Investment in Peru growing above expectations, on track to set new record

Investment in Peru has been growing above expectations this year and is on track to set a new record at the end of the year, said the local banking unit of Canada's Scotiabank (NYSE: BNS) in a report. Gross investment reached 29% of GDP at the end of the third quarter, which is a level not seen since the 1980s, according to the report. The gross investment is made up of private and public investment as well as inventories - and has been mainly driven this year by private investment (by local and foreign firms). The high level of private investment has in turn been led by the mining sector (mainly foreign firms re-investing their earnings), a real estate boom that has been fueled by Peruvians' higher incomes, more access to mortgage loans and the country's housing deficit, said the report. Increased investment by local and regional governments has also had a positive effect on private sector investment, the report added. Foreign direct investment (FDI) represents about 25% of private investment in Peru today with the remainder being local investment. FDI amounted to US$2.82bn in 3Q12, up 41% on the same quarter last year. The Scotiabank unit noted that 82% of FDI in this year's third quarter was made up of re-invested earnings. The bank also predicted that Peru's FDI will for the first time ever surpass the US$10bn-mark this year. Peru is expected to be the fastest-growing among Latin America's major economies in 2012, with Scotiabank Peru forecasting GDP growth of 6.2%.