Andean Group - June 2017 (ISSN 1741-4466)

Growth: On 14 June, Peru’s central bank (BCRP) issued a report reducing the country’s economic forecast to 2.8% GDP growth for this year, down from the previous estimate of 3.5% GDP growth in March. Despite this lowered outlook, Peru’s recent growth figures are still above the regional average of 1.1% growth for 2017, according to a report from the International Monetary Fund (IMF) published on 19 May.

During a presentation on 16 June covered by local news site Gestión, the BCRP president Julio Velarde explained that the downgrade was due to major delays in major infrastructure projects and damage to production caused by the El Niño weather phenomenon, which will negatively impact the agricultural, construction, and mining sectors, the BCRP report found.

Infrastructure: Peru will invest PEN 5bn (US$1.5bn) in sporting infrastructure ahead of the 2019 Pan-American Games, according to a statement released by the organising committee (Copal) on 19 June. Of this, PEN 3bn (US$916.7m) will go towards building better roads and viaducts and the remaining PEN2bn will be used for developing sporting venues. Organisers expect to offset all these infrastructure costs using the profits made from the mega sporting event.

Oil & gas: On 7 May, the Peruvian government authorised state-owned oil and gas company Pertróleos de Perú (Petroperú) to sell up to US$2bn in global markets to help finance the development of its largest oil refinery, Talara, located in the northern state of Piura. However, Peru’s comptroller general (CGRP) warned that the bonds could be risky due to concerns about the company’s debts including an unpaid US$500m syndicated loan.

Central bank eases reserve requirements: The central bank (BCRP) has lowered the reserve requirements for dollar deposits in foreign currency held by banks operating in the country from 44% to 42% of its assets, starting in July. The move should free up around US$110m for lending purposes, according to the BCRP.