TRACKING TRENDS
PERU | Disappointing first quarter results.
On 15 May Peru’s national statistics institute (Inei) revealed that GDP grew by 4.76% in the first quarter of 2014, below what markets had forecast. The result suggests that after posting stellar average economic growth rates of above 5% in the past couple of years, the economy is now experiencing a clear slowdown. The first quarter GDP figure also casts doubts over whether the official economic growth forecast of 5.5% for 2014 is attainable. According to Inei, the result was driven by a significant drop in activity in the mining & hydrocarbons sector in March. Year-on-year GDP growth in March was an unexpectedly low 4.9%, after local economists had forecast 5.65%. This despite the fact that all sub-sectors posted positive growth rates in the month, led by finance (13.56%) and manufacturing (5.67%). But Inei’s figures show that activity in the mining & energy sector only increased by 0.8% year-on-year in March, the lowest level since March 2013. More worryingly, production in the key mining sub-sector actually contracted by 1.7% in March. While production of copper (9.9%), lead (6.7%) and molybdenum (4.6%), were all up, production of other minerals including zinc (-18.5%), gold (-14.7%) and silver (-1.9%) were all sharply down. In fact, Inei’s seasonally adjusted figures for March show that the economy as a whole contracted by 0.4% in the month compared to February. The economic slowdown is clearly a concern for the government led by President Ollanta Humala, as it is aware that it needs the economy to continue ticking over if it is to deliver on its promises of reducing poverty and inequality in the country. A few days after the release of the Inei’s data, on 17 May, Production Minister Piero Ghezzi presented the government’s new ‘national production diversification plan’ to the members of the national industrial society (SIN). Ghezzi said the aim of the plan is to transform the country’s production structure so as to create new “engines of growth” for the domestic economy; and reduce the economy’s dependence on the high commodity prices to drive growth. Ghezzi then presented 23 proposals designed to recue operational costs and red tape across various economic sectors that will help to boost the country’s productivity.
COLOMBIA| US investors bullish on Ecopetrol.
On 20 May Colombia’s state-owned oil firm, Ecopetrol, announced that it had raised US$2bn from its issue of 30-year bonds in the US stock markets, the largest such operation by a Colombian company to date. The latest bond issue was the second operation carried out by Ecopetrol in international markets after it raised US$2.5bn on similar letters issued back in September. These are part of the plans by the Colombian government led by President Juan Manuel Santos for Ecopetrol to launch a major oil exploration programme in the country in the next couple of years. Significantly, the Ecopetrol bonds were placed at a yield of 5.92%, just 255 basis points over the yields offered by comparable US Treasury bonds. Noting that the bond issue was five times oversubscribed, Ecopetrol’s CEO, Javier Gutiérrez, said that he was “very satisfied with the issue… [which] evidences the confidence that international investors have in the firm, the country; and their appetite to invest in a firm such as Ecopetrol, which has been able to show consistent growth in the last couple of years”. A few days prior to conclusion of the bond issue, on 14 May, President Santos opened Colombia’s 10th international mining and oil congress in Cartagena de Indias. Santos then highlighted that in the last four years activity in the sector had increased on average by 8.9% to the point that it now accounts for 7.8% of Colombia’s GDP, adding that the hydrocarbons sub-sector’s prospects in particular were very “positive”. According to Santos, last year alone, Colombia’s crude oil reserves increased by 2.8% to over 2.4bn barrels and the expectation is that Ecopetrol’s exploration programme will reinforce this. In fact, on that same day Ecopetrol confirmed the discovery of a new crude oil deposit in the eastern Santander department. According to Ecopetrol, a new well drilled in its Bloque Playón concession is now producing 765 barrels of oil a day and the company will now conduct evaluation studies to determine the deposit’s reserve potential.
- Laptop computer assembly plant
On 14 May Bolivia’s President Evo Morales inaugurated the country’s first state-owned laptop computer assembly plant in the city of El Alto, La Paz department. The US$60m ‘Quipus’ plant is expected to produce 800 computers a day that the government will deliver free-of-charge to students and teachers in state schools across the country. Since 2011 the Morales government has been handing out laptops to students and teachers in state schools in a bid to improve education quality in the country. In a short speech Morales explained that the plant will be run by local technicians who have received training in China.