peru worth US$56bln

2011-11-19T18:39:00.000-08:00

Peru’s National Confederation of Private Business Associations (Confiep) announced investment projects worth 56 billion dollars which execution will allow the development of southern Peru.

The president of Confiep’s Regional Committee Ricardo Briceño noted that it is necessary to take proactive actions to facilitate the execution of these investments, which will benefit every Peruvian.

“This area totals 27 percent of the Peruvian territory and gathers 17 percent of the population, but only produces 15 percent of the Gross Domestic Product (GDP). In other words, it is one of the poorest regions in the country,” he said.

Based on a research carried out by the Peruvian Institute of Economy (IPE), Briceño highlighted that these investments will have a significant impact in the development of southern Peru, creating 1.9 million direct and indirect job opportunities just if we consider the mining investments worth 30 billion dollars.

“This means that we could give jobs to every Peruvian who joins Peru’s labor force for the next 11 years,” he said. (Andina)

IMF chief Christine Lagarde to visit Brazil Mexico and Peru later this month

2011-11-18T09:00:00.000-08:00

Christine Lagarde IMF Managing Director

International Monetary Fund Managing Director Christine Lagarde will be making her first official Latin American tour when she visits Peru, Mexico and Brazil between late November and early December, according to spokesperson David Hawley.

“Ms Lagarde has recently returned from an extensive period of travel that she is continuing, and this time she'll be travelling to Latin America. So, she will be in the region from November 28 to December 2”, Hawley said Thursday during press conference.

The IMF chief who took office last July will make her first stop at Peru on November 28, then will travel to Mexico, from November 29-30, and finally head to Brazil, December 1 and 2, mercopress reported.

“Ms Lagarde will meet the authorities in all three countries and non-official audiences”, added the IMF spokesperson.

The former French Finance minister only recently ended a visit to Asia that included Russia, Japan, China and Hawaii, where she attended the Asia-Pacific forum.

This will be the first visit of an IMF Managing Director to Latin America since taking the post from her fellow French born Dominique Strauss-Khan. (Andina)

video: http://www.youtube.com/user/Euronews

video: http://www.youtube.com/user/imf

Peru brand displayed in United States, major Latin American cities

2011-11-17T16:13:00.000-08:00

With an investment of more than US$2.2 billion, Peru’s Export and Tourism Promotion Agency (Promperu) has started a striking campaign so that the Peru brand logo is displayed in major cities of the United States and Latin America.

For instance, Peru has taken over the streets of Broadway, in New York, as 16 advertising billboards in one of the world’s most cosmopolitan cities are dressed with the logo, El Comercio online version reported.

In addition to the Big Apple, Peru is displayed in the streets of Los Angles, Chicago and Miami, as well as in American airports. The investment in this country is US$ 1.1 billion.

“This effort is part of a campaign that introduces Peru brand to the world, which seeks to position it as a multifaceted and captivating country. What better way to do it than in Time Square, a place visited by thousands of tourists every day,” Promperu's director of Country Image Promotion Isabella Falco said.

The other US$1.1 billion are invested in Rio de Janeiro (Brazil), Bogota (Colombia), Santiago de Chile (Chile) and Buenos Aires (Argentina), as well as in advertising spots in Warner, Fox, Discovery, History and National Geographic chanels.

“The campaign in some cities with which we have more exchange of tourists and exports will be launched internationally in 2012. We will work not only in the tourist sector but also in exports and imports,” Falco said (Andina)

video: http://www.youtube.com/user/carolacecilia2

Canada supports economic growth through conflict prevention in Peru

2011-11-14T18:44:00.000-08:00

Photo: Peruvian President Ollanta Humala meets with Canada's Prime Minister Stephen Harper.

Canada's Prime Minister Stephen Harper has announced support for a project that will help promote economic growth in Peru by reducing the impact of social conflicts related to the use of natural resources.

He made the announcement after meeting with Peruvian President Ollanta Humala at the Asia-Pacific Economic Cooperation leaders’ meeting.

“Canada is committed to contributing to economic prosperity and sustainable development in the hemisphere,” Prime Minister Harper said in a statement.

“The project being announced today will accomplish both goals by improving conflict management capacity so that Peruvians can derive maximum benefit from sustainable development of their extractive sector.”

The project, entitled Conflict Management and Prevention in the Extractive Sector is a four-year (2011–2015) initiative being implemented by the United Nations Development Programme that will provide technical assistance to Peruvian state agencies and regional governments, as well as to other stakeholders.

Activities will focus on training and capacity development in conflict management, support for the creation and operation of regional conflict management offices in eight regions and the promotion of dialogue at national, regional and local levels.

Canada recognizes that conflict management and prevention related to the extractive sector is key to sustainable economic growth in Peru.

In addition to today’s announcement, Canada is also undertaking a number of Corporate Social Responsibility projects in the country and actively supporting the Office of the Ombudsperson (Andina)

Peru’s Government Prepared to Make Stimulus Package ‘As Large As Needed’

2011-11-12T12:58:00.000-08:00

Miguel Castilla

Peru’s government will do whatever is necessary to maintain economic growth as Europe’s debt crisis threatens to turn into a global recession, said Finance Minister Miguel Castilla.

While the government’s current stimulus package, equivalent to 1 percent of gross domestic product, is enough to support growth for now, policy makers stand ready to expand spending further, Castilla said today in an interview in Honolulu, where he’s attending the Asia-Pacific Economic Cooperation Forum.

“If things were to become nastier, we will definitely put together a more aggressive one -- as large as needed,” he said. “It’s critical that growth keeps its performance.”

The deteriorating global outlook threatens to curb the private investment that has fueled a decade of region-beating growth in Peru, damping demand for the commodities that make up three quarters of the nation’s exports. The country has “ample space” to respond with fiscal and monetary stimulus should the global slowdown intensify, Castilla said.

“It depends on the magnitude, whether this is going to be a slowdown or a recession or a recession with a financial crisis,” he said. “Cash we have; liquidity buffers, we have too.

The question now is when to be more aggressive,”

Peru’s government tapped three years of fiscal surpluses to implement a $4.8 billion economic stimulus in 2009 after a global recession curbed demand for the Andean country’s metals, fishmeal and natural gas.

Growth Outlook

The central bank left its overnight rate unchanged yesterday at 4.25 percent, a two-year high, as above-target inflation outweighed concern about slowing global demand.

Growth in South America’s sixth-largest economy has gathered pace after consumer and business confidence rose following the country’s June 5 presidential election. The economy expanded 7.5 percent in August, after rising 6.5 percent in July and 5.3 percent in June.

“We’ll slow down for sure because we’re pretty much correlated with world growth,” Castilla said. “Our growth will be between 5 and 6 percent next year in an optimistic scenario, but one cannot disregard a correction if things were to worsen.”

GDP expanded 8.8 percent in 2010, which ranks as the country’s third-fastest annual growth rate in 16 years. Growth averaged 6.4 percent in the past decade.

The government doesn’t see a “massive need” to hurry plans to tap international bond markets because of its budget surplus, Castilla said.

The yield on the nation’s benchmark 7.84 percent sol- denominated bond due August 2020 fell 4 basis points, or 0.04 percentage point, to 5.67 percent at 4:20 p.m. Lima time, according to prices compiled by Bloomberg.

Aki Ito and John Quigley - Bloomberg

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.

Unasur ministers to create first South American space agency

2011-11-11T19:31:00.000-08:00

Union of South American Nations (Unasur) Defense Council. Photo: ANDINA/Juan Carlos Guzmán Negrini.

South American defense ministers agreed Friday, in Lima, to implement an aerospace agency, as part of the Action Plan 2012 of the Union of South American Nations (Unasur) Defense Council.

After a two-day meeting in the Peruvian capital, Argentinean Defense Minister Arturo Puricelli said the South American space agency will allow to join efforts and military technology to be able to reach the space and place satellites in the future.

Authorities also agreed to include in said plan the design, development and manufacture of a primary and basic South American training aircraft.

For this reason, a group of Peruvian, Brazilian, Venezuelan and Argentinean experts has been created to present a feasibility report in six months.

Moreover, another group is in charge to prepare a study for the design, development and manufacture of an unmanned aerial vehicle (UAV), proposed by Brazil.

The Action Plan 2012 seeks to establish a common methodology to measure military spending.

The extraordinary meeting of the South American Defense Council, which was opened by Peruvian Minister Daniel Mora and Unasur Secretary General Maria Emma Mejia, gathers all 12 Defense ministers in the region. (Andina)

Argentina Will Double Electricity Rates as Deficit Widens

2011-11-10T09:00:00.000-08:00

Foto: Cristina Fernandez

Argentina is more than doubling electricity rates for the biggest commercial users as President Cristina Fernandez de Kirchner seeks to stem a widening budget deficit without a return to international debt markets.

Argentine power rates will more than double for some industries beginning next month as the government reduces subsidies, according to a statement in today’s official gazette. Power rates during peak hours will increase to 254 pesos ($60) per megawatt hour from 111 pesos.

Fernandez, who was re-elected in a landslide vote on Oct. 23, is seeking to stem a widening budget deficit by cutting subsidies that will swell to about 72 billion pesos this year, or about 4 percent of gross domestic product, according to Moody’s Investors Service. Power generators in Argentina include Pampa Energia SA (PAMP), AES Corp. and Petrobras Argentina SA. (PESA)

“The announcement is positive, it shows that the government is moving toward a normalization of the sector,” said Maria Eugenia Fernandez Pouchan, a utilities analyst with Banco Santander SA in Buenos Aires. “This will help the nation to reduce spending. The next step would be for additional rate increases so that it’s not just savings for the government, but also gains for companies.”

The cost to generate electricity over the past year was 320 pesos per megawatt hour, the statement said.

Pampa Energia shares rose 1.8 percent this morning in Buenos Aires to 2.32 pesos at 9:52 a.m. New York time. Petrobras Argentina climbed 1.6 percent to 6.4 pesos.

Widening Deficit

South America’s second-biggest economy, which has been blocked from international credit markets since its 2001 default on $95 billion of bonds, has posted a fiscal deficit every month this year since March, totaling 5.3 billion pesos through September.

Expenditures surged 42 percent to 51.2 billion pesos in September from a year earlier, while revenue rose 31 percent to 51.6 billion pesos, according to the Economy Ministry.

The country’s budget deficit almost doubled to 1.9 billion pesos ($450 million) in September from 1 billion pesos in August as the government ramped up spending on public works and salaries ahead of the national elections.

Price Caps

Increases in electricity, natural gas and oil tariffs have been restricted since 2002, when then-President Eduardo Duhalde imposed price caps amid Argentina’s worst recession on record.

The caps prompted foreign utilities including Berkshire, U.K.-based BG Group Plc and France’s GDF Suez to leave the country or close local offices. Metrogas SA (METR), the country’s largest gas distributor, filed for bankruptcy in 2010, citing the restrictions.

“The government didn’t have much choice, electricity companies couldn’t continue operating if the previous tariffs remained frozen,” said Juan Pablo Fuentes, a Latin American economist at Moody’s in West Chester, Pennsylvania. “There’s still a lot more to correct. The capital controls measures are still worrying.”

Estimated Savings

Subsidy cuts will affect commercial users including banks, insurance companies, casinos, airport operators, mobile phone companies and miners, Planning Minister Julio De Vido said Nov. 2. Eliminating the subsidies will save the government 600 million pesos initially, he added.

Airport operator Aeropuertos Argentina 2000 SA said it isn’t considering raising fees after the cost increases take effect, spokesman Julio Scaramella said in a phone interview today.

Tariffs will rise to 245 pesos per megawatt hour in the periods of least usage. All tariffs rose by 143 pesos from prices fixed in 2009, according to the resolution.

Fernandez, 58, has moved to clamp down on accelerating capital flight and an erosion in public finances in the three weeks after her re-election. She ordered energy and mining companies to repatriate future export revenue, stepped up oversight of foreign exchange purchases and told insurance companies to bring their investments back to Argentina.

Gas Costs

Argentina will also increase gas rates for commercial users starting in December by at least 52 percent, newspaper El Cronista Comercial reported, citing a resolution by the national energy regulator, known as Enargas.

Even if today’s measure is “undoubtedly” a step in the right direction, it doesn’t solve the government’s fiscal imbalance, said Siobhan Morden, the head of Latin American strategy at RBS Securities Inc. The move may exacerbate annual inflation that economists estimate is about 24 percent, the highest in the world among major economies after Venezuela, she said.

“I just don’t know whether this administration has the political resolve to really confront this problem,” Morden said. “Frozen tariffs for years, a huge fiscal burden at 4 percent of GDP and resolving these distortions will have a short-term cost on higher inflation and lower growth.”

To contact the reporter on this story: Camila Russo in Buenos Aires at crusso15@bloomberg.net.

To contact the editors responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net; Dale Crofts at dcrofts@bloomberg.net.

Coffee Stockpiles to Hold Near 11-Year Lows As Colombian Rain Hurts Crop

2011-11-04T10:53:00.000-07:00

Coffee stockpiles may remain near 11- year lows into next year as Colombia’s Arabica harvest fails to meet forecasts, contributing to a “scarcity” of the bean favored by brewers including Starbucks Corp. (SBUX)

Colombia’s year-end coffee crop is falling below “expected volumes” amid “strong” global demand for coffee, said Jorge Vasquez, chairman of Colombia’s National Association of Coffee Exporters, in an interview yesterday in Cartagena, Colombia.

“There is a scarcity of coffee worldwide,” he said. In Colombia “you haven’t seen the expected volumes.”

Colombia, the second-largest grower of Arabica coffee beans after Brazil, will produce its smallest crop in two years in 2011 after above-average rainfall damaged plants, according to Vasquez. The harvest will likely slide to as low as 8.5 million bags this year, from last year’s 8.9 million bags, he said.

Arabica-coffee futures for December delivery fell 7 cents to $2.2615 a pound as of 8:17 a.m. on ICE Futures U.S. in New York.

To contact the reporter on this story: Heather Walsh at hlwalsh@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

Argentina in Crisis Is Eliminating Utility Subsidies in Bid to Stem Widening Deficit

2011-11-02T11:05:00.000-07:00

Argentine President Cristina Fernandez de Kirchner is cutting utility subsidies to commercial users in a bid is stem a widening budget deficit in South America’s second-biggest economy.

“Nobody should receive a subsidy that he doesn’t need,” Planning Minister Julio De Vido, who oversees utilities, energy and transportation, said in a press conference in Buenos Aires with Economy Minister and Vice President-elect Amado Boudou.

Utility stocks rallied as the announcement fueled speculation that a government cap on rates in effect for a decade may be loosened, said Juan Jose Vazquez, an analyst at Bull Market Brokers SA in Buenos Aires. Cia. de Transporte de Energia Electrica en Alta Tension Transener SA, the country’s main power transporter, rose 5.8 percent, the most in almost five months, at 2:05 p.m. in Buenos Aires after gaining 9.4 percent earlier.

De Vido said the government isn’t weighing an increase in utility tariffs.

Fernandez, 58, has moved to clamp down on accelerating capital flight and an erosion in public finances since her landslide re-election on Oct. 23. The country’s budget deficit almost doubled to 1.9 billion pesos ($450 million) in September from 1 billion pesos in August as the government ramped up spending on public works and salaries ahead of the vote.

Subsidy Commission

The budget surplus before interest payments, which Fernandez calls a “pillar” of her administration’s policies, tumbled 86 percent last month to 449 million pesos.

In addition to the cuts announced today, the government will create a commission to study additional changes to the subsidy regimen, according to a resolution distributed at the news conference that cited turbulence in global financial markets and the need to guarantee the “competitiveness” of Argentina’s economy.

“They know they have to increase tariffs,” Boris Segura, a Latin America analyst at Nomura Securities International, said in an e-mailed response to questions. “Otherwise, people won’t control consumption and they won’t be able to bring down the amount of subsidies granted.” Segura said utility subsidies account for about 4 percent of gross domestic product.

The subsidy cuts may “add pressure” to annual inflation economists estimate at 24 percent, near the fastest in the world after Venezuela, Alberto Ramos, a Latin America economist at Goldman Sachs Group Inc. in New York said in a report. Nevertheless, the move is a “step in the right direction,” he added.

Currency Controls

The announcement comes less a week after Fernandez announced tighter oversight of the foreign exchange market and ordered energy and mining companies to repatriate export revenue after capital flight estimated at $3 billion per month drained central bank reserves.

The subsidy cuts will affect commercial users including banks, insurance companies, casinos, airport operators, mobile phone companies and miners, De Vido said. Eliminating the subsidies will save the government 600 million pesos initially, he added.

Yields on bonds sold by Empresa Distribuidora Norte SA, Argentina’s biggest electricity distributor fell 13 basis points to 12.84 percent for debt maturing in 2022.

The government has subsidized utility companies since 2002 as it kept tariffs capped, following a financial crisis that culminated in a default on $95 billion of bonds a decade ago. BG Plc unit Metrogas SA (METR), the country’s largest gas distributor, filed for bankruptcy in 2010, citing the tariff restrictions.

To contact the reporters on this story: Eliana Raszewski in Buenos Aires at eraszewski@bloomberg.net; Rodrigo Orihuela in Buenos Aires at rorihuela@bloomberg.net

To contact the editors responsible for this story: Bill Faries at wfaries@bloomberg.net; Dale Crofts at dcrofts@bloomberg.net; Joshua Goodman at jgoodman19@bloomberg.net

Peru on its way to becoming shipping hub in South America

2011-10-30T07:58:00.000-07:00

Port of Callao

Peru’s port of Callao could become South America’s shipping hub, due to strategic location in the continent and investment in infrastructure, said Panama’s Investment Attraction and Export Promotion Agency (PROINVEX).

PROINVEX project manager Johnathan Rodriguez said Peru’s port development could lead to incredible growth for the country as long as national infrastructure develops.

"Peru could be to South America what Panama is to Central America because, generally, everything that occurs in Central America is redistributed through Panama's infrastructure," he said.

Rodriguez highlighted Peru’s strategic initiative, supported by investment in train, port and ground infrastructure, and said it would encourage trade with other countries in the region.

"Peru is awakening in every sense, it has impressive investments in infrastructure being made – this progress has stimulated our interest to strengthen bilateral business opportunities," he said.

Rodriguez said Peru’s investment in developing infrastructure would make it easy for cargo far away from the coast, to make its way to the rest of the world. (Andina)

Argentina Will Introduce Tighter Controls on Dollar Sales, Boudou Says

2011-10-28T20:12:00.000-07:00

Amado Boudou

Argentina will require banks and foreign exchange houses to verify information about individuals who seek to buy dollars, Economy Minister Amado Boudou said.

“This measure doesn’t change the amounts or methodologies, it is just a way of verifying a person’s economic and financial status,” Boudou told reporters in Buenos Aires today.

The government isn’t worried about capital flight and all Argentines who have wanted to buy dollars have been able to do so, Boudou said. The central bank, which has seen reserves fall to $47.6 billion from a record $52.6 billion in January as it defends the peso and pays debt, has the ability to manage the exchange rate, he added.

The new measures will take effect Oct. 31, Boudou said.

To contact the reporter on this story: Silvia Martinez in Buenos Aires at smartinez19@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

Argentina Central Bank Toughens Foreign Exchange Rules Amid Capital Flight

2011-10-27T19:08:00.000-07:00

Cristina Fernandez

Argentina’s central bank announced new restrictions on foreign currency purchases as President Cristina Fernandez de Kirchner struggles to stem accelerating capital flight in South America’s second-biggest economy.

The new rules require foreign investors, including individuals, to register foreign currency inflows tied to investments in property and other local assets. Those that fail to register the funds brought into the country will need to seek the central bank’s permission before repatriating any proceeds, the bank said in a statement.

In addition, Argentines purchasing more than $250,000 per calendar year will need to demonstrate the origin of the funds in a bid to clamp down on illegal currency transactions, the bank said. Companies will be allowed to purchase dollars and other foreign currencies at a level compatible with their net worth excluding investments in assets abroad, stakes in other local firms, and dollar deposits in Argentine banks and adjusted for the amount of dividends, earnings and currency transactions in a given financial quarter.

The new restrictions come a day after Argentina ordered oil, gas and mining companies to repatriate all future export revenue. Fernandez, in her first move since winning re-election Oct. 23, changed a 2002 decree requiring companies such as Repsol YPF SA, Total SA and Petroleo Brasileiro SA to keep at least 30 percent of their export revenue in the country.

Falling Investment

Foreign direct investment in Argentina fell to $2.4 billion from $3.5 billion in the first six months of the year, while increasing 54 percent to $83 billion for Latin America as a whole, according to a United Nations report published this week. Faced with inflation economists estimate at 24 percent, Argentines pulled $9.8 billion out of the economy in the first half of this year, compared with $11.4 billion in all of 2010.

Capital flight prompted the central bank to sell $2.7 billion of reserves in August and September to curb a slump in the peso, which has weakened 6 percent this year. Reserves have fallen to $47.8 billion this year from a record $52.6 billion while central banks in Brazil, Mexico and Chile build up savings.

To contact the reporter on this story: Joshua Goodman in Rio de Janeiro at jgoodman19@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

Argentina Orders Oil, Gas, Mine Companies to Repatriate All Export Revenue

2011-10-26T19:45:00.000-07:00

Cristina Fernandez

Argentina ordered oil, gas and mining companies such as Xstrata Plc to repatriate all future export revenue as the government struggles to stem accelerating capital flight from South America’s second-biggest economy.

President Cristina Fernandez de Kirchner, in her first move since winning re-election Oct. 23, changed a 2002 decree requiring companies such as Repsol YPF SA, Total SA, Petroleo Brasileiro SA and Pan American Energy LLC to keep at least 30 percent of their export revenue in the country.

The decision by Fernandez, who nationalized the $24 billion pension fund industry and has called for a limit on purchases of farmland by foreigners, is part of an effort to slow capital flight estimated at $3 billion per month that is draining central bank reserves. The policy may make it harder to attract foreign direct investment to Argentina that the United Nations estimates fell 30 percent in the first half of the year.

“These types of controls only discourage investment and thus hurt exports,” said Juan Pablo Fuentes, a Latin America economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “The oil sector is already hampered by controls and regulations. This will only add to those problems.”

Shares Tumble

Extorre Gold Mines Ltd, a Vancouver-based company that explores for gold and silver in Argentina, plunged 25 percent to C$7.00 at 12:07 p.m. New York time after falling as much as 26 percent, the most in more than 18 months.

Americas Petrogas Inc, a Calgary-based company that explores for oil in Argentina, declined 21 percent to C$1.47 after tumbling as much as 29 percent, the most in three years. Crown Point Ventures Ltd., also based in Calgary with onshore oil and gas projects in Argentina, dropped 16 percent to C$1.13 after falling as much as 26 percent, the most in 20 months.

Foreign direct investment in Argentina fell to $2.4 billion from $3.5 billion in the first six months of the year, while increasing 54 percent to $83 billion for Latin America as a whole, according to a UN report published yesterday. Faced with inflation economists estimate at 24 percent, Argentines pulled $9.8 billion out of the economy in the first half of this year, compared with $11.4 billion in all of 2010.

100% Tax

Export sales from oil, gas, petrochemicals, gold and copper in Argentina totaled $10.7 billion in 2010, or 16 percent of total exports, according to the national statistics agency. Argentina places a 100 percent tax on oil exports above about $45 per barrel, compared with a global price that has ranged from $75 to $114 per barrel this year.

The move ensures “equal treatment to all production activities,” according to a statement in today’s official gazette. Mining companies had been exempt from the policy requiring that 30 percent of export revenue be repatriated since 2004.

“This shows the problems the government is having in trying to stop capital flight,” said Walter Molano, an emerging markets analyst with BCP Securities. “The government is willing to take strong measures to stop it.”

Capital flight prompted the central bank to sell $2.7 billion of reserves in August and September to curb a depreciation in the peso, which has weakened 6.1 percent this year. Reserves have fallen to $47.8 billion this year from a record $52.6 billion while central banks in Brazil, Mexico and Chile build up savings.

Company Reaction

Kristian Rix, a spokesman for Repsol YPF, Spain’s biggest oil company, said the company will “respect the law.” Coeur D’Alene Mines Corp., a U.S.-based gold and silver producer, will see no immediate impact from Argentina’s order and is still “keen” to invest in the country, spokeswoman Wendy Yang said.

Jorge Palmes, chief executive officer of AngloGold Ashanti Ltd’s Argentine unit, said the company wasn’t aware of the measure. Officials at Vale SA declined to comment. Xstrata spokeswoman Alison Flynn said it’s “too early to comment.” Pan American Silver Corp “is still assessing the news and how this could affect our Argentinean operations,” spokeswoman Kettina Cordero said via e-mail.

Fernandez, 58, has tapped central bank reserves to pay debt and steady the peso, nationalized carrier Aerolineas Argentinas SA and fined economists who question official inflation reports since taking office in 2007. She has also kept caps on utility prices, causing Reading, U.K.-based BG Group Plc and France’s GDF Suez to leave the country. Metrogas SA, Argentina’s largest natural-gas distributor, filed for bankruptcy.

Delayed Deals

BP Plc, the U.K.’s second-biggest oil company, said yesterday it may delay completion of its sale of a $7.1 billion stake in Pan American Energy to Bridas Corp., co-owned by Cnooc Ltd, until next year as it doesn’t yet have the necessary Argentine antitrust and Chinese regulatory approvals.

Today’s decree in Argentina isn’t likely to affect the sale, BP spokesman Robert Wine said in an e-mailed response to questions today.

Bridas, also owned by Argentina’s billionaire Bulgheroni family, agreed in November to buy BP’s 60 percent stake in Pan American that it doesn’t already own. The deal can be terminated by either party if the approvals aren’t received by Nov. 1, unless both sides agree to an extension.

Planned Investments

Vale, the world’s biggest iron-ore producer, is spending $5.9 billion to build a fertilizer plant in Mendoza province, western Argentina, to export potash. The mine, which is scheduled to start operating in the first half of 2014, is expected to be the world’s largest. Rio-based Vale is building a railway and a port to ship the mineral to Brazil.

Vale Chief Executive Officer Murilo Ferreira told investors May 27 the company’s potash project is “magnificent.” The construction of the project was halted for more than two weeks in June by the provincial authorities, after arguing that it wasn’t complying with required contract demands.

Faced with today’s decision, companies “will have to either reinvest in other Argentinian projects or decrease exposure to the country,” Luis F. Zapata, head of Latin America Institutional Equity Sales at Canaccord Genuity, said.

To contact the reporters on this story: Rodrigo Orihuela in Buenos Aires at rorihuela@bloomberg.net; Camila Russo in Buenos Aires at crusso15@bloomberg.net; Laura Price in Buenos Aires at lprice3@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

Machu Picchu named best ecotourism destination in South America

2011-10-25T08:29:00.000-07:00

The Inca citadel of Machu Picchu, in the southeastern Cusco region, was voted South America’s Leading Green Destination for second year in a row at the 2011 World Travel Awards , Peru’s export and tourism promotion agency Promperu reported.

Other nominees in this category included Abrolhos (Bahia, Brazil), Caracas (Venezuela), Georgetown (Guyana), Pantanal of Mato Grosso (Brazil) and Patagonia (Argentina), among others.

Described by the Wall Street Journal as the ‘Travel industry's equivalent to the Oscars’, the World Travel Awards was established in 1993 to acknowledge excellence in the world's travel and tourism industry and is one of the most comprehensive and prestigious awards.

The Caribbean & The Americas Gala Ceremony marks the fifth and final leg of World Travel Awards 2011 Grand Tour, following heats in Dubai, UAE; Antalya, Turkey; Sharm El Sheikh, Egypt; and Bangkok, Thailand. Regional winners from these events progress to the Grand

Final at the end of 2011.

Every year, over 167,000 travel agents, in 160 countries, vote for the winners of The World Travel Awards. This year the award ceremony took place in Montego Bay, Jamaica. (Andina)

video: http://www.youtube.com/user/infocusco

Peru’s economy expanded 7.49 percent in August - and 7.51 between January and August

2011-10-17T10:02:00.000-07:00

Peru’s economy expanded 7.49 percent in August 2011, totalling 24 months of consecutive growth, reported on Thursday the National Statistics Institute (INEI).

This way, the growth of the Gross Domestic Product (GDP) between January and August amounted to 7.51 percent, while the rise between September 2010 and August 2011 (last 12 months) jumped 8.14 percent.

Agricultural activity in August rose 5.8 percent driven by the farming and livestock sub sectors (7.85 percent and 3.57 percent respectively).

The Agricultural activity increased 3.69 percent between January and August, driven by the farming and livestock sub sectors (2.24 percent and 6.04 percent respectively).

Fishing sector grew 82.57 percent in August due to the Maritime Fishing positive result (98.41 percent) and spite the drop in Continental Fishing (-7.41 percent).

From January to August, Fishing rose 26.81 percent due to Maritime Fishing positive result (29.92 percent) and the Continental Fishing drop (-10.90 percent).

In August, the Mining and hydrocarbons sector rose 3.19 percent due to the metal production positive evolution (2.30 percent) and hydrocarbons activity (7.21 percent).

From January to August, Mining and hydrocarbons fell 0.78 percent due to the drop of the mining metallic sector (-5.38 percent) and a rise in the hydrocarbons sector (26.43 percent).

Construction increased 6.66 percent, while Trading jumped 8.51 percent in July. During the first eight months of the year, Construction accumulated an increase of 3.56 percent and Trading increased 9.17 percent. (Andina)

Mining companies to invest $51.4bln in Peru

2011-10-16T10:09:00.000-07:00

Mining companies in Peru will invest $51.49 billion in new mines and expansion projects, and the trend to undertake more projects will continue in the coming years, the Ministry of Energy and Mines (MEM) said Sunday.

According to the latest monthly bulletin, there are mine expansion projects being pursued by eight companies, with an investment of $9.05 billion dollars.

Southern Peru Copper Corporation (SPCC) invests $1.6 billion in four of these projects, including the Cuajone and Toquepala mines and the Ilo refinery in the south of the country.

Other big projects include Xstrata PLC's $4.2 billion Las Bambas copper project in Apurimac region and Newmont Mining Corp's 51.35%-owned Minas Conga gold project in Cajamarca. Conga has an estimated capital cost of $ 4.0 billion to $4.8 billion.

Peru's Compania de Minas Buenaventura SAA has a 43.65% stake in Conga, while the World Bank's International Finance Corporation holds the remainder.

Peru is the world's second biggest producer of copper and silver and a major producer of gold, zinc, lead and other minerals. (Andina)

Over 200 Peruvian, 50 foreign companies to attend Expo Pesca & Acuiperu 2011

2011-10-14T18:58:00.000-07:00

More than 200 Peruvian companies and 50 foreign companies will participate in the fifth edition of the International Fair of Fishing and Aquaculture named Expopesca & Acuiperu 2011, the biggest fair in Latin America and the fourth in the world, to be held in Lima from November 11-12

This event will allow strengthening Peru not only as the first exporting country of fish meal in the world, but also as the country with the biggest fishing fair in Latin America.

This fair was made official by Peru’s Ministry of Foreign Trade and Tourism, meanwhile the National Superintendency of Tax Administration (Sunat) has granted custom facilities, in order to the samples can be imported temporarily without paying import duties and presenting bank bonds.

The showcase will display a great sample of equipments, supplies and services for fishing and aquaculture. Also, they expect to receive some 14,000 visitors during these three days of fair.

Peruvian and foreign Fishing and aquaculture entrepreneurs that will participate in this event likely to conclude business in a year by US$100 million approximately, general manager of Thais Corporation Guillermo Thais noted. (Andina)

Brazil Economy Contracted More Than Expected in August

2011-10-13T10:18:00.000-07:00

Favelas (Shanty Town) in Brazil

Brazil’s economy contracted more than expected in August, cementing expectations that policy makers will continue to cut interest rates.

Economic activity, a proxy for gross domestic product, fell 0.53 percent in August from the previous month, according to the central bank’s seasonally adjusted index, after expanding a revised 0.34 percent in July. The decline was steeper than the median forecast of a 0.4 percent slide from 13 analysts surveyed by Bloomberg.

Activity was up 2.93 percent from the same month a year ago, according to the non-seasonally adjusted series.

Traders are betting the central bank will cut its benchmark interest rate half a point to 11.5 percent at its Oct. 18-19 policy meeting, according to Bloomberg estimates based on interest rate futures yields. Central bank President Alexandre Tombini said last week “moderate” cuts in interest rates will help shield the economy from the European debt crisis and won’t compromise the country’s inflation target.

The yield on the interest rate futures contract maturing in January 2013, the most traded in Sao Paulo today, fell one basis point, or 0.01 percentage point, to 10.45 percent at 11:38 a.m. New York time. The real strengthened 1.4 percent to 1.7507 per dollar.

Lower Forecast

Finance Minister Guido Mantega told reporters in Paris today that Brazil’s economy will grow 3.5 percent to 4 percent this year, and could expand 5 percent in 2012. In 2010, Brazil grew 7.5 percent, its fastest expansion in more than two decades.

Consumer prices rose 7.31 percent in the year through September, exceeding the 6.5 percent upper limit of the central bank’s target range for a sixth straight month. The bank targets inflation of 4.5 percent, plus or minus two percentage points.

Retail sales in August fell the most since March 2010. Industrial output contracted in August for the third time in five months, while business confidence in the third quarter fell to its lowest level in more than two years.

Brazil will grow more slowly than China, India and Russia this year and in 2012, the International Monetary Fund forecasts.

Tombini cut the benchmark interest rate a half point to 12 percent on Aug. 31, after raising it at the previous five policy meetings, citing a “substantial deterioration” in the global economy.

To contact the reporters on this story: Matthew Bristow in Brasilia at mbristow5@bloomberg.net; Andre Soliani at asoliani@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.

Three Free-Trade Deals Pass U.S. Congress

2011-10-12T21:00:00.000-07:00

US Senate

The U.S. Congress approved free- trade agreements with South Korea, Colombia and Panama, bringing an end to years of stalemate and offering what supporters said was the biggest opportunity for exporters in decades.

The bills go to President Barack Obama, who spent two years seeking to broaden Democratic support for pacts revised from initial agreements reached by his predecessor. The South Korea deal, the biggest for the U.S. since the North American Free Trade Agreement in 1994, removes duties on almost two-thirds of American farm exports, and phases out tariffs on more than 95 percent of industrial and consumer exports within five years.

Yesterday’s step may diminish concern that the U.S. will turn to protectionism amid an unemployment rate that exceeds 9 percent, coming a day after a Senate vote designed to punish China for an undervalued yuan. The approval may also give impetus to Obama’s trans-Pacific trade initiative, which Japan, the world’s third-largest economy, is considering joining.

“This is a welcome development showing policy makers can be farsighted and come to an agreement that is positive for all parties involved in the long run in terms of GDP growth,” said Robert Subbaraman, Hong Kong-based chief economist for Asia excluding Japan at Nomura Holdings Inc. “There’s been a lot of market disappointment in policymaking this year.”

Stocks in Asia headed for a sixth straight day of gains, the longest winning streak in six weeks. South Korea’s benchmark KOSPI index rose 0.9 percent.

Economic Boost

The South Korea deal would boost American exports by as much as $10.9 billion in the first year in which it’s in full effect, according to the U.S. International Trade Commission. The accord with Colombia would increase exports as much as $1.1 billion a year. The U.S. Chamber of Commerce said the accords will prevent the loss of 380,000 jobs.

Companies such as Ace Ltd., Citigroup Inc. (C) and Pfizer Inc. have led the effort to get the South Korea deal passed, while Caterpillar Inc., General Electric Co. and Whirlpool Corp. were among the biggest backers of the accord with Colombia.

Obama submitted the legislation after House Speaker John Boehner, an Ohio Republican, said he would consider the worker assistance along with the trade deals. First reached under President George W. Bush more than four years ago, the measures overcame a stalemate with Republicans on aid for workers who lose their jobs to foreign competition.

Obama’s Welcome

“I’ve fought to make sure that these trade agreements” with three nations “deliver the best possible deal for our country,” Obama said in an e-mailed statement. “American automakers, farmers, ranchers and manufacturers, including many small businesses, will be able to compete and win in new markets.”

The vote is a win for Obama in a week when the Senate declined to proceed with his $447 billion plan to increase employment. A government report last week showed the nation’s jobless rate held at 9.1 percent in September.

With advanced economies facing predictions of a return to recession, the free-trade deals show how developed nations are turning to emerging markets as sources of growth. Colombia’s gross domestic product rose 5.2 percent in the year through June, and that of South Korea, Asia’s fourth-biggest economy, increased 3.4 percent. U.S. GDP expanded 1.3 percent in the second quarter from the previous three months at an annual rate.

‘Sorely’ Needed

“These agreements will provide an economic boost at a time when our country sorely needs it,” Senator Max Baucus, a Montana Democrat who leads the Finance Committee, which controls trade bills in the chamber, said after almost eight hours of debate.

Obama is seeking to double American exports by 2015, in part through boosting shipments to Asian nations. Nine nations are involved in negotiating the U.S.-led Trans-Pacific Partnership trade accord, known as the TPP.

The administration negotiated terms for auto tariffs in the South Korea agreement that won over the United Auto Workers union, an exchange of tax information with Panama and labor- rights assurances from Colombia.

The House and Senate passed the agreements as South Korean President Lee Myung Bak visited Washington. Lee, who is to address Congress today, told the U.S. Chamber of Commerce yesterday that the trade accord will create “good, decent jobs” that will help spur both economies.

Japan’s Concern

“Japanese companies will be put in a further disadvantageous position compared with South Korean competitors in the U.S.,” Yoichi Kaneko, a ruling Democratic Party of Japan lawmaker said today in a telephone interview. “There is still an opposition within the DPJ but I think it’s important for Japan to join the TPP and free trade agreements.”

The South Korean tariff phase-outs increase market access for U.S. chemical, automobile, medical device and drug companies, and the end of duties on a range of agricultural exports benefits producers of meat, dairy, vegetables and fruits and nuts. Banks and communications companies would also gain opportunities through reductions in regulatory barriers.

“Removal of tariffs will of course be good. South Korean automobile-parts makers have started to attract heightened interest from customers in the U.S. since the earthquake that crippled Japan in March,” said Moon Seung Ki, a spokesman for Hyundai Mobis Co., South Korea’s biggest auto-parts maker.

Samsung Electronics Co., the world’s No. 2 semiconductor maker, said it would see little change in sales from the deal. Nam Ki Yung, a Seoul-based spokesman for the company, said “it will be good for overall trade for both nations. Still, we don’t expect a big impact on our business.”

Labor Opposition

The trade deals were opposed by groups including the AFL- CIO the nation’s largest federation of labor unions and a frequent Democratic ally. Richard Trumka, the organization’s president, had urged lawmakers to oppose them, saying in an Oct. 4 speech in Washington that they are “lousy” deals and will destroy 159,000 jobs by encouraging companies to send work overseas.

“These flawed trade deals are the wrong medicine at the wrong time,” Trumka said in a statement yesterday. “Working people know what too many politicians apparently do not: These deals will be bad for jobs, workers’ rights and our economy.”

Senators Robert Casey of Pennsylvania and Sherrod Brown of Ohio, both Democrats from manufacturing states facing re- election next year, opposed the bills. They said prior trade measures never worked as well as advertised for U.S. workers.

“They will in fact lead to job losses, especially in manufacturing,” Casey said before the vote.

Colombia Bill

The Colombia accord faced the most opposition, passing on votes of 66-33 in the Senate and 262-167 in the House. Brown in the Senate and Representative Sander Levin of Michigan led Democratic opposition, saying Colombia had done too little to protect union leaders from assassination.

“Colombia remains the most dangerous place in the world to be a trade unionist,” Brown said in a speech on the Senate floor.

While the 51 Colombian union members killed last year represent a 73 percent decline from 186 in 2002, according to the National Union School, a labor-rights organization based in Medellin, slayings increased from 47 in 2009. More than 1,700 union members were killed in Colombia in the past decade, the most in the world and 63 percent of the global total, based on union school figures.

The pacts are the first passed by Congress since a deal with Peru in 2007.

The House also voted last night to renew aid for workers hurt by foreign competition and tariff preferences for developing nations. The bill extends benefits, including those for service workers that expired in February, through 2013 while cutting the weeks of extended unemployment insurance that participants can receive to 130 from 156, and reducing the health-care tax credit for people enrolled in the program.

To contact the reporters on this story: Eric Martin in Washington at emartin21@bloomberg.net; William McQuillen in Washington at bmcquillen@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

Venezuela to Sell $3 Billion of Bonds to Meet Demand for Foreign Currency

2011-10-11T18:39:00.000-07:00

Venezuela will offer $3 billion of bonds in the local market, swelling dollar debt sales this year to $7.2 billion, as the country seeks to finance spending and meet investor demand for foreign currency.

The government will sell the 11.75 percent bonds due in 2026 to local investors, who will pay with bolivars at the official foreign-exchange rate of 4.3 bolivars per dollar, according to a statement posted on the Public Credit Office’s website. Credit Suisse Group AG (CSGN) and Evrofinance Mosnarbank SA will manage the sale, the statement said.

“This has taken the market by surprise,” Jeff Williams, an emerging-market debt strategist at Citigroup Inc. in New York, said in a phone interview. “People weren’t expecting a new Venezuela issue this year, so in that sense it’s negative for the market.”

The $7.2 billion of debt to be sold by the government this year is the most on record, according to data compiled by Bloomberg. Venezuela, which has the highest borrowing costs of major emerging-market economies after Belarus, sells the bonds to provide foreign currency to local investors who are unable to buy dollars under President Hugo Chavez’s eight-year-old controls. Investors can re-sell them in overseas markets at a discount to obtain dollars. The securities will have a sale price of 95 cents on the dollar, the government said.

The sale will bring the total issuance between Venezuela and state oil company Petroleos de Venezuela SA to about $15.2 billion this year, a figure that surpasses the total amount sold by the rest of Latin American governments in the international market combined, Barclays Capital said today in a note.

‘Deteriorated’

“It is hard to explain why Venezuela has issued these bonds at a time when conditions in the international market have deteriorated,” analysts Alejandro Arreaza and Alejandro Grisanti said in the note. The government seems “willing to issue as much as possible” ahead of the 2012 elections, they wrote.

Yields on the government’s benchmark 9.25 percent bonds maturing in 2027 rose four basis points, or 0.04 percentage point, to 15.01 percent at 4:24 p.m. Caracas time, according to prices compiled by Bloomberg. The price fell 0.18 cents on the dollar to 65.45 cents.

Importers, Banks

The extra yield investors demand to own Venezuelan government bonds instead of U.S. Treasuries fell eight basis points to 1,296, according to JPMorgan Chase & Co.’s EMBI+ Index.

The Finance Ministry will begin receiving orders for the bonds on Oct. 13 and will announce the results of the sale on Oct. 17, the statement said. Venezuela will offer 40 percent of the bonds to import companies registered with the Foreign Exchange Board, known as Cadivi, while the remaining securities will be sold to individuals, banks, non-Cadivi companies and pension funds, the statement said.

The government is tapping credit markets for a second time this year as Chavez seeks to win a third consecutive six-year term next October. The sale also comes amid a surge in the central bank’s scarcity index and an inflation rate that rose for a fourth consecutive month in September to 26.5 percent, the highest of 78 economies tracked by Bloomberg.

Petroleos de Venezuela Bonds

State oil company PDVSA has sold $7.93 billion of bonds this year including new issuance and the reopening of previous bonds.

“This sale will create more pressure on the debt curve,” said Alberto Cardenas, head of strategy at Caracas-based investment bank BancTrust & Co. “It’s likely that PDVSA will come to market again at the end of this quarter.”

Venezuela’s average government dollar bond yields have fallen 61 basis points since Oct. 4 to 15.21 percent yesterday, according to JPMorgan. The average yield was 12.98 percent on Aug. 2.

The central bank may receive a portion of the bonds to sell through its Sitme currency market, where banks trade dollar bonds on behalf of clients to finance imports at an exchange rate of 5.3 bolivars per dollar, said Asdrubal Oliveros, director of Caracas-based consulting firm Ecoanalitica.

“The government picked a poor moment to sell bonds,” Oliveros said. “Venezuelan bond prices are low right now due to risk aversion and the government didn’t do any work leading up to the sale to reduce borrowing costs.”

To contact the reporters on this story: Daniel Cancel in Caracas at dcancel@bloomberg.net; Corina Rodriguez Pons in Caracas at crpons@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

Nine nations give up concluding TPP talks by APEC summit

2011-10-10T19:12:00.000-07:00

Trans-Pacific Partnership

Nine nations participating in Trans-Pacific Partnership free trade talks have given up on concluding the negotiations in time for the November APEC summit in Hawaii, several trade sources said Saturday.

Their working committee is planning to meet in Malaysia in December to continue the talks, according to the sources cited by Kyodo.

The nine include Australia, Singapore, Peru, the United States and Vietnam.

The move apparently reflects the conflicting opinions among the respective parties on how to break down trade barriers, and gives Japan more time to consider its position on joining the talks, after having fallen behind in the face of domestic opposition, particularly from the agriculture sector.

While the U.S. government had shown willingness to conclude the talks by the November summit of the Asia-Pacific Economic Cooperation forum, some observers said it would be difficult to make substantial progress in the talks until the U.S. presidential election is over next year. (Andina)

Peru-Ecuador Binational Cabinet Meeting takes place in Peru next month

2011-10-07T07:00:00.000-07:00

Ollanta Humala - Rafael Correa

The next Binational Cabinet Meeting between Peru and Ecuador will be carried out on November 17 in the city of Jaen, located in the Peruvian Cajamarca region, Peru’s Prime Minister Salomon Lerner noted Wednesday night.

“In this meeting, Peru and Ecuador will discuss social integration, infrastructure, agriculture and migration relations between both nations,” said Lerner after the 11th Cabinet session.

This Binational Cabinet Meeting will be the first one to which President Ollanta Humala will attend since taking office in July this year. The last session took place in the Ecuadorian city of Loja in October 2010.

Last month, Ecuadorian Ambassador in Lima Diego Ribadeneira highlighted that “bilateral relations between Peru and Ecuador are at its best," as both countries implemented specific and decisive measures in the binational cabinets.

On the other hand, Lerner stressed that during yesterday’s meeting of the Council of Ministers, the health sector reported on the progress made to build new hospitals in the country. (Andina)

JPMorgan Cuts Forecast for Brazil’s Economic Growth, Sees Deeper Rate Cuts

2011-10-04T10:17:00.000-07:00

JPMorgan Chase & Co. (JPM) cut its forecast for Brazil’s economic growth and said it expects the central bank to cut interest rates more than it previously expected as global financial turmoil weighs on confidence in Latin America’s biggest economy.

The bank, in an e-mailed report, said it expects policy makers to reduce the benchmark interest rate to 10.5 percent by January from its current 12 percent. Previously the bank expected the so-called Selic rate to fall to 11 percent in January.

Latin America’s biggest economy should grow 2.3 percent in the second half of the year, less than a 3.1 percent forecast made Aug. 8, JPMorgan analysts wrote in the report. The economy next year should expand 3.4 percent instead of a previous 3.8 percent forecast.

“Domestic growth prospects for next year still seems cushioned by a more preemptive monetary policy response and the buffers from fiscal and quasi fiscal policies,” JPMorgan analysts including Fabio Akira wrote in today’s report.

The currency will end the year at 1.80 per U.S. dollar, compared with the previous forecast of 1.70, JPMorgan said.

Alexander Ragir - Bloomberg

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

Peru's August mining/hydrocarbons output rose 3.19%

2011-10-03T10:08:00.000-07:00

Production in Peru's key mining and hydrocarbons sector rose 3.19% in August, as the mining subsector increased 2.3%, while the hydrocarbons subsector rose 7.21%.

The figures were released in a statement from the government's statistics agency, INEI, which show that growth remains strong in Peru's economy, Dow Jones Newswires reported.

The agency said Sunday that activity in the farming sector rose 5.83% in August over the same month a year earlier.

Electricity output increased 9.6% in August, while the fishing sector increased 82.57%.

The INEI releases the figures for growth in mining and other sectors before later releasing the overall gross domestic product number.

Peru's GDP expanded by 8.8% in 2010 and is expected grow by about 6.5% this year. (Andina)

Netflix to Tussle With Telefonica, Slim in Latin America

2011-09-30T10:27:00.000-07:00

Netflix Inc. (NFLX), seeking growth in Latin America after a price increase angered its U.S. DVD and online customers, is confronting entrenched competitors and cultural hurdles in its drive south of the border.

The company, based in Los Gatos, California, began selling subscriptions in Latin America on Sept. 5 and now offers movie streaming in 43 countries, including the Caribbean. The price is 99 pesos ($7.24) a month in Mexico and $7.99 elsewhere.

Lower incomes, less broadband availability and competitors such as Telefonica SA (TEF)’s TerraTV and Carlos Slim’s Net Servicos de Comunicacao SA (NETC4) will complicate the effort, Chief Executive Officer Reed Hastings said in July. Compared with the U.S., fewer Latin Americans have credit cards, the main Netflix payment tool, and fewer have Internet-ready game consoles.

“It will be slower because of payment methods and because of video-game consoles,” Hastings said.

The number of Internet users in Latin America is projected to more than double to 107.3 million in 2020 from 46.2 million at the end of 2011, according to SNL Kagan, a media consultant. The market for TV and video subscriptions will grow to $23 billion by 2015, according to PricewaterhouseCoopers LLC.

Netflix, which had almost 26 million users as of June 30, will double its foreign subscribers to 3.5 million in 2012, according to Michael Olson, an analyst at Piper Jaffray Cos. in Minneapolis who recommends the stock. That includes Canada, where 1 million people joined Netflix in its first year there.

Market Share

Competition and cultural barriers will keep Netflix at less than the 10 percent market share it needs to break even in Latin America, estimates John Blackledge, a Credit Suisse analyst in New York, who also recommends the shares.

Tony Wible, an analyst with Janney Montgomery Scott LLC and a long-time Netflix skeptic, predicts the company will have to drop its Latin America prices because consumers have lower incomes and pay less for cable TV than U.S. viewers.

“There is just not the incentive in Latin America for consumers to drop their cable service or to pay more to add Netflix,” said Wible. “They’re not as well known in that region than they were in Canada and there are regional monopolies in some of the countries.”

Netflix gained $1.36 to $114.55 at 11:34 a.m. New York time in Nasdaq Stock Market trading. It finished at the lowest close since August 2010 yesterday, following reports that Amazon.com Inc. (AMZN) and Microsoft Corp. (MSFT) plan products that may siphon users. As of yesterday, the stock had declined 63 percent from an all-time intraday high of $304.79 on July 13.

Latin American Goals

To support its efforts, Netflix has agreements with Sony Corp. (6758), Walt Disney Co. (DIS) and other Hollywood studios for access to movies and TV shows. The service also has signed on broadcasters such as Grupo Televisa SA and Comcast Corp. (CMCSA)’s Telemundo for telenovelas and other popular Latin American TV programs and films.

Netflix intends to duplicate its Canadian experience, where the service has signed up 10 percent of the broadband households, a feat that took six years in the U.S., Ted Sarandos, chief content officer, said at a Sept. 14 conference.

Competitors say they are ready.

“We don’t see the arrival of Netflix as a concern,” said Fernando Madeira, CEO of Madrid-based Telefonica’s Terra. “We’ve had competitors before -- America Online, Yahoo.”

TerraTV offers free, advertising-supported video online to 12 million Internet users in 17 countries, including Brazil, the largest Latin American market, according to Madeira.

It started a subscription service in February that has 200,000 registered users who pay 14.90 reais ($8.10) a month. Madeira said the service plans to reach 1 million viewers throughout Latin America by the end of next year.

Ties That Bind

TerraTV’s big advantage may be Telefonica’s relationships throughout Latin America. Fixed line and wireless accounts in the region generated almost 46 percent of the parent company’s 30.9 billion euros in 2011 first-half revenue.

“It is very difficult for people to come into this market that are not known,” Madeira said. Consumers “don’t like giving out their credit card numbers.”

Net Servicos, owned by Slim’s America Movil SAB and the Brazilian media giant Globo Comunicacao e Participacoes SA, is that country’s largest cable carrier. It recently reached an agreement to provide its subscribers with access to the Muu online service owned by Globo.

NetMovies Entertainment, a Brazilian, Netflix-like service owned by hedge fund manager Tiger Global Management, announced on Sept. 26 an agreement with Disney for “a large array” of films. NetMovies, which offers DVDs by mail and streamed movies, also has signed deals to be featured on Web-connected TVs including those made by Samsung Electronics Co., Panasonic Corp. (6752) and LG Electronics Inc. (066570), the company said in a statement.

Halo Effect

The online service doesn’t break out the numbers of its subscribers. Tiger Global and NetMovies didn’t respond to requests for comment.

“There’s a small brand halo effect in Canada that we don’t have in Latin America,” David Wells, chief financial officer of Netflix, said on the July conference call. “We’re building a brand that is largely unknown down in Latin America so there’s a little of an effect there in speed.”

Competition from illegal websites is also an issue.

In April, the U.S. Office of the Trade Representative put 11 Latin American countries on watch lists for intellectual property theft, including the region’s three largest media markets, Brazil, Mexico and Colombia.

The U.S. government says it has invited those on the lists to negotiate “a mutually agreed upon action plan” by which the countries would eliminate U.S. concerns over their enforcement of intellectual copyrights.

“We think there is a real pent-up demand from honest people who steal content because that’s the only way that they can get it,” said Sarandos.

Ronald Grover, Manuel Baigorri and Cliff Edwards - Bloomberg

To contact the reporters on this story: Ronald Grover in Los Angeles at rgrover5@bloomberg.net; Manuel Baigorri in Madrid at mbaigorri@bloomberg.net; Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

Rousseff Crisis Spurred by Lula Debts as Brazil Boom Diminishes

2011-09-27T20:22:00.000-07:00

On a cool July evening, Brazilian President Dilma Rousseff hosts a cocktail party for 50 leaders of her governing coalition, Bloomberg Markets magazine reports in its November issue. Speaking from the foot of a red-carpeted staircase in the living room of Alvorada Palace, where she lives with her mother and aunt, Rousseff tells the gathered politicians that these are the best times for Brazil, according to four people who attended.

“The world is going through economic and financial turbulence,” says Rousseff, who’s dressed in a black pantsuit. “But we’re living through a great moment.”

In a toast, Dilma, as she’s known to almost all Brazilians, juxtaposes the task of managing the country’s new economic prosperity with U.S. President Barack Obama’s struggle with the Republicans to get the U.S. government budget under control.

“And up there, they only have two parties,” she jokes.

Brazil has 27.

Rousseff, 63, inherited just about everything a president could want from her mentor and predecessor, Luiz Inacio Lula da Silva: an economy growing at a 7.5 percent annual pace and unemployment, at 5.3 percent, that was the lowest since at least 2001. Brazil’s Bovespa stock market index rose six-fold during Lula’s eight-year tenure, as iron ore, soybean and sugar exports boomed, driven in large part by demand from China.

Lula pulled 24.5 million people out of poverty in his years in office, according to data compiled by the Getulio Vargas Foundation, and Rousseff says that in the next four years, she will eliminate extreme poverty in Brazil.

A Miracle Subdued

Yet Rousseff took office in what has turned out to be a rocky period for Brazil’s economic miracle. Her government and Brazil’s economy have been hit with a series of setbacks. Brazil’s subdued mood may be best captured by the swoon in its stock prices: The Bovespa index was down 22 percent in 2011 as of yesterday.

The bad news spills over into politics. From June to September, five of Rousseff’s cabinet ministers resigned, four of them after the police or the press made allegations they had misused public money.

On Aug. 17, Agriculture Minister Wagner Rossi stepped down after Veja magazine alleged he had illegally used his influence for personal gain. Rossi denies wrongdoing. His PMDB party, with 80 deputies in the 513-member lower house, is a crucial part of the 15-party governing coalition led by Rousseff’s Workers’ Party, which itself has just 86 Assembly seats.

Inflation Affliction

On the economic side, Brazil is once again suffering from an old affliction: inflation. Consumer prices, as measured by Brazil’s IPCA index, rose 7.2 percent during the 12 months ended in August. Though mild compared with the country’s legendary hyperinflation -- which peaked at an annual rate of 6,821 percent in April 1990 -- the price increases are eroding some of the progress Lula and Rousseff, who used to be his chief of staff, have made at reducing poverty and building a middle class.

The dilemma for Rousseff’s government is that officials don’t want the fight against inflation to choke off economic growth. From January to July, central bank President Alexandre Tombini responded to the inflation threat by raising Brazil’s benchmark interest rate five times.

Then, on Aug. 31, to the surprise of analysts, the central bank lowered the rate, to 12 percent from 12.5 percent. Even after the cut, Brazil’s rate was the highest among the Group of 20 nations, representing the world’s largest economies.

Global Downturn

The central bank’s rationale for the rate cut was that a “substantial deterioration” in global economic growth will also slow Brazil’s expansion and push down inflation.

“Even assuming that they’re correct on their overly bearish view on Brazil’s economy, they’re clearly putting growth above their inflation target,” says Tony Volpon, Latin America strategist at Nomura Securities International Inc. in New York. “The outcome in the long run will be higher overall inflation.”

Despite the global economic gloom, Will Landers, who manages $8.5 billion in Latin American stocks at New York-based BlackRock Inc., sees only blue sky for Brazil’s economy.

“The natural resources aren’t going away, global food demand isn’t going anywhere and the middle class will continue to develop,” Landers says. “The domestic consumption story is unparalleled. It’s still a great place to invest.”

There are two immediate culprits behind what is the worst inflation in six years: skyrocketing credit and heavy spending by the government. Bank lending to businesses and consumers stood at 47 percent of GDP as of July, up from 24 percent when Lula took office in 2003, according to the central bank.

Lula’s Mixed Legacy

And in the run-up to the Oct. 31, 2010, election that put Rousseff into the presidency, Lula spent lavishly. Government spending in 2010 jumped 22.3 percent to 700 billion reais ($378 billion).

To tame inflation, Rousseff pledged on Feb. 9 to cut 50 billion reais from the 2011 budget. She also needs to cut the government subsidies that allow the National Development Bank to lend money at cheap rates, says Paulo Vieira da Cunha, a former central bank director who’s now a partner at New York-based hedge fund Tandem Global Partners LLC. The bank handed out a record $101 billion in loans last year for projects such as building nuclear power plants, dams and roads and improving the electrical grid -- 40 percent more than the $72.2 billion loaned to countries around the globe by the World Bank.

Carry Trade

Commercial banks have also contributed to the inflation spiral. With near-zero interest rates in the U.S. and Europe, banks have been borrowing at low rates abroad and then lending at higher rates in Brazil, prompting Tombini to tighten bank liquidity requirements, a move that he says has removed 61 billion reais from circulation and helped prevent a credit bubble.

Brazil’s high interest rates have attracted speculative investors to Brazil’s bond market, adding fuel to the 27 percent rise in the value of the real against the dollar since the end of 2008. The strong real makes exports more expensive and imports cheaper, which has resulted in a flood of Chinese goods filling store shelves, hurting local manufacturers.

The real has fallen 13 percent this month against the dollar as investors have fled emerging market assets on concern Europe’s debt troubles will stall the global economy. The decline may improve Rousseff’s image with exporters and manufacturers, although it will fuel inflation by increasing prices for imported consumer goods, says Mauricio Rosal, an economist with Raymond James Financial Inc. in Sao Paulo.

“The real fell because of problems with Europe, but if a solution is found, the currency will bounce back,” Rosal says. “What’s happening in Europe isn’t going to solve Brazil’s structural problems.”

World Cup Costs Rise

Rising borrowing costs make government financing more expensive for the road improvements and other construction projects Brazil is undertaking to prepare for hosting the 2014 World Cup and the 2016 Summer Olympics. The government is building stadiums, housing and other facilities for the games and is also upgrading transportation and other infrastructure as part of an $886 billion investment plan through 2014.

Rousseff can attack all of her problems at once with a single measure: reducing the huge and growing government budget, says Alberto Ramos, a New York-based economist at Goldman Sachs Group Inc. (GS) specializing in Latin America. Since Lula took office, public spending has tracked GDP upward, with the economy growing to $2.1 trillion in 2010 from $552 billion in 2003.

Need for Austerity

“I’ve never seen an economy with so many macro issues that can be addressed with just one instrument,” Ramos says. “If they would cut the fiscal budget significantly, they’d let the central bank loosen monetary policy. Lula rode the wave of rising commodity prices and forgot to make the reforms needed to make it sustainable.”

By cutting government spending, Brazil could both lower taxes and reduce the cost of its $1.73 trillion debt by making more room for policy makers to cut interest rates, Ramos says. In 2008, the last year for which data are available, Brazil’s federal, state and local governments collected taxes equivalent to 35 percent of Brazil’s GDP, with half of the money spent on pensions, corporate subsidies and welfare programs and 16 percent spent on debt payments.

Both public and private projects are expensive to bring off because of what Ramos and other analysts call the Brazil Cost. The price of doing business is driven up by taxes, graft, a turgid bureaucracy and high borrowing costs, Ramos says.

Unfriendly to Business?

Brazil, the world’s seventh-largest economy, ranks 127 out of 183 countries in the ease of doing business, according to the World Bank’s Doing Business 2011 survey.

It takes an average of 120 days to complete the 15 procedures to start up a company.

Persuading the legislature to spend less will be an uphill battle, according to an Aug. 10 report on the economy by Bank of America Corp. The most Rousseff can hope for, the report says, are modest changes in the tax code and a rise in the time younger government employees need to work before they get their pensions.

The generous pension system is an important component of government overspending, says Simon Nocera, founder of San Francisco-based hedge fund Lumen Advisors LLC, who studied the subject while working as an economist at the International Monetary Fund in the 1990s.

Public servants can retire with 100 percent of their final salary after as few as 25 years of service, though men must be 60 and women 55 before they can collect. In 2010, the government spent 333 billion reais on pensions -- almost the GDP of Ireland.

Generous Pensions

“If they reformed the pension system, they could lower taxes and interest rates,” Nocera says. “It’s the easiest way to lower costs, but there’s no political will.”

Rousseff, who had never run for any office before being elected president, has little experience in negotiating the political deals that will be needed to reduce the budget and push down inflation and interest rates. And the recent cabinet resignations don’t help.

One victim was Antonio Palocci, Dilma’s chief of staff, an experienced Workers’ Party leader who stepped down in June after a news report that his consulting firm had earned 20 million reais in 2010, most of it when he was running Dilma’s electoral campaign. Opposition lawmakers claim he was selling access to the future president. Palocci denies wrongdoing.

Palocci Departs

Rousseff replaced Palocci with Senator Gleisi Hoffmann, a woman with almost no heft within the party, according to David Fleischer, a political analyst at the University of Brasilia.

Rousseff also lost her tourism minister -- who resigned on Sept. 14 after federal police arrested 38 people for the illegal use of money from his ministry.

Alfredo Nascimento, her powerful transportation minister and a leader of the Party of the Republic, also resigned amid allegations of kickbacks and overbilling in a ministry that doles out $15 billion a year for public works projects. He also denies wrongdoing.

With the pressure on to root out corruption, in the following two months Rousseff forced out about 20 more officials from the Transport Ministry, prompting Nascimento’s party to pull out of the government coalition.

Rousseff’s July cocktail party was one attempt to keep the government together so she has a chance to fight off the demon of inflation. At one point, Rousseff raised her wine glass for a toast to “fraternity” and “harmony” before noticing that not everyone had a drink. Waiters scurried to give glasses to those who were empty-handed before she continued.

Toasting Together

“It was very important for President Dilma to make sure we could all toast together,” Minister of Institutional Affairs Ideli Salvatti says.

Her coalition might be fragile, but given the economic powerhouse that Lula bequeathed her, Dilma’s glass is still more than half full.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.

To contact the editor responsible for this story: Michael Serrill at mserrill@bloomberg.net.

Brazil Economists See Inflation Topping Target Range First Time Since 2003

2011-09-26T13:05:00.000-07:00

Brazil central bank

Brazil’s central bank will miss its inflation target this year for the first time since 2003, a central bank survey of economists shows.

Consumer prices will rise 6.52 percent this year, according to the median forecast in a Sept. 23 central bank survey of about 100 analysts published today, as record low unemployment and a weaker currency fuel consumer price increases.

The forecast was up from 6.46 percent the previous week. The central bank targets inflation of 4.5 percent, plus or minus two percentage points, and year-end inflation has remained within the target range for the past seven years.

“The report shows that the market expects the weaker currency to contribute to inflation, although not enough to change the central bank’s focus,” said Luciano Rostagno, head strategist of CM Capital Markets, in a telephone interview from Sao Paulo. “The central bank has signaled that it will keep promoting a policy of cutting rates.”

Central bank President Alexandre Tombini cut Brazil’s benchmark interest rate a half point to 12 percent on Aug. 31, after raising it at the previous five policy meetings, citing a “substantial deterioration” in the global economy. The bank said lower borrowing costs won’t compromise its 4.5 percent inflation target next year.

Annual inflation in mid-September was 7.33 percent, the fastest rate in six years.

Falling Yields

Yields on the interest-rate futures contract maturing in January 2013, the most traded in Sao Paulo today, fell 12 basis points, or 0.12 percentage point, to 10.34 percent at 9:38 a.m. New York time. The real weakened 0.5 percent to 1.8436 per dollar from 1.8339 Sept. 23.

The real has fallen 14 percent this month against the dollar as investors shun emerging market assets on concern Europe’s debt crisis will hurt the global economy. A weakening currency could increase the cost of imported consumer goods, Rostagno said.

Economists held estimates for the benchmark Selic at 11 percent for the end of this year and 10.75 percent for year-end 2012, the survey showed.

For the next 12 months consumer prices as measured by the IPCA index will rise 5.76 percent, from a previous estimate of 5.71 percent, according to the survey. The forecast rose for the fifth straight week.

Prices will rise 5.52 percent in 2012, the survey showed, up from the previous week’s forecast of 5.50 percent.

The economists reduced their estimate for this year’s economic growth to 3.51 percent from 3.52 percent a week earlier and held their 2012 growth forecast at 3.7 percent.

Brazil’s unemployment rate was unchanged at 6 percent in August, a record low for the month, the national statistics agency said on Sept. 22. Average real wages rose 0.5 percent from the previous months to 1,629.40 reais ($839.16) a month.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

Peru upgrades navy, air defenses

2011-09-25T10:47:00.000-07:00

Peru is upgrading its key naval assets and acquiring new components for its air defenses as the country grapples with unrest among coca growers in the Amazon.

The government has been unveiling plans over the past few weeks that include substantial investments in upgrades to the military equipment.

Top of the list are upgrades to Peruvian naval assets and the country's air defenses.

Italian-built Lupo class frigates form the high-end of Peru's naval defenses, with eight of the 3,000t Carvajal class ships said to be in service with varying stages of operational efficiency.

Four of the vessels were built under license from 1984-87, while the second batch of four frigates was decommissioned by the Italian navy and sold to Peru in 2004-06, the defenseindustrydaily.com web site said.

Most of the upgrades are likely to affect the second batch of the ships, which includes the fourth ship bearing the name BAP Bolognesi, named in honor of Peruvian military hero Francisco Bolognesi. The first ship, Almirante Grau class cruiser BAP Coronel Bolognesi, was commissioned in 1907.

The naval upgrade is part of an overall strategy to build defenses against increasingly sophisticated and heavily armed drug gangs.

The upgrades to the BAP Bolognesi (FM-57), commissioned in 2006, will add new electronics, radar and decoy countermeasures to ship's arsenal. Some reports said Peru might also replace the old Italian Otomat anti-ship missiles on board the frigates with French Exocet MM40 Block III missiles.

Last month the U.S. Defense Security Cooperation Agency said Peru asked to buy four NATO Sea Sparrow MK57 MOD 10 that will replace its existing MOD 2 systems mounted above the helicopter hangar on the four ex-Italian ships from the second batch. The vessels include FM 55-58: BAP Aguirre, BAP Palacios, BAP Quinones besides BAP Bolognesi.

The agency, in its notification to Congress, said the possible sale would be worth about $50 million.

"The proposed sale will improve Peru's capability to meet current and future threats of enemy anti-ship weapons," the agency said. "Peru will use the enhanced capability of the MK57 MOD 10 NSSMS on its four Lupo class frigates purchased from Italy in 2004."

The frigates have MK57 MOD 2 NATO Seasparrow Systems modified to fire the Aspide air defense missile. The systems retain the ability to fire the RIM-7 Seasparrow missile and Peru intends to move from the Aspide missile to the RIM-7 Seasparrow in a future purchase.

According to UPI.com, Peru already has MK 57 Missile Systems and will have no difficulty absorbing the additional systems into its inventory, it noted.

In addition, the prime contractors would be Raytheon Technical Service Co. and Raytheon Integrated Defense Systems. (Andina)

Brazil Exporters Said to See Trade Finance Cost Double Amid Credit Crunch

2011-09-23T20:05:00.000-07:00

Santos - Brazil

The cost of short-term trade finance for Brazilian investment-grade companies more than doubled this month as European banks retreat from the dollar loan market, according to three people familiar with the matter.

A one-year credit line backed by export contracts costs now as much as 2.85 percent, compared with 1.35 percent in the beginning of September, according to two bankers who asked not to be identified because the terms of the loans are private. It’s the first increase in the cost of trade finance for Brazil’s biggest exporters since the 2008 global credit crunch.

The credit tightening comes at a time when demand for trade finance is rising in Brazil as major exporters seek to sell dollars for reais after the currency slumped 10 percent in five days, hitting a two-year low yesterday. Exporters took $38.9 billion of ACCs, as the short-term trade loans are known in Brazil, this year through Sept. 16, surpassing the $37.6 billion they borrowed all of last year, according to central bank data.

Brazilian companies get as much as 40 percent of their trade financing from banks in Europe, where parliaments are seeking to expand a 440 billion-euro ($592 billion) plan to rescue troubled lenders and stressed euro-area governments, one of the bankers said. Loans from Asian and North American banks are not enough to supply all the funding needed for the short- term trade facilities, they said.

The Brazilian central bank may need to provide trade lines as it did in 2008 to help weather the funding shortage, one of the bankers said.

Central Bank

For now, the central bank isn’t considering using reserves to offer banks credit lines in dollars to finance exports, an official familiar with the discussion about anti-crisis measures said. The drop in credit from Europe is being compensated by more loans from the U.S. and Asia, said the official, who asked not to be named because the discussions are private. Should the situation deteriorate, the central bank stands ready to use reserves, as in 2008, to provide dollar loans to Brazilian companies and banks, he said.

Banco do Brasil SA (BBAS3), the biggest supplier of ACC loans in Brazil, is maintaining the price and the maturity of its trade finance lines even as some European banks retreat from the market, said Allan Toledo, president of the lender’s wholesale area. The bank is increasing its borrowing for trade loans from Asian and North American banks to offset declining credit supply from Europe, he said.

Funding Sources

This year, the bank has already lent $13.6 billion through ACCs, more than the $12.6 billion for all of last year, Toledo said.

The international interbank market accounts for about one third of Banco do Brasil’s dollar funding, Toledo said. At the end of June, the bank had $31.7 billion that could be used to fund exports, he said. About $3 billion of that total came from personal deposits, $6.5 billion from company deposits and $10 billion was obtained from bonds the bank sold and other structured funding operations.

Cristiane Lucchesi and Andre Soliani - Bloomberg

To contact the reporter on this story: Cristiane Lucchesi in Sao Paulo at clucchesi5@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

Markets Pound South America as Leaders Proclaim Strength in Face of Crisis

2011-09-23T10:46:00.000-07:00

“No offense to the Greeks but I think your investment would be safer in Peru,” President Ollanta Humala said last night during a Council of the Americas dinner in New York. Photographer: Andrew Harrer/Bloomberg

Leaders from South America came to New York this week to tout their combined economic strength in the face of financial turmoil in developed nations. They’ll return home with their armor dented after investors dumped the region’s stocks, bonds and currencies.

The presidents of Brazil, Colombia, Peru and Chile -- the region’s four investment-grade economies -- rattled off a list of accomplishments in speeches this week while attending the United Nations General Assembly: record foreign currency reserves, falling debt levels and economic growth above 4 percent. While criticizing policy makers in Europe and the U.S. for acting slowly to address their debt challenges, they vowed to work together to protect their own economies from turmoil.

“No offense to the Greeks but I think your investment would be safer in Peru,” President Ollanta Humala said last night during a Council of the Americas dinner in New York.

The MSCI EM Latin America Index extended a weekly slump to 14 percent, the most since November 2008, while the MSCI World Index lost 7.6 percent. In Brazil, the Bovespa stock index fell for fifth day while the real rebounded after the central bank sold dollars in the futures market for the first time in two years to stem a 17 percent tumble this month. Chile’s peso rebounded from the biggest drop among global currencies as speculation the central bank will cease its dollar-buying program overshadowed copper’s tumble to a one-year low.

Boost Coordination

Colombian President Juan Manuel Santos told investors yesterday that he and his Brazilian counterpart, Dilma Rousseff, discussed at the UN the need to boost coordination within South America. Resisting a global recession won’t be easy, said Claudio Loser, a former International Monetary Fund official. Policy makers in many countries have less room to increase spending and slash interest rates like they did following the collapse of Lehman Brothers Holdings Inc. in 2008, he said.

“You can coordinate policies, but I don’t think you can perform miracles,” said Loser, who oversaw Latin America at the IMF from 1994 to 2002 and now runs the Centennial Latin America research company based in Washington. “If there is a deep shock, all the countries in Latin America will see a sharp decline.”

While trade among South American nations has soared in recent years, together with cross-border deals like Chilean carrier Lan Airlines SA’s planned takeover of Brazil’s Tam SA, announced last year, the region is far more dependent on world demand for its raw materials.

‘All About Commodities’

The World Bank estimates that net private inflows to Latin America surged $203 billion in 2010 from $57 billion in 2003 amid China-led demand for Chile’s copper, Brazil’s iron ore and Argentina’s soy. In 2008, the Thomson Reuters/Jefferies CRB Index of 19 commodities tumbled 36 percent; so far this year prices are down 7.7 percent.

“It’s all about commodities for those economies,” Simon Nocera, co-founder of San Francisco-based hedge fund Lumen Advisors LLC and a former economist at the IMF, said by phone. “Prices are coming down in reaction to the slowdown in China.”

Falling borrowing costs have been another underpinning of what the IMF in April called a “bonanza” for the region’s economies. Average Brazilian dollar yields dropped to 4.71 percent from 6.46 percent since July 2008, while Colombian yields fell to 4.16 percent from 6.32 percent, according to JPMorgan Chase & Co. Average yields on Latin American corporate dollar bonds have fallen to 6.32 percent from 7.58 percent.

Forecast Maintained

Brazil, the region’s largest economy and the world’s second-biggest exporter of iron ore, has so far been little affected by the global slowdown, Rousseff said this week. The IMF maintained its forecast for Brazilian growth next year at 3.6 percent in a Sept. 20 report.

“But we know that our capacity to resist isn’t unlimited,” Rousseff told the UN General Assembly Sept. 21, the same day the real tumbled 4.8 percent to the lowest level in 15 months. “We’re confronting an economic crisis that, if it isn’t overcome, may produce a serious political and social rupture.”

Peru’s currency will probably rebound from a three-month low as central banks loosen monetary policy worldwide, spurring flows into the Andean country as investors hunt for yield, said Finance Minister Miguel Castilla. Peru will see “large” amounts of investment, leading to increased demand for the sol, he told the Bloomberg Mila conference in New York yesterday.

“Unfavorable external conditions may slow down some of those flows, perhaps, but the president is absolutely committed to keep the economy growing at fast rates,” Castilla said.

Declining Budgets

While the IMF cut its forecast this week for economic growth in Latin America and the Caribbean, the region’s economies are still forecast to expand 4.5 percent this year compared with 1.6 percent growth in advanced nations. Peru is expected to grow 6.2 percent this year and 5.6 percent in 2012, outpacing the rest of the region, according to the IMF.

Other regional strengths against a potential recession include record levels of foreign reserves and declining budget deficits. Peru and Chile are even running surpluses.

“I’m still bullish for the region,” said Zeina Latif, a senior economist in Sao Paulo for RBS Securities. “There are some cushions now that weren’t there before.”

At Santos’ urging, finance officials from South America have met twice since August to discuss ways to protect their economies. Developing countries should rely on “South-South cooperation” given the failure of developed nations to contain the global crisis, he said yesterday, adding that the Northern Hemisphere is “running out of ammunition.”

Trade Barriers

While Rousseff at the UN warned against a return to protectionism that she says could deepen a global slump, Brazil has led the region in erecting trade barriers. Last week, it raised by 30 percentage points a tax on foreign-made cars in a bid to protect carmakers from a surge in imports from China and South Korea.

Should the real extend a decline this month, losing competitiveness will be the least of Brazil’s worries. After rallying 46 percent from the end of 2008 through August, the real has tumbled 17 percent this month, more than any other currency.

In 2008, when the real slid 38 percent from a 10-year high in the span of four months, companies including Sadia SA, then the country’s second-biggest food company, reported billions of dollars in losses on bad bets the currency would continue to rally. In July, the real strengthened even more, as 12-month foreign direct investment climbed to a record $72 billion.

The JPMorgan Latin American Index of currencies, which slumped 19 percent in 2008, has lost 10 percent this year. The MSCI EM Latin America (MXLA) Index of equities plummeted 53 percent in 2008, its worst year in at least two decades. The same gauge has lost 28 percent this year.

“We were not expecting this,” Chilean Finance Minister Felipe Larrain told reporters in Washington yesterday referring to the peso’s tumble, adding that until now the currency had been stable. “We are well-prepared, but not bullet-proof.”

Joshua Goodman and Katia Porzecanski - Bloomberg

To contact the reporter on this story: Joshua Goodman at jgoodman19@bloomberg.net; Katia Porzecanski in New York at kporzecanski1@bloomberg.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.

Foreign investors bet on Peru after meeting with President Humala

2011-09-22T10:42:00.000-07:00

Luis Castilla Peruvian Minister of Economy and Finance

Peruvian Minister of Economy and Finance Luis Castilla said on Wednesday evening that important foreign business groups have committed to invest in the country after hearing Peruvian President Ollanta Humala’s presentation at the Peruvian Business Forum held in New York.

During his participation in said forum, the Peruvian leader talked about his policy of economic growth with social stability and inclusion, which was praised by some major foreign investments funds such as BlackRock, one of the most important investment funds in the world.

“President Humala’s presence generated great expectations. He has attracted much interest and we have had meetings with several investors from the financial sector who have committed to invest in the country,” the minister told the press in New York.

He added that Peruvian and foreign investors in New York are pleased with Humala's idea of "continuing what is right and filling the gaps that still exist, especially regarding social inclusion," which was not addressed by former governments.

Castilla went on to add that in said business forum they talked about major social programs, plans to invest more and to close the gap in infrastructure within the rural sector, as well as policies to ensure the entry of private capital in public-private partnerships (PPPs) in investment projects within different sectors. (Andina)

Brazil’s Inflation Accelerates More Than Analysts Expected After Rate Cut

2011-09-20T10:43:00.000-07:00

Favela - Brazil

Brazilian consumer prices jumped more than economists expected this month, limiting the central bank’s space to further cut interest rates to shore up growth in Latin America’s biggest economy. Yields on interest-rate futures rose.

Consumer prices, as measured by the IPCA-15 index, rose 0.53 percent in the month through mid-September, the national statistics agency said today. That’s the fastest pace since May and steeper than 40 of 41 economists expected in a Bloomberg survey whose median forecast was for a 0.49 percent price rise.

Central bank President Alexandre Tombini cut Brazil’s benchmark interest rate a half point to 12 percent on Aug. 31, after raising it at the previous five policy meetings, citing a “substantial deterioration” in the global economy. The bank said the lower borrowing costs won’t compromise its 4.5 percent inflation target next year.

“Inflation has quite a lot of pressure and there’s no sign that the global slowdown is affecting the domestic scenario,” said Luciano Rostagno, chief strategist at CM Capital Markets in Sao Paulo. “The chances of inflation cooling down this month as the bank has been saying is less and less likely.”

Borrowing Costs

Traders pared bets for lower borrowing costs in the interest rate futures market, pushing the yield on contracts due January 2013 up two basis points, or 0.02 percentage point, to 10.66 percent at 9:13 a.m. New York time. The real rose 1 percent to 1.7793 per U.S. dollar.

Yesterday, in a speech in Lisbon, Tombini said that Brazil can take advantage of a deterioration in the global economic environment to “rebalance” its macro-economic policies. While he didn’t specify what policies may be adjusted, analysts expect him to lower the benchmark Selic rate another percentage point this year, according to a Sept. 16 bank survey of 100 economists published yesterday.

In August, Tombini said annual inflation will have a “significant” drop from September and will be reduced by two percentage points by April.

Analysts covering Brazil’s economy estimate prices will keep rising next year and inflation will stay above the bank’s target through 2013, according the central bank survey. This year, consumer prices as measured by the IPCA index will rise 6.46 percent, the survey found.

Inflation doubled this month from the 0.27 percent reading in mid-August, led by a 1 percent jump in clothing prices and 0.72 percent increase in the cost of food and beverages, the statistics agency said.

Prices rose 7.33 percent from a year ago, the fastest pace in six years. Inflation first breached the 6.5 percent upper limit of the government’s target range in May.

‘Very Pressured’

“Today’s number indicates that inflation is very pressured and should be above the high end of the target range this year,” said Silvio Campos Neto, an economist at Tendencias Consultoria Integrada in Sao Paulo.

Even as the industrial sector shrank in July from a year earlier, higher wages continue to bolster demand for consumer goods.

Unemployment fell to 6 percent in July, its lowest level this year, fueling a 1.4 percent jump in retail sales in the month that was the biggest this year. The country’s minimum wage, which is used to adjust pension payments, is slated to rise 14 percent next year.

As inflation accelerates, workers across the nation have walked off their jobs to demand higher salaries. More than 70,000 metalworkers in the industrial belt surrounding Sao Paulo are scheduled to vote today whether to strike after carmakers and manufacturers rejected their demand for a 10 percent raise.

Brazil’s economic growth slowed last quarter to 3.2 percent from a year earlier, down from 4.2 percent in the first quarter and a 7.5 percent pace last year that was the fastest in two decades. The retail industry led the second-quarter expansion, increasing 4.9 percent from a year ago.

Alexander Ragir - Bloomberg

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

Chavez Nationalizes Nation’s Gold Industry Amid Soaring Prices for Metal

2011-09-19T19:29:00.000-07:00

Hugo Chavez

Venezuelan President Hugo Chavez ordered the nationalization of the gold industry and gave companies 90 days to form joint ventures with the state as he seeks to boost control over the nation’s metals producers.

The government will hold at least 55 percent of any joint ventures, according to a decree in today’s Official Gazette. The decree sets a royalty rate of 10 percent to 13 percent and says that all Venezuelan gold production will be sold to the state.

Chavez first announced the nationalization of the industry and plans to repatriate Venezuela’s foreign gold reserves on Aug. 17. Petroleos de Venezuela SA, the state oil company, is forming joint ventures with both state and publicly traded companies to operate mines including Las Cristinas, which Chavez confiscated from Canada’s Crystallex International Corp.

“The government will have a monopoly of gold production and sales,” according to the decree. “All the gold that is produced from mining operations in national territory will be turned over to the Republic.”

Rusoro Mining Ltd. (RML), a Vancouver-based company that produces 100,000 ounces a year of gold, said on Aug. 30 that it would transfer its assets to a joint venture controlled by PDVSA, as the Caracas-based company is called.

Venezuela produces 11 metric tons of gold a year, and illegal miners extract an additional 10 to 11 tons a year, Chavez said in May.

‘No Dividends’

Chavez, who is currently in Cuba being treated for an undisclosed type of cancer, on Sept. 17 approved $130 million of new funding for the country’s state mining holding company Corporacion Venezolana de Guayana.

The funds will be used to pay salaries and overtime owed to workers, many of whom have been participating in strikes in recent months, the ministry of mining and basic industries said in a statement today.

“It’s clear that the mining industry is not producing any dividends for the state at the moment,” Chavez said on Sept. 17.

Mining Arbitration

Of 18 arbitration cases pending against Venezuela in the World Bank’s International Centre for Settlement of Investment Disputes, at least three of them are mining ventures including Crystallex’s claim for almost $4 billion.

Gold Reserve Inc., a Spokane, Washington-based mining company, is seeking $2.1 billion in damages after its Las Brisas gold and copper project was seized in May 2008.

The South American country, in an effort to boost stalled production and take advantage of rising prices, last year relaxed restrictions on gold exports to allow some companies and joint ventures with the government to send as much as 50 percent of their output abroad.

Gold futures for December delivery declined $38.50, or 2.1 percent, to $1,776.20 an ounce at 1:40 p.m. on the Comex in New York.

Nathan Crooks and Corina Rodriguez Pons - Bloomberg

To contact the reporter on this story: Nathan Crooks in Caracas at ncrooks@bloomberg.net; Corina Rodriguez Pons in Caracas at crpons@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

Peru celebrates its unique, varied cuisine

2011-09-19T10:39:00.000-07:00

When the chairman of Peru's Gastronomy Society set out to research the roots and multifarious preparations for raw fish marinated in lemon juice, spices and julienned onions, his goal was twofold: first to explain the unique context from which Peru's famous seafood dish, cebiche, was born and second, to internationalize it.

“We're building a global brand for Peruvian cuisine,” said Mariano Valderrama, author of "The Roots and Flavors of the Cebiche," in an interview at his home in Lima. “Gastronomy will serve as the locomotive to push Peru's trains of agriculture and tourism.”

Mr. Valderrama and other local culinary enthusiasts, such as renowned Peruvian chef Gaston Acurio, are at the forefront of an effort to unite the main actors in Peru's restaurant and gastronomical sectors. Already, their efforts have paid off.

Restaurants serving Peruvian gourmet have popped up in countries such as Chile, Mexico, Argentina, Colombia, Panama, Ecuador, and Venezuela during the past five years, prompting food gurus such as Anthony Bourdain to dub Peru's capital, Lima, the “gastronomical capital” of South America.

An article published this week by the Christian Science Monitor highlighted that Mr. Acurio's Peruvian gourmet franchises have opened in 18 countries, including a branch of his famous La Mar cebicheria in San Francisco.

Within a year of the late 2007 launch of Peru's Gastronomy Society (also known as APEGA), the roughly 200-member organization created the country's first national gourmet food festival, called Mistura.

At an affordable $5.50 a ticket, Mistura has attracted Limeños from all walks of society. Attendance jumped sevenfold within two years of Mistura's inaugural 2008 launch, attracting two hundred thousand people in 2010. Mr. Valderrama estimates 300,000 people will attend this year's Mistura festival, which opened its doors Sept. 8 and comes to an end today.

So what makes Peruvian cooking so special? “Peru is a melting pot of different cultures, and Peruvian food has always been very open to innovation and to different influences,” says the APEGA chief. “You have very interesting mixtures.”

Founded by Spanish conquistadors in 1535, Lima's position along the Pacific coast and establishment as the political, social and economic capital of the Spanish Viceroyalty brought with it a steady influx of immigrants from Europe, Asia, Africa and the mountainous Andean regions into the Peruvian capital. Today, Lima's 43 districts showcase a colorful melange of Old World Spanish, Moorish, Baroque, and American architectures interspersed with somber, compact buildings built during the 1980s and '90s, when Peru was encumbered by economic hardship and political violence.

The “City of the Kings” now houses roughly 9 million inhabitants from a variety of socioeconomic backgrounds dwelling in a mixture of diverse neighborhoods, with renovated colonial-era houses, ocean-side apartment buildings, and high-rises in the upscale Barranco, Miraflores, and San Isidro districts set against a steep backdrop of multicolored shantytowns lining Lima's hillsides and surrounding deserts.

Peru's national cuisine mirrors Lima's historic ethnic, economic, and political diversity, with Peruvian cooking boasting a unique fusion of Spanish, Chinese, Japanese, Italian, African, Andean, and Amero-Indian influences.

“Most if not all Peruvian food was originally considered poor people food,” says Eva Rosales, who blogs about Peruvian cuisine on her website, Latinas en La Cocina. “Exchange and interaction with other cultures developed a fusion of a wide array of diversified dishes,” Ms. Rosales said in an e-mail interview.

Numerous microclimates and an extensive biodiversity have endowed Peru with 2,000 types of potatoes, 35 types of corn, and more than 800 species of fish. Native varieties of the aji – or chili pepper – serve as a unifying ingredient which, according to Mr. Valderrama, Lima's culinary community hopes to one day market and distribute internationally.

“Successfully promoting Peru's gastronomy in a short time will be a lot of work,” says Mr. Valderrama. “The process is just starting.” (Andina)

Toromocho to start copper production in October 2013

2011-09-16T15:32:00.000-07:00

Chinalco Peru Executive VP, David Thomas, said that Toromocho copper project, located in Peru’s Junin region, will start its production in October 2013.

“We started the construction of the mine in May. We plan to start the pre-production in January 2013 and the production in October,” said Thomas during the Top Mining forum carried out during the 30th edition of Perumin Mining Convention, one of the most important mining events worldwide.

The executive VP noted that the mine’s reserves total over 1.5 billion copper tons, with an average of 0.5 percent copper, 0.2 percent molybdenum and 6.9 percent silver per ton.

“The mine will produce 117,000 tons per day for 36 years,” he said.

Chinalco is one of China’s biggest mining companies and the third largest aluminum producer in the world. (Edwin Bardales - Andina)

Freeport Copper Miners Strike in Peru and Indonesia After Talks Break Down

2011-09-14T10:30:00.000-07:00

Freeport-McMoRan Copper & Gold Inc. (FCX)’s copper miners in Peru and Indonesia went on strike today after pay-increase talks broke down, union officials said.

About 1,200 workers at Freeport’s Sociedad Minera Cerro Verde SAA (CVERDEC1) unit, Peru’s third-largest copper producer, walked off their jobs at 8:30 a.m. New York time, Mining Federation General Secretary Luis Castillo said today by telephone. About 8,000 non-staff workers at Freeport’s Grasberg mine in Indonesia started a one-month strike at midnight local time, said Virgo Solossa, head of organizational affairs at the labor union.

Workers in Peru, Chile, Bolivia and Indonesia have gone on strike at copper, gold and zinc mines this year, seeking improved conditions and a bigger slice of record profits. Copper yesterday rose as much as 1.5 percent as threats of mine strikes heightened concern a global shortfall will increase.

“Freeport’s offer was insufficient,” union General Secretary Leoncio Amudio Amudio said yesterday by telephone from Arequipa, 750 kilometers (466 miles) southeast of Lima. “There was no chance of reaching an agreement.”

Freeport fell 71 cents, or 1.7 percent, to $41.29 as of 10:00 a.m. in New York trading. Cerro Verde rose 10 cents, or 0.3 percent, to $39 in Lima yesterday.

Cerro Verde miners held a 48-hour work stoppage last week. Freeport and Grasberg’s labor union ended 38 days of talks over 2011-2013 contract terms on Aug. 26 after failing to agree on wages. Negotiations started after the workers walked off from their jobs for eight days in July.

Copper Shortfall

A strike at Grasberg, located in Mimika, Papua province, 1,940 miles (3,120 kilometers) east of Jakarta, and in Peru could widen a global production shortfall of copper estimated at 670,000 metric tons this year by Barclays Capital and boost prices of the metal in London that have fallen more than 14 percent from a record $10,190 a ton on Feb. 15.

“The management expects the workers to cancel the strike plan and return to the negotiation table because the law gives them room to continue negotiation,” Ramdani Sirait, a Jakarta- based spokesman at Freeport, said in a text-message. He declined to comment on the impact of the strike on production and sales.

The Grasberg workers still expect wages to increase to between $17.50 and $43 an hour from $1.50 to $3.50, Solossa said today. The union cut their expectations from $35 to $200 an hour initially, he said Aug. 26. Freeport offered a compensation package that includes an increase in basic wages for non-staff employees of 22 percent over a two-year period, Sirait said on Sept. 5.

‘No Sincerity’

“We don’t see any sincerity from the company on resolving the pay issue and coming up with a new offer,” Solossa said by telephone today from Timika, the closest town to the mine. “We’ve obtained permits from the regent and chief of police for the strike.”

Workers in Peru are demanding a 9 percent annual wage rise, while Cerro Verde is offering a one-time bonus of 1,200 soles ($705), Amudio said.

Phoenix-based Freeport will continue negotiating a new labor contract, spokesman Eric Kinneberg said on Sept. 8. Cerro Verde, which is studying a $3.5 billion expansion to increase annual copper output by 45 percent, boosted first-half output by 4 percent to 161,246 metric tons.

Grasberg, where operations started in 1990, contains the world’s largest recoverable reserves of copper and the biggest gold reserves, according to Freeport’s website. Copper production at the mine fell to 1.22 billion pounds (553.4 million kilograms) last year from 1.41 billion pounds in 2009, according to the website. Gold output declined to 1.79 million ounces (50,745 kilograms) from 2.57 million ounces.

Copper for three-month delivery declined 1.7 percent to $8,617.75 a metric ton as of 4:13 p.m. local time on the London Metal Exchange.

Alex Emery, Yoga Rusmana and Eko Listiyorini - Bloomberg

To contact the reporter on this story: Alex Emery in Lima at aemery1@bloomberg.net.

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net.