Peru s fundamentals and economic perspectives Julio Velarde Governor Central Bank of Peru March 2014
Agenda 1. Peru s growth is based on strong fundamentals 2. Recent economic developments and prospects 3. Monetary Policy Framework 4. Closing remarks 2
Peru s GDP growth is expected to be among the highest in the region in 2014 World GDP : 2014 (percentage change) Peru: 6,0% Source: WEO and BCRP. 3
GDP growth was the highest among the region s leading economies 6,2 GDP in Latin America : 2002-2013 * (average percentage change) 5.2 4.5 4.4 4.1 3.4 3.2 2.3 Peru Argentina Colombia Chile Uruguay Brazil Venezuela Mexico Source: WEO IMF. * Gross domestic product at constant prices 4
Higher capital accumulation contributes to sustainable output growth Total Investment: 2013 * (percentage of GDP) 34.6 23.7 24.0 24.2 25.7 26.8 27.1 27.6 30,0 18.6 19.2 * Forecast Source: WEO IMF 5
Foreign direct investment increased by 6 times in the last decade Foreign Direct Investment (Stock in billions of US$) 74.5 63.4 51.2 43.0 11.8 12.5 12.9 13.3 15.9 20.5 26.8 32.3 34.5 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Annual growth rate 7,0 6,0 2,6 3,4 19,4 28,9 30,9 20,6 6,7 24,5 19,2 23,9 17,4 6
In 2012, FDI flows increased by 49 percent, whereas they increased 27 percent in the first half of 2013 Foreign Direct Investment Flows by Country (in billions of US$) Countries 2012 I Sem. 2013 Growth rate 2012 I Sem. 2013 Peru 12, 2 6,9 49% 27% Chile 30,2 10,4 32% -26% Argentina 12,6 5,2 27% -32% Paraguay 0,3 n.a. 27% - Bolivia 1,1 n.a. 23% - Colombia 15,8 8,3 18% 5% Uruguay 2,7 1,6 8% 8% Brazil 65,3 39,0-2% -10% Ecuador 0,4 n.a. -13% - Venezuela 3,2 2,7-15% 44% Mexico 15,5 23,8-34% 158% Source: ECLAC 7
Higher FDI flows mainly in the mining and hydrocarbon sectors Foreign Direct Investment Flows by Sector (millions of US$) Sector 2001 2013 Number of times Hydrocarbon 22 1 254 Mining 134 4 981 Financial sector 162 851 Non-financial services 323 2 548 Manufacturing 184 122 Energy and others 320 417 TOTAL 1 144 10 172 57 37 5 8 1 1 9 8
Continuous increase in employment rates, even during the 2008-2009 financial crisis Urban Employment 1/ ( Percentage change) 7.2 8.3 8.3 5.4 4.2 4.0 2.8 1.3 2006 2007 2008 2009 2010 2011 2012 2013 1/ Enterprises with 10 or more workers Source: Ministry of Labor and Promotion of Employment 9
Permanent increase in payroll due to sustained economic growth Payroll Lima (Real % change) 10.7 5.5 7.7 7.1 6.7 5.5 3.6 2007 2008 2009 2010 2011 2012 2013 Source: INEI 10
1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 After hyper-inflation in 1990, monetary policy was reformed and inflation was reduced Inflation Rate 1970 2013 (End of period) 10000 7 649,5% 1000 100 10 Inflation target 1 0.1 11
Average inflation of 2,3 percent in the last 13 years Inflation in Latin America: 2001-2013 * (%) 20.8 9.3 7.9 6.0 4.6 4.1 2.9 2.3 2.0 Venezuela Argentina Uruguay Brazil Colombia Mexico Chile Peru Peru** Source: WEO IMF * Inflation, consumer price index, end of period ** Excludes food and energy 12
Poverty is at its lowest level of the last 25 years 49 49 Peru: Poverty Rate (as percentage of population) 45 39-21 36 35 Latin America: Poverty reduction 2005-2011 (in percentage points) -16-13 -11-11 -10 31-8 -7-6 -5-4 -3-2 -24-19 -14-9 -4 1 28 Peru Brazil Ecuador Uruguay a/ Colombia Latin America Venezuela Paraguay Panama Dominican Republic Honduras b/ Chile c/ Costa Rica 1Mexico d/ 26 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: ECLAC a/ Percentage change 2007-2011, b/ Percentage change 2006-2010, c/ Percentage change 2006-2011, d/ Percentage change 2005-2010 13
Significantly lower financial dollarization, despite still being an important source of risk for the financial sector Credit to the private sector: Dollarization ratio (%) 75 74 72 69 67 65 61 55 55 54 49 45 45 43 45 45 41 40 35 25 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Jan. 2014 14
Preventive accumulation of international reserves is fundamental to reduce the risks of financial dollarization Peru: Net foreign exchange reserves (in millions of US$) 63,991 65,663 44,105 48,816 27,688 31,196 33,135 8,403 8,179 8,613 9,598 10,194 12,631 14,097 17,275 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 15
in percent of adequacy metric High reserve adequacy ratio compared to other emerging economies Reserves relative to other emerging economies 1/ 550 500 450 Russia Romania Peru 400 350 300 250 200 150 100 Brazil Indonesia Colombia Chile Mexico South Africa Poland Hungary 50 0 10 20 30 40 in percent of GDP 1/ The composite adequacy metric Is a weighted sum of exports, short-term debt, portfolio liabilities, and broad money (FMI, 2011). 16
and its public debt stock is among the lowest in the region Gross public debt: 2013* (% GDP) 68.3 57.0 50.4 47.1 44.0 41.2 35.7 32.3 26.2 19.2 12.9 Brazil Malaysia Vietnam Thailand Mexico Philippines Korea Colombia Indonesia Peru Chile * Forecast 17
Net public debt is expected to fall to 2,1% in 2015 NON FINANCIAL PUBLIC SECTOR DEBT STOCK: GROSS AND NET DEBT 46.9 (percentage of GDP) 38.5 Gross Debt 32.3 Net Debt 23.9 19.7 19.2 17.3 16.4 4.8 3.5 2.3 2.1 2003 2006 2012 2013 2014* 2015* * Forecast 18
Agenda 1. Peru s growth is based on strong fundamentals 2. Recent economic developments and prospects 3. Monetary Policy Framework 4. Closing remarks 19
Improvement in the majority of indicators of macroeconomic expectations MACROECONOMIC EXPECTATIONS SURVEY RESULTS November December January 2014 1. CURRENT BUSINESS SITUATION 60 61 62 2. SALES 56 57 54 3. INVENTORIES (COMPARED TO PREVIOUS MONTH) 55 53 50 4. SALE ORDERS (COMPARED TO PREVIOUS MONTH) 56 55 50 5. FINANCIAL SITUATION 61 62 65 6. ACCESS TO CREDIT 65 65 68 7. 3 MONTH FINAL PRODUCT DEMAND EXPECTATIONS 59 61 62 8. 3 MONTH NEW HIRINGS EXPECTATIONS 52 53 54 9. 3 MONTH MACROECONOMIC EXPECTATIONS 54 59 59 10. 3 MONTH INDUSTRY EXPECTATIONS 58 59 61 20
Consumer Confidence Index showed an optimistic level of 57 points in January. E.10 M M J S N E.11 M M J S N E.12 M M J S N E.13 M M J S N E.14 Consumer Confidence Index Better 100 90 80 70 Worse Unchange Better Index + + Unchanged Worse 60 60 50 40 30 20 10 0 = - = - 57 Fuente: Apoyo Consultoría. January 2013 (Index value: 57) Percentage % Better 27 Unchanged 59 Worse 14 21
Investors Confidence Index increased to 64 points in January 100 ÍNDICE DE INVERSIÓN A 6 MESES Respecto de proyectos de inversión: Qué medidas realizará su empresa en los próximos seis meses? Investor s Confidence Index Reducir Mantener Acelerar Índice 100 90 80 70 + 90 80 70 Increase 60 60 50 40 30 = 50 40 30 Remain constant 20 20 10 0 Source: Apoyo Consultoría J.12 J A S D M.13 M J J A S N D E.14 January 2013 (Index value: 64) Percentage % Increase investment 29 Remain constant 69 Reduce 2-10 0 Reduce 22
Peru s GDP is expected to grow 6,0 percent in 2014 GDP growth rate 2014 (annual percentage change) Peru 6.0 Bolivia Paraguay Colombia Ecuador Chile Uruguay Mexico 5.3 5.0 4.6 4.1 3.9 3.6 3.4 Brazil 2.0 Argentina 0.2 Venezuela -1.0 Source: Consensus Forecast, February 2014 and BCRP 23
GDP growth in Peru is expected to be among the highest in the world in the next 10 years GDP Growth 2014-2023 (Annual average, %) 7,0 6,7 5,5 5,4 5,3 5,2 4,7 4,7 4,5 4,4 4,4 4,3 3,9 3,9 3,8 3,7 3,7 3,6 3,6 3,5 India China Indonesia Peru Philippines Malaysia Turkey Thailand Chile Lithuania Colombia Singapore Latvia Ukraine Mexico Estonia Poland Taiwan Hong Kong South Korea Source: Consensus Forecasts (Oct. 2013). 24
The recovery of the primary sectors will be associated with the start-up of investment projects GDP Growth (Real % change) 2008-2013 2014 2016* Agriculture and livestock 4,4 3,7 Fishing 1,5 4,4 Mining and hydrocarbons 2,0 11,9 Manufacturing 3,9 5,0 Electricity and water 5,8 6,0 Construction 11,0 7,6 Commerce 7,2 6,1 Other services 6,8 6,4 GDP 6,2 6,3 *Forecast 25
consistent with the behavior of private investment GDP Growth (Real % change) 2008-2013 2014 2016* Private Consumption 5,8 5,3 Private fixed investment 9,3 6,7 Public expenditure 10,5 8,8 Exports 3,5 10,3 Imports 7,6 7,0 GDP 6,2 6,3 *Forecast 26
US$ 28,5 billion of private investment announcements for the next two years PRIVATE INVESTMENT PROJECTS ANNOUNCEMENTS (in millions of US$) September IR 2014-2015 December IR Mining 13 880 14 110 49 Hydrocarbons 3 797 4 036 14 % Stock of Announced Investment Projects (in millions of US$) September IR December IR Total 67 383 69 684 Source: Specialized Media and Newspapers Electricity 2 813 3 293 12 Industrial 1 671 1 991 7 Infraestructure 1 133 1 133 4 Other Sectors 3 431 3 952 14 Total 26 725 28 515 100 Source: Specialized Media and Newspapers 27
Copper production would double in 2015 COPPER PRODUCTION (in thousands of metric tons) 2,577 1,996 1,198 1,281 1,511 2012 2013 2014* 2015* 2016* *Forecast 28
Investment in the mining sector increased 14,3% in 2013 INVESTMENT IN THE MINING SECTOR: JANUARY - NOVEMBER (in millions of US$) PROJECT FIRM JANUARY - NOVEMBER 2012 2013 Var. % Las Bambas XSTRATA LAS BAMBAS S.A. 880 1 590 81 Cerro Verde SOCIEDAD MINERA CERRO VERDE S.A.A. 516 926 80 Toromocho MINERA CHINALCO PERÚ S.A. 949 919-3 Antapaccay COMPAÑIA MINERA ANTAPACCAY S.A. 348 537 54 Antamina COMPAÑIA MINERA ANTAMINA S.A. 575 462-20 Constancia HUDBAY PERU S.A.C. 5 429 8 031 Toquepala / Cuajone SOUTHERN PERU COPPER CORPORATION SUCU 113 330 192 Conga MINERA YANACOCHA S.R.L. 984 285-71 La Arena LA ARENA S.A. 229 182-20 Planta de Óxidos EMPRESA ADMINISTRADORA CERRO S.A.C. 43 175 302 Pindo y Parcoy CONSORCIO MINERO HORIZONTE S.A. 130 155 19 Colquijirca SOCIEDAD MINERA EL BROCAL S.A.A. 78 151 93 Quellaveco ANGLO AMERICAN QUELLAVECO S.A. 19 149 697 Lagunas Norte MINERA BARRICK MISQUICHILCA S.A. 159 144-10 Río Tinto RIO TINTO MINERA PERU LIMITADA SAC 53 120 127 Others 2 383 1 979-17 TOTAL 7 466 8 532 14 Source : MINEM 29
Trade balance would be positive due to new mining projects starting in 2014 Trade Balance (Billion US$) 5.7 2.2 0.0-0.4 2013 2014* 2015* 2016* 2013 2014* 2015* 2016* % Change Volume Exports -2,1 8,0 12,9 14,6 Imports 5,5 4,4 7,7 7,2 % Change Price Exports -7,3-5,1 0,0 0,9 Imports -2,7-2,8 0,2 1,6 * Forecast 30
Current account deficit financed by long-term capital inflows CURRENT ACCOUNT PLUS LONG - TERM EXTERNAL CAPITAL INFLOWS OF PRIVATE SECTOR 1/ : 2006-2016 (% GDP) 11.3 7.9 6.1 6.5 7.2 3.8 5.1 4.7 1.9 2.2 3.0 2006 2007 2008 2009 2010 2011 2012 2013 2014* 2015* 2016* 31 1/ Includes net foreign investments, portfolio investment and private sector s long-term disbursement. * Forecast
Indicators of Financial Vulnerability Indicators of Financial Vulnerability Unit 2003 2008 2013 1 Dollarization of credit to the private sector % 69 49 41 2 Dollarization of public debt % 85 62 44 3 NIR/ST liabilities + amortization on external debt times 7,4 3,7 7,9 4 ST banks foreign liabilities/banking credit % 4,9 5,3 2,7 5 ST banks liabilities (deposits + credit lines)/rrs times 3,1 2,5 1,7 6 Non-residents holdings of local public debt/public sector deposits % 0,0 11,9 21,5 7 Average maturity of the public debt years 7,6 11,2 12,5 8 NIR/GDP % 16,6 24,5 31,6 9 Domestic Currency Deposits/CB FX Position % 0,6 0,6 0,9 32
Korea Indonesia Russia Thailand Mexico Argentina Brazil Turkey Philippines Venezuela Ukraine Poland Romania Czech Republic Hungary South Africa Israel Chile Kasakhstan Egypt India Taiwan Colombia Malaysia China Peru Short term external debt / foreign reserves EM stress metric: short - term debt / reserves 2.5 2 1.5 1 0.5 0 IMF: STXD/Reserves (1997) DB: STXD/Reserves (2013) Source: IMF, Haver Analytics, Deutsche Bank 33
Peru has a low level of external vulnerability compared to the region 120.0 100.0 2013F 2014F Moody's External Vulnerability Indicator 80.0 60.0 40.0 20.0 0.0 Chile Uruguay Argentina Mexico Colombia Peru Brazil Source: Moody s, November 2013. The indicator is calculated as (Short-Term External Debt + Currently Maturing Long-Term External Debt + Total Nonresident Deposits Over One Year)/Official Foreign Exchange Reserves 34
Peru is among the least vulnerable emerging economies with a high level of foreign exchange reserves and fiscal surplus Fiscal Balance Fiscal Balance India India Economic Indicators for Emerging Countries Economic Indicators for Emerging Countries Economic 40.0 Forex Indicators Reserves Forex for / Emerging Countries 40,0 GDPReserves/GDP Forex Reserves/GDP Poland Poland Israel Israel Israel 40,0 35.0 35,0 30.0 30,0 25.025,0 Hungary Hungary Hungary Brazil Brazil Brazil 15,0 10,0 10.0 10,0 5,0 5.0 5,0 0,0 0.0 0,0 China China China Turkey Turkey Turkey Mexico Mexico MexicoColombia Colombia Colombia Argentina Argentina Argentina Russia Russia Russia 20.020,0-8.5-8,5-7.5-7,5-6.5-6,5-5.5-5,5-4.5-4,5-3.5-3,5 20,0-2.5-2,5-1.5-1,5-0.5-0,5 0.5 0,5 Chile Chile Chile -8,5-7,5-6,5-5,5-4,5-3,5-2,5-1,5-0,5 0,5 15.0 15,0 Lower than Lower average than average 35,0 30,0 25,0 Higher than Higher average than average Peru Peru Peru HIgher than HIgher average than average Lower than Lower average than average 35
The fiscal balance is expected to be near zero in 2014 and 2015 FISCAL SURPLUS (as percentage of GDP) 2.3 2.9 2.4 2.0 2.1 0.8 0.1 0.0-0.2-1.3 2006 2007 2008 2009 2010 2011 2012 2013* 2014* 2015* * Forecast 36
Peru s fiscal surplus is among the highest in the region 1.8 1.3 0.6 Overall balance: average 2010-2012 (% GDP) -1.1-1.2-1.3-1.7-2.6-3.5-3.8-4.3 Korea Peru Chile Thailand Indonesia Philippines Colombia Brazil Vietnam Mexico Malaysia 1.4 0.8 Overall balance: 2013* (% GDP) -0.7-0.8-1.0-2.2-2.7-3.0-3.8-4.0-4.3 Korea Peru Chile Philippines Colombia Indonesia Thailand Brazil Mexico Vietnam Malaysia * Forecast 37
Agenda 1. Peru s growth is based on strong fundamentals 2. Recent economic developments and prospects 3. Monetary Policy Framework 4. Closing remarks 38
The Central Bank of Peru lowered its monetary policy interest rate to 4,0 percent in November % jun/08 oct/08 mar/09 ago/09 ene/10 jun/10 nov/10 mar/11 ago/11 ene/12 jun/12 oct/12 mar/13 ago/13 ene/14 8.50 Central Bank policy interest rate vs 90 day corporate interest rate (In percentage points) 7.50 6.50 5.50 4.50 3.50 4.84 4.00 2.50 1.50 0.50 Policy interest rate 90 day corporate interest rate 39
Output growth is expected to remain close to its potential level 7 6 Output gap 5 4 Feb. 2014: 4,0 % 3 2 1 0-1 -2-3 Output gap Policy interest rate 2008 2009 2010 2011 2012 2013 2014 2015 40
Macroprudential policies to keep sustainable credit growth and to support the dedollarization process Apr 12 May 12 Jun 12 jul-12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Feb 14 Mar 14 % 35 Domestic Currency Reserve Ratio (As percentage of total obligations subject to legal requirements) Average required DC Marginal DC 30 30,0 30,0 30,0 25 25,0 25,0 20 20,0 15 10 05 Jun.13: Establishment of maximum average rate of reserve requirement of 20% Liquidity provided: S/. 480 mill. Aug.13: Reduce maximum average rate of reserve requirement to 19% Liquidity provided: S/. 567 mill. Sep.13: Reduce maximum average rate of reserve requirement to 17%. Liquidity provided: S/. 2 026 mill. Oct.13: Reduce maximum average rate of reserve requirement to 16%. Liquidity provided: S/. 1 064 mill. Dec.13: Reduce maximum average rate of reserve requirement to 15%. Liquidity provided: S/. 1 086 mill. Jan.14: Reduce maximum average rate of reserve requirement to 14%. Liquidity provided: S/. 1 091 mill. 16,0 16,0 15,0 14,0 Feb.14: Reduce maximum average rate of reserve requirement to 13%. Liquidity provided: S/. 1 086 mill. 13,0 12,5 Mar.14: Reduce maximum average rate of reserve requirement to 12,5%. 41
Higher preference for credit in domestic currency since the second quarter of 2013 CREDIT TO THE PRIVATE SECTOR (yoy percentage change) Soles Dólares Total 23,4 13,7 2,1 feb-13 mar-13 apr-13 may-13 jun-13 jul-13 aug-13 sep-13 oct-13 nov-13 dec-13 jan-14 Stock in millions of S/. 176 624 178 334 179 576 181 082 184 279 186 643 189 806 191 960 194 364 198 012 199 167 199 740 Soles 97 020 98 768 100 503 101 866 104 184 106 157 108 699 111 374 113 501 116 592 117 882 118 706 feb12 mar12 abr12 may12 jun12 jul12 ago12 sep12 oct12 nov12 dic12 ene13 feb13 mar13 abr13 may13 jun13 jul13 ago13 sep13 oct13 nov13 dic13 ene14 Dollars (millions of US$) 28 430 28 417 28 240 28 292 28 605 28 745 28 967 28 780 28 879 29 079 29 030 28 941 Monthly flows (millions of S/.) 1 026 1 710 1 242 1 506 3 196 2 365 3 163 2 154 2 404 3 648 1 155 573 Soles 807 1 748 1 735 1 363 2 318 1 973 2 542 2 675 2 127 3 091 1 290 824 Dollars (millions of US$) feb-13 79 mar-13 apr-13-176 may-13 51 jun-13 314 jul-13 140 aug-13 221 sep-13-186 oct-13 99 nov-13 199 dec-13-48 jan-14-90 Annual Stock in percentage millions of S/. change 17614,8 624 17814,1 334 17913,6 576 18113,1 082 18412,8 279 18612,7 643 18913,3 806 19112,8 960 19413,4 364 19814,2 012 19913,1 167 19913,7 740 Soles 9715,4 020 9815,9 768 10016,8 503 10117,3 866 10417,6 184 10618,2 157 10819,2 699 11120,3 374 11321,6 501 11623,1 592 11722,4 882 11823,4 706 Dollars (millions of US$) 2814,0 430 2811,8 417 28 240 9,8 28 292 8,0 28 605 7,1 28 745 6,2 28 967 6,1 28 780 3,8 28 879 3,5 29 079 3,5 29 030 2,0 28 941 2,1 Monthly flows (millions of S/.) 1 026 1 710 1 242 1 506 3 196 2 365 3 163 2 154 2 404 3 648 1 155 573 Soles 807 1 748 1 735 1 363 2 318 1 973 2 542 2 675 2 127 3 091 1 290 824 Dollars (millions of US$) 79-13 -176 51 314 140 221-186 99 199-48 -90 Annual percentage change 14,8 14,1 13,6 13,1 12,8 12,7 13,3 12,8 13,4 14,2 13,1 13,7 Soles 15,4 15,9 16,8 17,3 17,6 18,2 19,2 20,3 21,6 23,1 22,4 23,4 Dollars 14,0 11,8 9,8 8,0 7,1 6,2 6,1 3,8 3,5 3,5 2,0 2,1 42
Mortgages and credit to households reduced their pace of growth, whereas credit to firms keeps its dynamism Credit to the Private Sector (Annual growth rates) Dec. 12 Dec. 13 Jan. 14 Credit to Firms 13,3 13,0 14,0 Credit to Households 19,4 13,4 13,3 Consumption 15,3 11,4 11,6 Car Loans 25,2 14,5 12,9 Credit cards 13,4 8,2 8,8 Others 15,6 12,9 13,0 Mortgage 25,7 16,2 15,6 TOTAL 15,1 13,1 13,7 43
Housing prices increased by 14 percent in 2013 IV 98 IV 99 IV 00 IV 01 IV 02 IV 03 IV 04 IV 05 IV 06 IV 07 IV 08 IV 09 IV 10 IV 11 IV 12 IV 13 2000 1800 Median sale price of apartments by m2 La Molina, Miraflores, San Borja, San Isidro and Surco 1600 1400 1200 1000 800 600 400 US$ 670 Average price 1998 I - 2013 IV US$ 817 US$ 1800 200 PER: SALE PRICE / ANNUAL RENT IN US$ by m2 1/ 2010 - IVT 2011 - IVT 2012 - IVT 2013 - IVT La Molina 16,1 15,8 11,6 16,4 Miraflores 13,3 15,7 15,0 15,9 San Borja 14,7 17,2 18,2 16,7 San Isidro 13,8 16,7 18,4 17,7 Surco 14,7 16,3 15,0 16,6 Average 14,1 15,2 15,8 16,1 1/ These ratios were calculated using the median of sale prices in each district. 44
Soles per US$ Since May 2013, the Central Bank intervened to reduce volatility in the foreign exchange market Millions of US$ 2.842 2.801 Exchange rate and foreign exchange intervention 600 450 Millions of US$ Net Purchases 2010 8 963 2.760 300 2011 3 537 2.719 150 2012 13 179 2.679 0 2013 5 2.638-150 Jan Apr 2013 5 210 2.597-300 May Dec 2013-5 205 2.556 2.515-450 -600 2014* -1 470 2010 2014 24 214 * As of February 21. Net dollar purchases Exchange rate 45
Long term interest rates are consistent with recent developments in the world economy and macroeconomic fundamentals jul/10 ago/10 sep/10 oct/10 nov/10 dic/10 ene/11 feb/11 mar/11 abr/11 may/11 jun/11 jul/11 ago/11 sep/11 oct/11 nov/11 dic/11 ene/12 feb/12 mar/12 abr/12 may/12 jun/12 jul/12 ago/12 sep/12 oct/12 nov/12 dic/12 ene/13 feb/13 mar/13 abr/13 may/13 jun/13 jul/13 ago/13 sep/13 oct/13 nov/13 dic/13 ene/14 feb/14 Yield (%) 14.0 13.0 12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 Country 10-year Treasury bond yield Tasa (%) Dec 12 Apr 13 Dec 13 Feb 24 2014 LATAM 10-year Treasury Bond Yield Policy Rate Brazil 2023 9,57 9,70 13,21 12,79 10,50 Colombia 2024 5,73 4,91 6,79 7,29 3,25 Mexico 2023 5,55 4,59 6,54 6,38 3,50 Peru 2023 4,10 4,11 5,60 6,67 4,00 Brazil Colombia Mexico Peru Perú Colombia Mexico Brasil Source: Bloomberg 46
Non-resident Treasury bond holdings Non-resident Treasury bond holdings (in millions of S/.) 20,000 19,500 19,691 19,000 18,500 18,000 17,500 17,258 18,021 17,602 17,000 16,870 16,500 16,000 15,500 15,000 Dec 12 Apr 13 Dec 13 Jan 14 Feb 14* * As of February 24 47
Prudential accumulation of foreign exchange reserves in order to lower exposure to financial dollarization risks 32 International Reserves* (as percentage of GDP) 17 15 13 12 Peru Brazil Chile Mexico Colombia * Information as of December 2013. Source: Central banks and IMF World Economic Outlook 2013. 48
Inflation rate fell to 2,86 percent in December 7 6 5 YoY % Chg. December 2013: Inflation: 2,86% Inflation expectations (Nov): 2,7% INFLATION AND INFLATION EXPECTATIONS (YoY % Change) Inflation Inflation expectations 4 3 2 1 0 Maximum Inflation target Minimum -1-2 dec-02 dec-03 dec-04 dec-05 dec-06 dec-07 dec-08 dec-09 dec-10 dec-11 dec-12 dec-13 49
Inflation expectations are below 3 percent for 2014 and 2015 MACROECONOMIC EXPECTATIONS SURVEY END OF PERIOD INFLATION RATE (in percentage) Expectations from Sep. 13 IR* Dec. 13 IR* Jan. 14 Financial System 2014 2,5 2,6 2,6 2015 2,5 2,6 2,5 Economic Analysts 2014 2,5 2,6 2,7 2015 2,4 2,5 2,6 Non-financial Sector 2014 3,0 3,0 2,9 2015 3,0 3,0 3,0 * IR: Inflation Report 50
Inflation is expected to stay in the inflation target range throughout 2014-2015. 5 Inflation forecast, 2014-2015 (annual percentage change) 5 4 4 3 3 2 2 1 1 0 0-1 2010 2011 2012 2013 2014 2015-1 51
Agenda 1. Peru s growth is based on strong fundamentals 2. Recent economic developments and prospects 3. Monetary Policy Framework 4. Closing remarks 52
Closing Remarks End of cyclical desceleration and beginning of economic recovery in the global economy. Despite uncertainty about the speed of the tapering process, this occurs amidst a gradual recovery of the American economy. Peru s good economic position among emerging economies due to strong macroeconomic fundamentals and fast reaction ability. Opportunity to move forward through an agenda of structural reforms to boost potential output growth. 53
Peru s fundamentals and economic perspectives Julio Velarde Governor Central Bank of Peru March 2014