Download 16th APEC Leaders Summit in PERU 21

EMBASSY OF PERU
IN MALAYSIA
16th APEC LEADERS SUMMIT IN PERU
21-23 NOVEMBER 2008
Peru has been a full member of APEC since 1998. Its participation began at the
Summit held in that year in Malaysia. It is important to emphasize that Peru is the
only member of the Andean Community that is also a member of APEC. The
commercial exchange with the member economies of APEC has increased over
time, and represents now more than 50% of Peru’s total trade.
In November 2003, the APEC member economies agreed to elect Peru as the site of
the 16th Summit of that Forum in 2008, which represents the greatest challenge for
Peru to raise the standards of its economy to that of the Asia-Pacific economies in
terms of efficiency and competitiveness. The organization of this event is a joint
initiative of the government and the private sector.
The following concept was chosen as the theme of the year of the Presidency of
Peru: “A new commitment to the Asia-Pacific development”. Its objectives are:
 Broaden the participation of other players in the process of building the AsiaPacific community, promoting the association between the private and public
sectors, the inclusion of the representatives of civil society and the
cooperation of the financial institutions
 Strengthen the focus on personal and economic development, to include an
integral approach to the major issues that affect the region such as energy
security, personal security, climate change and sustainable economic growth.
Economic Situation in Peru
This 16th APEC Summit will be held in the framework of a very favorable economic
situation in Peru.
Over the past few years, Peru has achieved steady growth in its production levels.
In the five year period 2002-2006, there was an annual average increase in the
gross domestic product, GDP, of approximately 6%. 2007 closed with a 9% increase.
Until September 2008, the growth rate had attained 9% again and the forecast for
2009 is that this growth rate will decelerate slightly to 7%, mainly due to the current
international financial crisis and the ensuing recession in most developed contries. If
a growth rate of 6.5% per annum were maintained between 2010 and 2012, Peru
would bring off the feat of doubling its GDP in less than a decade, taking the period
2001-2012.
This healthy growth has been produced in a climate of confidence on the part of the
business community and consumers, favored by a stable macroeconomic
environment with low inflation, fiscal and external surpluses and a buoyant credit
system. This situation was conducive to a significant increase in the per capita
income which, since 2006, has been above the historic high point achieved in 1975.
The per capita GDP was 8,1% up over the previous year in 2007, and 14% up over
the figure for 1975.
Unlike in past times, when economic growth was led by the commodity sectors,
since 2003 it is the sectors linked with internal demand, rather than commodities,
that are driving this dynamic growth. Construction and manufacturing industries and
trade and services sector have been the most buoyant in the domestic market.
Thus, Peru stands out as one of the leaders in Latin America: it is the economy that
showed the highest growth in 2007, it has one of the lowest inflation rates in the
region, and it has external, fiscal and monetary “armour” that will enable the country
to withstand any temporary international crisis.
This booming period has been reinforced in 2008 with some very important
international recognition:
 Investment Grade
At the beginning of 2008, Peru, after Mexico and Chile, was the third Latin American
country to obtain the important Investment Grade ranking, as a result of its sound
financial management and continuous strong economic growth. Precisely, in April
2008, risk-taking agency Fitch upgraded the credit ratings for Peru’s long term debt
in foreign currency to BBB- from BB+; and from the long-term debt in local currency,
the rating was raised to BBB from BBB-. Fitch’s decision was based on the high
levels of sustained growth shown by the Peruvian economy in recent years, the good
management of public finances, and the financial management of the public debt.
Likewise, in July 2008, other very important risk-taking agency Standard & Poor’s
announced that it has raised its foreign currency long-term credit rating on Peru to
BBB- from BB+, and raised its local currency long-term credit rating on the same
country to BBB+ from BBB-. Standard & Poor’s explained that its decision was based
on the significant decline in Peru’s fiscal and external vulnerabilities within a context
of high and diversifying sources of growth with low inflation and strengthening
macroeconomic fundamentals. It also reflects Standard & Poor's expectation that
these trends will remain in place over the medium term despite an increasingly
riskier international environment and the continuation of challenging local politics.
 Invitation to Peru to participate in the Investment Committee of the Organization
for the Economic Co-operation and Development (OECD)
On July 31st, OECD announced that its 30 Member States had decided to invite Peru
to participate in the OECD Investment Committee and to adhere to the “Declaration
on International Investment and Multinational Enterprises” of that organization. In
accordance with OECD, Peru has become the 41st adherent to the said Declaration,
in recognition of its impressive progress in pursuing investment policy reforms to
improve the country’s business climate and to reduce poverty. These initiatives have
helped drive robust economic growth and vibrant foreign direct investment flows. As
an adherent to the Declaration, Peru commits to treating foreign investors in the
same way as domestic investors and to promoting responsible business conduct.
 Improvement in the World Ranking of Competitiveness
Peru ranks 83rd in the World Ranking of Copmpetitiveness 2008-2009 published
recently by the World Economic Forum, showing an improvement of three positions
in relation to the study that was made in the period 2007-2008. In accordance with
the Report, the main improvements of Peru are in the macroeconomic stability and
the efficiency of the goods and labour markets, maintaining as a stronghold from the
country, the sophistication of the business and the financial market.
ECONOMIC REASONS TO INVEST IN PERU
Peruvian Economic Fundamentals
Peru is showing an excellent economic performance. During 2007, the GDP
increased by 9.0%, a rate among the highest in the world, and which ensures that
the rapid expansion of the country will be for more than 9 consecutive years. These
positive expectations for the coming years are based mainly on the highly favorable
prospects for public and private investment, and to the increased confidence of
foreign and domestic investors.
World Growth (% change)
Source: International Monetary Fund and Banco Central de Reserva del
Perú (BCRP)
During 2007, exports reached a record level of US$ 27,588 million, registering a
growth of 16.3% over the previous year, after having grown by over 35% for 3
consecutive years. This reflects the growth in international demand derived from
rising international prices and increasing quantities being demanded, from which the
local private business sector is able to benefit.
Exports 2007
Source: BCRP and SUNAT.
International reserves and fiscal balance
In 2007, Peru continued to demonstrate a solid international liquidity position, thanks
to its high level of net international reserves, which reached US$ 27,686 million, a
figure equivalent to seventeen months of imports. The high level of reserves also
ensures Peru‘s compliance with its international obligations.
Net International Reserves
(million of US$)
Source: Banco Central de Reserva del Perú
Another key element in the evaluation of the health of Peru’s economic growth lies in
the government’s balance of payments, where Peru has managed to rapidly reduce
its fiscal deficit. This went from an average of 2.4% of GDP during the first 3 years of
this decade to registering a surplus of 2.5% of GDP in 2007. This is the result of
good economic management and increased tax revenues, helped by economic
growth and high international prices. It should be stressed that the Peruvian fiscal
balance is one of the most solid in the region.
Fiscal Deficit (%GDP)
Source: Banco Central de Reserva del Peru
Main Exports’ Destinations
In 2007, 19% of Peruvian exports went to the United States, a country with which
Peru has tariff preferences through the ATPDEA, and with which Peru has signed an
FTA that is expected to enter into force at the beginning of 2009. Other important
markets are the Asian bloc countries, including China and Japan, destination of 11%
and 8%, respectively, of Peruvian exports. Out of the 10 main trade partners of Peru,
six are APEC Member Economies.
Trade by Countries 2007
(US$ millions)
Source: SUNAT
Trade by Countries 2007
(%)
S
ource: SUNAT