THE NEW PERU

ONCE HAMPERED BY DRUG SMUGGLING AND TERRORISM, PERU IS BECOMING BETTER KNOWN AS A GROWING ECONOMY AND TOURISM HOT SPOT.

By Steven Fox

When Ollanta Humala, a left-leaning politician and former military officer, won Peru’s 2011 presidential election, investors worried that the mineral-rich country had become ideologically sympatico with Venezuela’s Hugo Chavez. Instead, Humala has proven himself a pragmatist, focused on maintaining Peru’s economic growth.

Rather than mimicking Chavez, he’s followed the example of Brazil’s former president Lula, courting both Western and Chinese investors.

In the 1990s, Peru was primarily known for cocaine exports and domestic terrorism in the form of a rebel organization known as the Shining Path. Cocaine remains a major problem, but the influence and territorial control of the Shining Path have greatly shrunk due to military crackdowns and dwindling popular support; the terrorist group is now more akin to a network of gangs.

Economic growth has also helped to marginalize the Shining Path. Peru has enjoyed average annual growth of 6 percent since 2001, and Humala looks set to continue the policies underlying that growth. With a national GDP of $300 billion and inflation around 3.4 percent, Peru is lifting the standard of living for its 29 million people. Fifteen percent of earnings from extractive industries now go directly to regional governments, which has led to an improved political climate in Peru, which in turn promotes economic stability. As a result, Peru has reduced the national poverty rate by 23 percentage points since 2002, according to the CIA’s World Factbook.

SINCE 2006, Peru has signed free trade deals with the U.S., Canada, China, Korea, Japan and the European Union. Those agreements have boosted exports, while the goods coming into Peru are finding healthy markets. China has begun to play a particularly significant role in Peru’s development; trade between the two countries was valued at $13 billion in 2011, and China directly invested another $750 million in Peru. Over 500 Chinese companies are active there, one reason why President Humala has already visited China twice.

TOURISM IS ANOTHER fast-growing sector of the Peruvian economy. Though the country has a very limited supply of top-end hotel rooms — fewer than 1,000 of them in Lima — the 2011 opening of the $130 million Westin Lima Hotel somewhat improved matters. The government recently capped the number of visitors to the famed ruins at Machu Picchu to 2,500 daily, but that move has actually spurred the growth of other archaeological sites as tourist destinations. The country is seeing more visitors not only from the United States, but also from other Latin American nations.

PERU IS THE WORLD’S third largest producer of copper and zinc and the sixth largest gold producer, and the government’s pro-business outlook has encouraged mining companies to deepen their commitments; Chinese and U.S. investors poured $19 billion into Peruvian mining in the past year alone. Foreign miners such as Southern Copper, Newmont Mining Corp. and Xstrata own most of the large concessions, but private domestic firms own most of the small and medium-sized mines. Though down from an extraordinary 15.7 percent growth rate in 2010, Peru’s mining sector still looks set to grow by a healthy 8 percent this year.

NATURAL GAS DISCOVERIES in the Camisea region, in central Peru, have turned Peru into an LNG exporter. Construction of a 1,000-kilometer natural gas pipeline from Camisea through the Amazon should begin this year; it’s expected to cost some $3 billion. An Inter-American Development Bank study estimates that the Camisea project will yield about $23 billion in net benefits to Peru over the project’s 33-year life span.

PERU’S GROWTH IS both supported and fueled by a burgeoning IT sector. Oracle, HP, Microsoft, Google and IBM all operate there, and spending on IT is pegged to increase at 11 percent annually between 2012 and 2016. Over 20 percent of the population of 29 million has Internet access; 75 percent has mobile phones.

$23 BN EXPECTED PROFIT OF CAMISEA PROJECT

500+ CHINESE COMPANIES ACTIVE IN PERU

2,500 DAILY VISITORS TO MACHU PICCHU

$300 BN PERU’S GROSS DOMESTIC PRODUCT

WAYS TO INVEST IN PERU:

• iShares MSCI Peru ETF.

• Competition is lively in the mobile market, but the incumbent Telefónica del Peru — trading under Telefonica S.A. (TEF) — continues to dominate Peru’s fixed-line sector.

• Newmont Mining (NEM) is one way to get mining exposure in Peru. NEM controls the Yanacocha mine, which is the largest gold producer in Latin America (the company says production has exceeded 26 million ounces since the mine opened in 1993). NEM is now engaged in a legal spat with a regional government within Peru over the Minas Conga project, but analysts expect Newmont to prevail within the next few months.

 — Research provided by Dane Bryant.

Welcome!

Magazines Review offers you a broad range of popular American magazines online. Browse an extensive directory of magazines, covering most important aspects of your life. Find the most recent issues of your favourite magazine, or check out the oldest ones.

About content

All the articles are taken from the official magazine websites and other open web resources.

Please send your complains and suggestions through our feedback form. Thank you.