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Area: 1.3 million km2 Third country in extension in South America (five times the size of the UK)

Area: 1.3 million km2 Third country in extension in South America (five times the size of the UK) Population: 27 million inhabitants Capital : Lima (8 million inhabitants ) Currency : Nuevo Sol 3 Natural Regions: Coast, Highlands y Jungle Forest GDP 2001: US$ 54 billions

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Area: 1.3 million km2 Third country in extension in South America (five times the size of the UK)

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  1. Area: 1.3 million km2 • Third country in extension in South America (five times the size of the UK) • Population: 27 million inhabitants • Capital : Lima (8 million inhabitants) • Currency : Nuevo Sol • 3 Natural Regions: Coast, Highlands y Jungle Forest • GDP 2001: US$ 54 billions • GDP per capita: US$ 2,500

  2. 1. Economic fundamentals Peru’s estimated 2002 growth is poised to outpace the US, Europe and most of Latin America Strong economic fundamentals have allowed Peru to weather the regional crisis well Peru is undertaking measures to sustain economic growth by promoting private investment, and fostering regional and sectoral diversification Tax reform and the strengthening of the collection system are already boosting fiscal revenues The renewal of the Andean Trade Preference and Drug Eradication Act (ATPDEA) by the US will further enhance Peru’s export base

  3. Objectives of the economic program • To achieve high and sustained economic growth • To reduce unemployment and poverty • To maintain low inflation rates • To maintain high level of international reserves that provides a safeguard against external shocks

  4. Peru’s economy has been growing consistently for the past 14 months… Monthly GDP Growth (%, yoy) Transition Government Toledo Administration Despite persistent volatility in the region, Peru’s growth is recovering fast (%, yoy) Source: INEI (above) and Consensus Economics Inc. (below)

  5. …and the recovery is no longer being driven by mining alone Source: MEF

  6. The economic recovery is helping to reduce unemployment • Unemployment Rate • (%) Source: MEF

  7. Private investment grew 4.5% year on year in the third quarter, after falling for 8 consecutive quarters on the same basis; correspondingly, credit to the private sector is also recovering The incentives in place are expected to increase private investment by 1% in the whole of 2002 and 4.5% in 2003 Private investment is no longer falling and is expected to recover in the upcoming quarters Private Investment and Credit to the Private Sector (%, yoy) Source: Banco Central de Reserva

  8. Higher mining and non-traditional exports are pushing the trade balance into surplus… • Imports and Exports Evolution • (US$ BN) Source: Banco Central de Reserva

  9. Fiscal policy is aimed at reducing fiscal deficit 1,0 0,0 Public Sector- Consolidated Economic Results of (As a % of GDP) -1,0 -2,0 -1,9 -2,3 -2,3 -3,0 -3,0 -3,2 -4,0 1999 2000 2001 2002 2003 Source: Central Reserve Bank (2002)

  10. The tax measures implemented earlier this year seek to widen the tax base, and curb evasion by strengthening the tax collection agency (SUNAT) As a result of tax reform, revenues are expected to increase by 1% of GDP on an annual basis … the ongoing efforts to boost tax collection are yielding impressive results • Internal Tax Collection • (% change, yoy) Source: MEF

  11. Long-term flows cover all of the current account deficit • Current Account Deficit and Long-Term Flows • (US$ MM) *FDI figures include privatization revenues Source: Banco Central de Reserva del Peru

  12. Inflation has declined drastically in recent years and will end 2002 below the 2.5% target • Inflation Evolution • (%, yoy) • Inflation - Comparative Analysis • (% yoy, 2002E) Source: Banco Central de Reserva (above) and Government Official Data (Below)

  13. The Nuevo Sol has retained its value best amongst its regional peers Latin Currencies (Jan 1st =100) Source: Bloomberg

  14. Prudent monetary policy has managed to reduce interest rates while keeping prices and FX stable Nuevos Soles Interbank Lending Rate (%) Source: Banco Central de Reserva

  15. Peru’s external liquidity position continues to strengthen, while FX reserves are growing • Net International Reserves • (US$ BN) • Months of Import Coverage - Comparative Analysis • (Months, 2002E) *as of Oct. 31 Source: Banco Central de Reserva (above) and JPMorgan (Below)

  16. Financial sector indicators continue to strengthen Asset Quality (%) (%) % of Past-Due Loans Reserve Coverage Banking Sector Profitability (%) (%) Net Interest Income / Interest Income Return on Assets Source: Superintendencia de Banca y Seguros

  17. 6 498 Argentina 1 658 1 614 Latin America Ecuador 1 063 Brazil 962 Venezuela 686 617 Colombia 322 Perú Emerging Markets Country Risk (EMBI) (in basic points) 7 000 6 500 6 000 2 000 1 000 1 000 500 México Source: Reuters 25/11/2002

  18. The decentralization process underway seeks to develop the manufacturing base outside of Lima • Lima currently concentrates • 54% of GDP generation • 62% of registered companies • 46% of the labor force • Decentralization Law put limits on the size of the deficit and indebtedness of regions • Legislation in place ensures that decentralization will not thwart fiscal discipline of the central government • Regional Contribution to GDP • % of GDP Source: INEI

  19. Amount issued : US$ 500m Maturity : 5 years Maturity date : Jan. 2008 Coupon rate : 9.125% Rate of return : 9.35% Price : 99.073% Succesful Sovereign Bonds Issue(Nov 2002)

  20. Peru has a flexible and manageable financing plan for 2003 Source: MEF

  21. Peru’s public external debt to GDP ratio has been cut by nearly half since 1993 • Public External Debt to GDP • (%) • External Debt to Exports • (%) Source: Central Reserve Bank of Peru

  22. Peru’s dependence on market financing is relatively low Brazil Mexico US$BN US$BN Brady Bonds 8% Global Bonds 39% Brady Bonds 15% Total = $97.7 Total = $77.9 Colombia Peru CommercialBank Loans 1% Export Credits 4% Supplier 5% US$BN US$BN Global Bonds 7% Brady Bonds 14% Other Bonds 16% Total = $23.1 Total = $19.8 Source: JPMorgan Source: MEF

  23. The macroeconomic framework 2002-2005 points to a consolidation of the economic recovery Source: MEF

  24. 2. Strategic regional position PERU holds the key so that Asian partners of APEC can trade with: The countries of MERCOSUR, specially Brasil and Argentina

  25. PERU is the only country in the Andean Community that belongs to APEC; the Andean Community is a market of more than 100 million inhabitants with a combined GDP of US$ 250 billions. .. And the Andean Community of Nations that include Venezuela, Colombia, Ecuador and Bolivia...

  26. 3. Clear framework for foreign investment Stable and predictable investment environment Same treatment for domestic and foreign investors Basic principle Restricted activities None Performance requisites None

  27. Legal framework for investment • Constitutional principles • Equal treatment for domestic and foreign investors • Expropiations are prohibited, unless it is for national interest or national security Foreign Investment Law • Access to the best exchange rate for profit remission • Free remissión of profits and royalties Stability contracts • For concessions and investments spannning more than 10 years • Protects the investors in case of policy changes

  28. Legal stability • For foreign investors: • Equal treatment as with domestic investors • Free disposal of foreign exchange • For companies • Hiring policies mechanisns • Export promotion mechanisms • Corporate income tax

  29. Perú is member of the following institutions: • MIGA • OPIC • ICSID Bilateral Investment treaties with: • Argentina • Germany • Australia • Bolivia • China • Korea • Canada • Chile • Colombia • Denmark • Ecuador • El Salvador • Spain • Finland • Netherlands • Great Britain • Italy • Malaysia • Norway • Paraguay • Portugal • Rumania • Sweden • Switzerland • Thailand • Venezuela

  30. Many companies are now investing in Peru • Telefónica de España • Banco Bilbao Vizcaya • Endesa Desarrollo S.A. • Grupo Santander • Repsol - YPF • Orient Express • Royal and Sun Alliance • CDC Partners • Exotic Farm Fruits • Noranda • Teck Corp. • Cominco • Hydro Quebec • Quebecor • Barrick • Newmont • Cyprus Minerals • Bell South • Nextel • Citibank • Bank Boston • Nestle. • Asea Brown Boveri • Aventis • Saint Gobain • Sodexho • Schneider Electric • Pechyney • Degrémont • Holbah II Ltd. • Shell • Stet Mobile • Adrien • Duke Energy • PSEG • Entergy • Aguaytia Energy • Cargill • Nabisco • Procter & Gamble • Kimberly Clark • Group Mexico • Group Portales • Group Bimbo • Zeta Gas • Shougang Corp. • Marubeni • Matsushita • Mitsui • Honda Motor • Daewoo Corp. • Mitsubishi • SK • Luchetti • Falabella • Ripley • Mantos Blancos • Empresas Pizarreño • Empresas IANSA • Costa S.A. • BHP • Firth Ind. • NZ Dairy Products • Mount Isa Mines • Newcrest

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