Vitals:Peru

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October 2013 v.III

Insight
Further evidence of a strong fourth quarter has surfaced with reports out of Perus Central Reserve Bank pointing
to 6-6.5% GDP growth. Perus Ministry of Economy and Finance also believes that accelerated growth from October
through December this year is to be anticipated. Further expansion is expected in the fourth quarter due to the
recovery of business confidence, better growth prospects of the local economy and greater dynamism of the world
economy, an official from the MEF stated. Contributing to optimistic growth forecasts is the continuation of foreign
private investment which has reached 45.6 billion USD in September.
Foreign direct investment grew 27% in the first half of 2013 as Peru became the third largest target for FDI inflow
in the region. The Economic Commission for Latin America and the Caribbeans latest report notes that Peru has
attracted 6.87 billion USD in FDI inflow during the first half of the year, on track to overtake inflow for 2012 which
was 12.24 billion USD, an indication of continued confidence in Peruvian markets. With funding primarily being
pumped back into infrastructure projects and the continued expectations of mining sector growth, the last quarter
of 2013, as well as the beginning of 2014, provide a strong foundation for the future development of the country.

Foreign Influence
International forces weigh on the Peruvian economy as the U.S. Fed delays stimulus tapering to 2014, sentiment
surrounding Chinese manufacturing output, and U.S. government debt ceiling conversations continue.
Janet Yellen is slated to become the new chairman of the U.S. Federal Reserve replacing Ben Bernanke after his term
expires on January 31st, 2014. Yellens thoughts on moving the
economy focuses on increasing aggregate demand by striving
IGBVL Performance
to keep real interest rates low. Continuation of quantitative
16,050.0
easing by the U.S. Fed, expected to begin tapering in February
15,900.0
2014, will likely contribute to the recovery of gold in the global
market and, likewise, the share price of mining companies of 15,750.0
15,600.0
the IGBVL.
15,450.0

Perus largest trading partner by volume, China, displays a 15,300.0

IGBVL
decreasing Purchasing Managers Index (PMI) heading into
15,150.0
1-Oct-13
5-Oct-13
9-Oct-13 13-Oct-13 17-Oct-13
September. Chinas PMI has shown a decrease from 51.8 in
August to 51.2 in September, indicating a neutral outlook by
purchasing managers. Although this appears to be negative news, the decline is marginal; steady output from
China is to be expected in the coming months.
United States debt ceiling talks continue, as no legislation has yet to be finalized to increase the borrowing limit
of the U.S. government, financial officials from around the world view the present situations occurring in the U.S.
as an absolute threat to the current stance of the global economy. The head of the European Central Bank, Mario
Draghi, stated, I think it is unthinkable that an agreement wont be found, he also went on to say, If this situation

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were to last a long time, it would be very negative for the U.S. economy and the world economy and could certainly
harm the recovery. This situation within the U.S. has created negative sentiment for both businesses and investors
to reinvest in the global economy. With further debt ceiling talks, gold has the potential to become an attractive
safe-haven asset during this time, at least in the short run. Should investors look to gold for safety, it should have
a positive impact on the IGBVL and mining companies in the Peruvian market.

Monetary Policy
Currency in circulation is currently 32.72 billion Sol with an exchange rate of 2.7649 Sol per USD. International
reserves remain at an all-time high of 66.85 billion USD, 2.85 billion more than reserves at the end of 2012.

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