This content is from: Local Insights

Perspectives for 2011

Javier Castro Salinas

It is the consensus of economists, international banks and multilateral agencies that Peru's GDP is going to grow between 6% and 7% during 2011, continuing the pace of the past decade. With its economy growing 9% during the last year and an annual inflation of around 2.5%, with the most stable currency of Latin America and with the most profitable stock exchange in the world, Peru is, with Brazil and Chile, one of the stars in South America.

Today, no one doubts the soundness of the Peruvian economy. It is recognised not only by investors but also by the credit rating agencies (S&P, Moody's and Fitch) that granted investment grade status to Peru and are now considering improving its rating. With a sound banking system, free trade agreements with the most important economies of the world, a completely open economy, no restrictions on the free circulation of foreign currency, and friendly treatment of foreign investment, Peru continues its race to be a developed country in a short period of time. The Peru index risk is diminishing day by day.

Notwithstanding the above, Peru continues to offer huge opportunities to make business. Its gap in infrastructure is estimated at $70 billion. The part of its territory that is exploited for mining purposes is not more than 10% of the potential mining area; there are tremendous reserves of gas and oil to be discovered according to previous research; the banking penetration rate is 22%, while the average in the region is 35%. Peru appears to be one of the places that no investor can ignore, and foreign investors' inquiries into the Peruvian legal framework are part of the daily work of law firms in the country.

Financial transactions as well as M&A deals are common work nowadays, and they are growing not only in number but also in sophistication. Peruvian firms are now working with principal New York firms, and every day there are a number of opportunities in which Peruvian firms are the ones doing the contacting, contrary to what happened in the past when Peruvian firms were always hired or contacted by international firms. On the other hand, Peruvian entrepreneurs are now able to invest in other countries, which brings a need for their Peruvian counsel to contact and hire attorneys overseas.

For 2011, Peruvian legal firms expect to continue within this spectacular environment. We are expecting lots of M&A, due to the foreign appetite for Peruvian companies and the very active participation of local and foreign investment funds. We are also expecting a great deal of work in infrastructure: concessions and construction. These activities will come, undoubtedly, in conjunction with a great number of local and international financial transactions: loans and issuances of stocks and bonds.

At the same time, we expect to see an increasing number of mining and oil and gas transactions (it must be remembered that Peru is a mining country: it is the world's number one producer of silver, fifth producer of gold, and second producer of zinc and copper, among other resources).

Peru's expectations are huge and, most importantly of all, it has solid foundations.

Javier Castro Salinas

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