BMI is expecting healthy growth in Peru in 2011 and is also bullish about the medium-term outlook, which means the operating environment for the freight transport sector should be supportive. However, the recent victory for Ollanta Humala in the presidential election on June 5 has a huge bearing on the route the country's finances will take. Our near-term positive outlook for Peruvian markets will be reinforced if appointments to key positions, including the finance minister and central bank president, are perceived as signalling broad policy continuity and a pro-investor stance.
Over the longer term, heightened political risk could re-emerge, weighing on the performance of Peruvian assets. While in the short to medium term, Humala's need to reassure international investors and the inclusion of moderate technocrats in his economic team will likely keep him tied to a centrist policy trajectory, we believe his core, left-wing supporters may become dissatisfied a year or two down the line, which risks him moving back towards the left of the political spectrum.
Based on our analysis at the time of writing, BMI forecasts 2011 GDP growth of 6.2% in Peru (representing a deceleration on the 8.5% growth rate achieved in 2010). We expect growth to ease further to 4.9% in 2012 and to fluctuate around 5% in the subsequent years. As a result, in the five years to 2015 we expect growth to average a strong 5.3% per annum.
Headline Industry Data
?? Total Peruvian trade (imports+exports) will remain vigorous in 2011: BMI predicts real term growth of 11.5%
?? We are projecting throughput at Callao to grow 6.5% this year to 18.57mn TEUs ?? Air freight is predicted to grow by 8.5% to 245mn tonnes in 2011
Key Industry Trends
APM Wins Concession To Operate Callao's Muelle Norte
Proinversión, Peru's private investment promotion agency, has awarded the concession to develop Callao's Muelle Norte terminal to APM Terminals Callao, which is a consortium led by APM Terminals. BMI believes the news is a positive development for the port, which handles 45% of Peruvian cargo, bringing to a close a controversial concessioning process.
Callao Becomes Victim Of Own Success
The Port of Callao is operating very near capacity, following on from the opening of a new terminal in May 2010, according to the managing director of DP World's Americas region, Matthew Leech.
Key Risks To Outlook
BMI believes that risks to our Peruvian freight transport forecasts are now slightly to the upside. Peruvian markets have staged an impressive recovery since Ollanta Humala's victory in the presidential election on June 5 caused a sharp selloff across all asset classes. This underpins our core view that the near-term risks associated with a Humala victory have been to some extent overblown, as it is looking increasingly possible that the new government will pursue a much more moderate economic policy path than had originally been feared. In particular, we are encouraged that a number of major mining and other projects have been confirmed in the week since the result was announced, as there was concern that major investors would pull out on the back of a Humala win.
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