Peru eyes debt sale as trust grows

Peru could tap global credit markets later this year as investors grow more confident in the economic policies of left-wing President Ollanta Humala, the country's finance minister told Reuters on Wednesday. Finance Minister Luis Miguel Castilla spoke a day after Standard & Poor's raised its long-term foreign currency rating for Peru on expectations Humala will run a sound budget and support growth.
Humala, a former army commander, scared investors when he railed against capitalism as a presidential candidate in 2006. The local stock index plunged 12.5 percent on June 6, the day after he was elected. But Humala has since reinvented himself as a moderate and helped reassure jittery financial markets by appointing Castilla, a technocrat who served as deputy finance minister under former President Alan Garcia.
Castilla welcomed the ratings agency's decision to put the Andean nation another notch into investment grade. "This is all good news and should provide a return to the private investment flows we saw a year ago," he said in an interview. "We won't rule out an issuance in the fourth quarter." Any sale would be for a minimum $500 million or the equivalent in Peruvian soles, he added. He estimated growth of a solid 5.5 percent in the third quarter. That would mark a slowdown from a 6.6 percent expansion in the second-quarter.
Peru's economy is expected to grow 6.5 percent in 2011, after surging 8.8 percent in 2010 on the back of solid consumer spending and sizzling demand for its key metals imports. The government is prepared to provide stimulus measures if the global economy slides back into recession and threatens Peru's growth, Castilla said.
"If we move from a situation of slower global growth to a global recession, as soon as that happens we will stimulate the economy," Castilla said. He earlier told journalists that stimulus, if needed, would include stepping up public investment.
In the past few years Peru has managed to track one of Latin America's fastest growth rates while maintaining one of the region's lowest inflation rates. Castilla said August inflation, to be released on Thursday, will be "significantly below" July's 0.79 percent.
While Humala has repeatedly promised to honour existing private contracts and promote private investment, he does want state-run energy companies to play a greater role in the economy, as they do in Brazil, Chile and Colombia. State-run power companies, including Electroperu could go public this year in a bid to secure more capital, Castilla said. Government-run Petroperu, which refines, stores and sells oil, could list on the Lima stock exchange in 2012. "It will depend on the appetite of the market, the initial offering has not been defined," Castilla said.