Latin America Capital Markets Origination August, 214 Peru: Capital Market and Infrastructure Themes John Greenwood
Peru Market Themes Macroeconomic Stability and Growth 1 2 Macro Fundamentals Micro Fundamentals Solid Sovereign Credits Strong Corporate Balance 2 Sheets Investor Money Inflows 1 3 Macroeconomic Stability and Growth Solid Sovereign Credits Strong Corporate Balance Sheets 3 Technicals Development of Local Markets Investor Money Inflows Development of Local Markets Growth of Local Money Managers 4 Supply 6 Important Infrastructure Needs 4 5 Peru s Opportunity 1
Macroeconomic Stability and Growth GDP Growth YoY LatAm Peru 7.% 7.% 6.% 6.% 5.% 5.% 4.% 3.% 2.% 1.% 3.8% 2.72% 2.54% 4.% 3.% 2.% 1.% 6.28% 5.2% 5.52%.% 212 213 214F.% 212 213 214F Brazil Mexico Colombia Chile 7.% 7.% 7.% 7.% 6.% 6.% 6.% 6.% 5.% 5.% 5.% 5.% 4.% 4.% 4.% 4.% 3.% 2.% 1.%.% 1.3% 2.28% 1.82% 212 213 214F 3.% 2.% 1.%.% 3.91% 2.99% 1.6% 212 213 214F 3.% 2.% 1.%.% 4.21% 4.27% 4.49% 212 213 214F 3.% 2.% 1.%.% 5.45% 4.23% 3.63% 212 213 214F Peru s growth remains robust 2 Source: International Monetary Fund, World Economic Outlook Database, April 214
Solid Sovereign Credits S&P s Ratings S&P Credit Rating Peru AA- 8 A+ 7 A 6 A- 5 BBB+ 4 BBB 3 BBB- 2 BB+ 1 4.2% 3.5% 3.2% BBB BBB+ BBB+ 212 213 214 14% 12% 1% 8% 6% 4% 2% % Key: S&P International Rating Gross Debt / GDP Brazil Mexico Colombia Chile S&P Credit Rating AA- 8 A+ 7 A 6 A- 5 BBB+ 4 BBB 3 BBB- 2 BB+ 1 35.3% 36% AA- 8 42.2% 45% AA- 8 25.1% 25.1% 25.2% 35% A+ 7 4.4% 43% A+ 7 A 41% 35% 6 37.8% A 6 39% A- 5 A- 5 33.6% 34% 37% BBB+ 33.3% 4 35% BBB+ 4 34% BBB 3 33% BBB 3 33% BBB- 31% 2 BBB- 2 29% BBB BBB BBB- 33% BB+ 1 BBB BBB+ BBB+ 27% BB+ 1 BBB- BBB BBB 32% 25% 212 213 214 212 213 214 212 213 214 Inflation, Yoy Growth 26% 25% 24% 23% 22% 21% 2% AA- 8 A+ 7 A 6 A- 5 BBB+ 4 BBB 3 BBB- 2 BB+ 1 AA- AA- AA- -6.8% -6.7% -5.9% 212 213 214 1% 8% 6% 4% 2% % -2% -4% -6% -8% Peru s improving credit profile has been recognized 3 Source: S&P s ratings. Bloomberg as of July 29, 214
Growth of International Investor Inflows LatAm Issuance Primary Market Historical Volume Peru CDS Against its Peers 5 yr CDS Cumulative Volume (US$ bn) 14 12 1 8 6 4 2 214YTD: US$12.1 bn 213YTD: US$7.6 bn 212YTD: US$71.2 bn 212 213 214 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 125.3 118.8 Ireland(Baa1/BBB+/BBB+) Spain(Baa2/BBB-/BBB+) Philippines(Baa3/BBB/BBB-) Panama(Baa2/BBB/BBB) Peru(Baa2/BBB+/BBB+) Colombia(Baa3/BBB/BBB) Lithuania(Baa1/A-/BBB+) Thailand(Baa1/BBB+/BBB+) Italy(Baa2/BBB/BBB+) Bulgaria(Baa2/BBB/BBB-) Romania(Baa3/BBB-/BBB-) Indonesia(Baa3/BB+/BBB-) Brazil(Baa2/BBB-/BBB) South Africa(Baa1/BBB/BBB) Russia(Baa1/BBB-/BBB) 89.75 $ $5 $1 $15 $2 $25 $3 Peru has growing access to international investors. 4 Source: Citi and Bloomberg as of August 1, 214
Growth of Local Pension Funds & Money Managers Assets Under Management Peru 5 4 38. 36.5 38.8 US$ (bn) 3 2 1 212 213 214YTD Brazil Mexico Colombia Chile US$ (Tn) 1.25 1.2 1.15 1.1 1.2 1.1 1.1 US$ (bn) 6 5 4 3 2 447.6 478.2 515. US$ (bn) 1 8 6 4 71.2 68.7 72.8 US$ (bn) 3 25 2 15 1 254. 252.1 264.4 1.5 1 2 5 1. 212 213 214YTD 212 213 214YTD 212 213 214YTD 212 213 214YTD Peru s local pools of capital continue to grow 5 Source: Dealogic as of July 29, 214.
Large Pipeline of Infrastructure Initiatives in Peru US$ mm ProInversion Project Pipeline 214-215 (1) Energy Transportation 32,987 2,935 Southern Peruvian Gas pipeline National Supply System of LNG Transmission Lines (22 Kv) Hydro Power Plants (1,2 MW) Lima Metro System - Line 2, 3 and 4 Chinchero International Airport - Cusco Lima and Callao Beltway Road Longitudinal of Sierra Tranche 4 and 5 Huancayo and Huancavelica Train Telecommunications 19,17 National Network of Optic Fiber Rural Telecommunication projects Water Infrastructure 4,17 Lima Potable Water Supply Regulation Works Chillon River Other 866 Construction and Supply Essalud Hospitals Integral Waste Management for Lima Hospitals Choquequirao Cable Railway 87,975 (1) Source: Proinversion, as of June 5, 214. 6
Global Trends in Infrastructure Financing 6 Global Project Bond Volume 56 Debt Product Breakdown Volume (US$ billions) 5 4 3 2 23 26 15 13 14 16 25 213 212 Bond 15% Bond 8% 1 6 25 26 27 28 29 21 211 212 213 Bank Loan 85% Bank Loan 92% Project Bond Volume by Sector Project Bond Volume by Region 213 212 213 212 Oil & Gas 23% Industrial/ Telecom 9% Conventional power 13% Renewables 17% Oil & Gas 18% Industrial/ Telecom 3% Mining 8% Conventional power 2% Renewables 11% Europe 33% Asia Pacific (Excl. India) 9% Americas 51% Asia Pacific (Excl. India) 4% Americas 5% Infrastructure 39% Infrastructure 4% Middle East & Africa 8% Europe 5% Middle East & Africa 5% Source: Dealogic 7
Infrastructure Financing Best Practices Prioritize Ensure transparency in the bid process Educate all stakeholders How should governments achieve best practices for infrastructure financing? Allow flexibility in the contractual process for bankability considerations Utilize pension fund community Leverage Multilateral capabilities Standardization of government obligations Development bank alignment Not just bank market capital market solutions Develop local currency funding 8
Citi s LatAm & Peru Capital Markets Leadership International Debt Syndicated Loan Top 3 Underwriter in Peru Top 3 Underwriter in LatAm Recent CITI s Peruvian Transactions: Top 3 Underwriter in Peru Top 3 Underwriter in LatAm Recent CITI s Peruvian Transactions Local Debt Top 3 Underwriter in Peru Top 3 Underwriter in LatAm Recent CITI s Peruvian Transactions Top 3 Across All Capital Markets Equity Capital Markets Top 3 Underwriter in Peru Top 3 Underwriter in LatAm Recent CITI s Peruvian Transactions Source: Dealogic as of July 29, 214. Market data from 29-14 YTD. 9
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