Peru's optimism for PPK spurring FDI

Miners, steel and energy companies in Peru pumped last year's earnings into expansion projects, fueling a 61% jump in foreign direct investment (FDI) in the first quarter, according to the Lima chamber of commerce (CCL).

FDI totaled US$2.05bn in Q1, the highest figure in over a year, the central bank said in a report.

The increase was due to the fact that investors feel more confident about Peru's economic outlook since President Pedro Pablo Kuczynski, a former investment banker, took office in July 2016, according to César Peñaranda, chief economist for the CCL.

Industries led by mining, metallurgical operations, hydrocarbons and electricity have lined up 332 investment projects totaling nearly US$109bn over the next six years, Peñaranda said.

"This figure indicates that these companies kept their profits in the country to reinvest them to expand their production capacity," Peñaranda told state gazette El Peruano. "There were expectations that the new government could generate a more dynamic economy."

President Kuczynski won the June 2016 elections on pledges to eliminate bureaucratic obstacles to US$25bn in public-private partnership infrastructure projects as part of his bid to reactivate the economy and create more jobs.

The report will provide a shot in the arm for Kuczynski, who was forced to shuffle his cabinet and suspend a key airport contract last week due to political pressure from the opposition. The government plans to increase deficit spending in a bid to jumpstart the economy, which posted 2.1% growth in Q1, its slowest pace in eight quarters.

INVESTMENT

Peru's mining industry, the world's second largest copper and silver producer and ranked third in zinc and tin, invested US$564mn in Q1, led by China Minmetals, Southern Copper and Shougang, according to the central bank.

In the energy sector, Repsol invested US$14mn at its La Pampilla refinery, while Enel and Luz del Sur invested US$25mn and US$20mn in expansions, respectively.

Manufacturing investment included US$6mn in Aceros Arequipa's steelworks, while cement producer Unacem allocated US$5mn to its Carpapata III power plant and Condorcocha plant. Brewer SABMiller (US$9mn), Coca Cola bottler Lindley (US$20mn) and the Gloria Group (US$4mn) also invested in expansions.