INVESTMENT OPPORTUNITIES IN PERU WHY INVEST IN PERU? 1. Internationally acknowledged macroeconomic soundness 2. Friendly investment environment 3. Open trade and market access policy 4. Attractive sectors to Invest 1. MACROECONOMIC SOUNDNESS Peruvian economy rise rapidly in the last decade … Real GDP, 2002-2012 (Variation %) Real GDP 1952-2011 (aver annual var. %) 6.4 5.1 6.8 5.0 5.5 4.0 7.7 8.9 8.8 6.9 6.3 5.0 0.9 3.9 3.6 9.8 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 GDP , 2002-2012 (USD thousands of million ) 199.6 176.7 153.9 -1.0 1952-1961 1962-1971 1972-1981 1982-1991 56.8 1992-2001 61.4 69.8 79.4 92.4 107.4 127.1 127.4 2002-2011 Source: Central Reserve Bank of Peru, Ministry of Economy and Finances and IMF 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1.1. MACROECONOMIC SOUNDNESS MACROECONOMIC STABILITY ESTABILIDAD MACROECONÓMICA Economic growth has been driven by rising private investment…. Private Investment 2002-2012 (Annual average variation %) Private Investment 2002-2012 (US$ Billion) 25.9 23.3 20.1 12.0 6.3 42.8 22.1 11.7 34.6 13.6 8.1 29.5 27.3 22.4 0.2 19.5 15.1 8.4 9.2 10.5 12.3 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 -15.1 Source: Central Reserve Bank of Peru and Ministry of Economy and Finance * Preliminary figure 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1. MACROECONOMIC SOUNDNESS …… today represents almost 22% of GDP …. Total investment 2002-2012 (% of GDP) Inversión Pública Public Investment Inversión Privada Private Investment 25.8 21.6 2.8 2.8 2.8 2.9 19.5 4.5 19.2 19.6 25.7 24.8 24.2 23.1 5.2 20.2 3.1 Source: Central Reserve Bank of Peru 18.2 2009 17.7 2008 2007 16.4 2006 15.5 2005 15.1 2004 2003 2002 15.0 5.9 26.7 5.2 3.4 21.5 14.8 24.1 21.5 2012 18.4 22.9 26.7 2011 17.9 4.3 25.1 2010 17.6 17.8 Total investment – LATAM 2012 (% of GDP) Perú Chile Mexico MéxicoArgentina Argentina Colombia Colombia Brazil Brasil Peru Chile Source: International Monetary Fund and Central Reserve Bank 1. MACROECONOMIC SOUNDNESS … Peru is an attractive market for foreign investment, which Register a 12,000 millions in 2012 Foreign direct investment – LATAM 2012 /1 (% GDP) Foreign direct investment flow 2002 - 2012 (US$ Billion) 12.24 8.46 6.92 10.6 8.23 6.2 6.43 5.49 4.3 3.9 3.7 3.47 2.58 2.16 2002 1.34 1.60 2003 2004 2005 1.7 2006 2007 Source: Central Reserve Bank of Peru (BCR) 2008 2009 2010 2011 2012 Chile Peru Colombia LAC Source: IDB 1/ Peru and Chile are closing figures Source: BCR and Central Reserve Bank of Chile Brazil Mexcio 1.1. MACROECONOMIC SOUNDNESS MACROECONOMIC STABILITY ESTABILIDAD MACROECONÓMICA Complemented with a dynamic international trade… Balance of Trade 2002-2012 (US$ million) 48,000 44,000 40,000 36,000 32,000 28,000 24,000 20,000 16,000 12,000 8,000 4,000 Exports Exportaciones Importaciones Imports Trade Balance Balanza Comercial 2002 7,714 7,393 321 Source: Central Reserve Bank of Peru 2003 9,091 8,205 886 2004 12,809 9,805 3,004 2005 17,368 12,082 5,286 2006 23,830 14,844 8,986 2007 28,094 19,591 8,503 2008 31,019 28,449 2,569 2009 26,962 21,011 5,951 2010 35,565 28,815 6,749 2011 46,268 36,967 9,301 2012 45,639 41,113 4,526 1. MACROECONOMIC SOUNDNESS ... all, in a frame of macroeconomic stability, Peru registers the lowest inflation rate in the region… CPI in Latin America: 2001-2012 (Annual Variation %) CPI – Latino America 2002- 2011 (Annual Average Variation %) 23.7 10.7 6.6 Venezuela Argentina Brasil 5.1 4.3 3.2 2.5 Colombia Mexico Chile Peru CPI – Latin America: Projections up to 2013 (Annual Average Variation %) 25.0 10.6 Source: Central Bank of Reserve of Peru, Ministry of Economy and Finances, CEPAL * Preliminary figures 2.0 3.0 3.1 3.9 Peru Chile Colombia Mexico 5.6 Brasil Argentina Venezuela 1. MACROECONOMIC SOUNDNESS Peru maintains a healthy level of debt… Public Debt– Latin America 2012 (% of GDP) Public Debt– Peru 2002-2012 (% of GDP) 64.9 46.6 46.9 42.6 39.3 43.8 44.9 México Argentina 32.3 28.5 25.9 26.0 34.2 23.5 21.4 19.7 19.8 11.2 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Central Bank of Reserve of Peru Chile Perú Colombia Source: FMI. Cifra de Perú, Source BCRP Brasil 1. MACROECONOMIC SOUNDNESS ...and has accumulated international reserves for a third of the GDP Net International Reserves (US$ Billion) Net International Reserves – Latin America 2012 (% GDP) 64.0 66.7 43 48.8 33 Korea Corea 15 15 16 13 14 México Mexico India India Brasil Brazil Chile Chile 17.3 Malaysia Malasia Thailand Tailandia Peru Perú 2013* 2012 2011 2010 Colombia Colombia As of February 15, 2013 Source: Central Reserve Bank of Peru 2009 2008 10 2007 2006 2005 12.6 14.1 2004 2003 2002 9.6 10.2 28 33.1 Indonesia Indonesia 27.7 27 Russia Rusia 44.1 31.2 45 2. FRIENDLY INVESTMENT ENVIRONMENT Peru offers a favorable legal framework for foreign investment: Non discriminatory treatment: Foreign investors receive the same treatment as local investors. Unrestrictive access to most economic sectors *. Free transfer of capital. Free competition. Guarantee for Private Property. Freedom to purchase stocks from locals. Freedom to access internal and external credit. Freedom to pay royalties. Network of investments agreements and member of ICSID and MIGA. Peru participates in the Investment Committee of the Organisation for Economic Cooperation and Development (OECD) – It promotes the implementation of the Guidelines for Multinational Enterprises. *Investments that require authorization: Located within 50 km in the frontier line and those destined to arms, ammunitions and explosive. Likewise, a principal local partner for investments in maritime cabotage as well as in air transport is required. 2. FRIENDLY INVESTMENT ENVIRONMENT Continuous effort to facilitate the establishment and operation of business Peru ranks second in the region in the improvement of business regulations. Venezuela Colombia 180 Guyana 114 Doing Business 2013 Surinam 45 164 Ecuador . 139 Brazil Peru 130 43 Bolivia 155 Paraguay 103 Uruguay Chile 89 37 Argentina 124 Position Country 1 Chile 2 Peru 3 Colombia 4 Uruguay 5 Paraguay 2. FRIENDLY INVESTMENT ENVIRONMENT Investment Agreements Peru has signed and currently in force Agreements for the Promotion and Reciprocal Protection of Investment and Trade Agreements of further scope that includes investment chapters that underpin our liberalization policy. Australia China* Korea* Malaysia Singapore* Thailand Japan * Trade agreements Canada* United States* Cuba El Salvador Argentina Bolivia Chile* Colombia Ecuador Paraguay Venezuela Germany Belgium and Luxemburg Denmark Spain Finland France Netherlands Iceland* Italy Liechtenstein* Norway Portugal United Kingdom Czech Republic Romania Sweden Switzerland* It has also signed agreements to avoid double taxation with Andean Community, Brazil, Chile and Canada. 3. OPEN TRADE AND MARKET ACCESS POLICY An open trade policy sustained over time Evolution of nominal tariff, effective and dispersal 1993 – 2013 18 16 16.3 9.0 Dispersión Arancelaria Arancel Nominal Arancel Efectivo 1_/ 8.0 14 12 7.0 12.3 6.0 10 5.0 8 4.0 6 3.0 4 3.2 2 1.1 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Dic. Dic. Dic. Dic. Dic. Dic. Dic. Dic. Dic. Dic. Dic. Dic. Dic. Dic. Dic. Dic. Dic. Dic. Dic. Dic. Feb. Notes: 1) Affective Tariff= (Amount of total revenue Avaloren CIF / Total Amount of CIF Imports)*100. 2)Tariff Dispersion= Standard Deviation 2.0 1.0 0.0 3. OPEN TRADE AND MARKET ACCESS POLICY Working to become a globalized economy, with preferential access to the world’s largest markets These countries stand for enlarged market of over 4 billion people with a joint GDP over US$ 56 billion 96% of Peruvian exports Agreements in force Agreements to become effective Agreements under negotiations 4. ATTRACTIVE SECTORS TO INVEST Peru offers a wide range of investment opportunities AGROINDUSTRY Lands with world-leading returns. It is projected that 90,000 ha for agricultural exports will double in 3 years. FISHING – AQUACULTURE Long fishing coastline (3,080 Miles) and “waters mirrors” which offer favorable conditions for the development of marine and inland aquaculture. FOREST TEXTILE - CLOTHING Presence of high biologic diversity and high value timber. 78.8 million ha of natural forest. Recognized quality of pima cotton. 1st worldwide producer of South-American camelid fiber: alpaca, vicuña. “Full package" producer. TOURISM Important cultural destination, great potential for ecotourism and adventure tourism with 8 prioritized destinations. REAL STATE The housing deficit affects to 25% of households (over to 2 million). There are various financing house programs ENERGY Great energetic potential: Ample availability of water resources and natural gas have allowed to meet the growing electricity demand. MINING A polymetallc mining country. Peru is one of the most important metal reserve worldwide. 13.6% of the land is subject to mining concessions, and only 1.1% of the land is taken for mining exploration and explotation TECHNOLOGY SERVICES The lowest labor costs per operator, US$ 270, in Latin America, which accounts for 60% of operating costs in call centers. PETROCHEMICAL Peru is the only sustainable source of natural gas in the South American Pacific area. Peru has oil fields that have not been explored 16 yet (26.6 million ha). PROJECTS PORTFOLIO ROAD CONCESSIONS: LONGITUDINAL DE LA SIERRA ROAD PROJECT, SECTION 2: Ciudad de Dios Cajamarca - Chiple, Cajamarca - Trujillo y Dv. Chilete - Empalme PE-3N Location: Cajamarca and La Libertad. CALLED Cities: Ciudad de Dios, Cajamarca, Chiple and Trujillo Description: The project comprises the initial regular maintenance (460 km), rehabilitation and upgrading works (90km) and the operation and maintenance of all the Section in order to obtain the required level of service. Approximated length of 875 km. Estimated investment*: US$ 552million Type of concession: Co-financed Competition factor: The lowest payment for Rehabilitation and maintenance (PRM), initial regular maintenance annual payment (PAMPI) and maintenance and operation annual payment (PAMO) that the concessionaire is willing to offer based on the maximum amount set by the State. Concession Term: 25 years Current status: The final version of the contract is published on Proinversion’s web site. Estimated award date: IV QT 2013. * VAT not included ROAD CONCESSIONS: LONGITUDINAL DE LA SIERRA ROAD PROJECT, SECTION 4: TO BE CALLED Location: Junín, Huancavelica, Ayacucho and Apurímac. Cities: Huancayo – Izcuchaca - Mayocc and Ayacucho , Description: The project comprises the rehabilitation and the upgrading works (117 km), regular initial maintenance (160 km) and operation and maintenance of all the Section, in order to obtain the required level of service. Approximated length of 640 km. Estimated Investment*: US$ 250 million Type of concession: Co-financed Current status: To be called the III QT of 2013. Estimated award date: II Q 2014. * VAT not included ROAD CONCESSIONS: LONGITUDINAL DE LA SIERRA ROAD PROJECT SECTION 5: TO BE CALLED Location: Cusco, Apurimac and Puno. Cities: Urcos – Combapata - Calapuja and Sicuani, Puno Ilave and Desaguadero. Description: The project comprises the regular initial maintenance, and operation and maintenance of all the Section, in order to obtain the required level of service. Approximated length of 423 km. Estimated Investment*: US$ 127 million Type of concession: Co-financed Current status: Proinversion requested to the Ministry of Transport and Communication update of the Evaluation report. Estimated award date : III QT 2014. * VAT not included HUANCAYO - HUANCAVELICA RAILWAY TO BE CALLED Location: Departments of Junín and Huancavelica. Description: The project includes the execution of the following works along the 128 Km of the existing track lines: Railway upgrade Changes to the tracks in critical sectors Purchase of rolling stock Reinforcement of 15 railway bridges Extension of 38 tunnels for standard gauge rolling stock (1,435 mm) Upgrades to the signaling and telecommunication systems Draining works The project includes the interoperability with Ferrocarril Central (railway service with standard gauge of 25 ton per axle) for the connection of high Andes regions with the port of Callao and the Santa Anita Market. The project has a great agricultural and mining potential. Estimated investment*: US$ 150 million Type of concession: Co-financing Concession Period: 30 years Current project status: Proinversión is currently waiting for the disbursement of funds to announce the public bid for the preparation of pre-investment studies and transaction advisor. LEYENDA Ferrocarril Central Ferrocarril Huancayo Huancavelica Ferrocarril Sur * VAT not included Estimated date of award: II QT 2014 SUPPLY SYSTEM OF LNG FOR DOMESTIC MARKET CALLED Location: Lima. Description: The project comprises the concession to design, finance, build, operate and maintain a supply system that includes: A reserve tank of liquid natural gas at or near the gas liquefaction plant of Pampa Melchorita (170 km south of Lima). Equipment's for re-gasification and dispatch natural gas for users in Lima and Callao in case of emergency situations. With a capacity of 130 MM cubic meters to supply the consumption for 7 days. Estimated Investment *: US$ 250 million. Type of concession: Self-sustained. Concession term: 20 years plus the build period (30 months). Competition factor: Directed related to the investment to be executed. Current status: The second version of the contract is under process. * VAT not included Estimated award date : IV QT 2013. 220 KV LA PLANICIE INDUSTRIALES TRANSMISSION LINE TO BE CALLED Location: District of La Molina Description: The project comprises the concession to design, finance, build, operate and maintain of a transmission line 16.6 Km long, and two circuits with a capacity of 400 MVA each. The final 5 Km of the line will be underground. Estimated investment*: US$ 56.6 million. Type of concession: Self-sustained Concession period: 30 years construction period (22 months). plus the Competition factor: Less Costs of Total Services as of the date of submission of the Proposal. Current project status: To be called. Estimated date of award: I QUARTER 2014. * VAT not included 220 KV FRIASPATA – MOLLEPATA TRANSMISSION LINE AND ORCOTUNA 220/60/13.8 KV SUBSTATION TO BE CALLED Location: Huancavelica, Ayacucho and Junin. Description: The project comprises the concession to design, finance, build, operate and maintain of a transmission line with an approximated length of 90.5 Km long and capacity of 152 MVA. Estimated investment*: US$ 43.5 million (line: US$30.8 million; substation: 12.7 US$ million) Type of concession: Self-sustained Concession period: 30 years plus the construction period (estimate: 32 months). JUNÍN HUANCAVELICA AYACUCHO Competition factor: Less Costs of Total Services as of the date of submission of the Proposal. Current project status: To be called. Estimated date of award: I QUARTER 2014. * VAT not included ENERGY SECURITY AND SOUTHERN GAS PIPELINE Location: Cusco, Arequipa and Moquegua. CALLED Description: The project comprises the concession to design, finance, build, operate, maintain and transfer of a natural gas distribution system. Includes the following components: Malvinas Camisea CUSCO Chiquintirca Quillabamba Reinforcement works of the of liquid and natural gas transport system. Includes strenghthening of pipelines from the separation plant of Malvinas to the compression station at Chiquintirca. Construction of natural gas pipelines and/or liquid gas pipelines from the existing natural gas transport system (between Malvinas and Chinquintirca) to Anta (Cusco region) able to supply natural gas to the future thermal plant of Quillabamba and south coast of the country. Construction of the Southern region gas pipeline from Anta to south coast of the country. Anta PUNO AREQUIPA MOQUEGUA Puerto Matarani Ilo TACNA Estimated Investment*: US$ 2 431 million Type of concession: Self-sustained Competition Factor: The lowest cost per transport service Current status: Enquires to the Bidding Documents. * VAT not included Estimated award date: I Q 2014 ENERGY NODE IN THE SOUTH OF PERU CALLED Location: Arequipa and/or Moquegua. Description: This project comprises the construction of two thermal plants of 500 MW each (+/- up to 20% of capacity). They will initially operate with Diesel b5 and then with natural gas once this is available in the southern coast of Peru. Project 1 to be nominally 500 MW (+/- 20%), to be commissioned on or before May 1, 2016. Term of the Project to be 20 years starting with first day of operation. Project 2 to be nominally 500 MW (+/- 20%) to be commissioned on or before March 1, 2017. Term of the Project to be 20 years starting with first day of operation. Type of concession: It will be carried out in the framework of L.D 674, through the following Agreements: Investment Commitment. Take or Pay. Ship or Pay. Power Purchase Agreements (PPA). • • Estimated Investment (VAT not included): US$ 800 Million. Competition Factor: Lowest price per installed capacity. Current status: Enquires to the Bidding Documents. Estimated award date: IV QT 2013. NEW INTERNATIONAL AIRPORT OF CHINCHERO – CUSCO CALLED Location: Chinchero and Huayllabamba districts, Urubamba Province , Cusco Region. Description: The project comprises the concession to design, build, finance, operate and maintain the new international airport of Chinchero – Cusco. Estimated investment*: US$ 556 million Type of concession: Co-financed Competition factor: To be defined Concession term: 40 years Current status: The pre investments studies on profile level are published on Proinversion’s web site. Estimated award date: IV QT 2013. * VAT not included GENERAL SAN MARTÍN PORT CALLED Location: Pisco, Ica Region. Panamericana Sur Red Vial N°6 BRAZIL Description: The project comprises the concession to design, build, finance, maintain and operate the General San Martin port. The initial works comprises. Dredging up to reach a depth of until -14 m Multipurpose-berth A storage yard to receive freight and other cargos Support facilities Energy Interconnection 2 mobile cranes Yard equipment Other equipment for general cargo Estimated investment*: US$ 101 million Concession term: 30 years Type of concession: Self-sustaining Current status: The fourth contract draft is published in Proinversion’s web site. * VAT not included Estimated award date: IV QT 2013 AMAZON WATERWAYS CALLED Location: Loreto and Ucayali. Description: The project comprises dredging works and ships transit signaling in Huallaga, Marañon, Ucayali and Amazonas rivers so as to ensure adequate navigability conditions among the Yurimaguas, Pucallpa and Iquitos ports. Estimated investment*: US$ 74 million Type of concession: Co-financed Concession term: 20 years Current Status: The Third version of the contract is published on Proinversions’ web site. Estimated award date: I QT 2014. * VAT not included CHILLÓN RIVER WATER SUPPLY WORKS TO BE CALLED POR CONVOCAR Location: Lima. Description: The project comprises the concession to design, finance, build, operate and maintain of dam works (40 MM cubic meters approximately) of Chillón river basin. Estimated investment* : US$ 45 million Type of concession: Self- sustained Concession term: 20 to 30 years Current status: In order to develop the previous studies the hiring of a consultancy was called. Estimated award date: III QT 2014. * VAT not included HEADWATER AND PIPELINE WORKS FOR THE SUPPLY OF DRINKING WATER TO LIMA Location: Junín and Lima. Description: I. Design, financing, construction, operation and maintenance of the following infrastructure works : TO BE CALLED POR CONVOCAR o Expansion of Pomacocha and Huallacocha Bajo dams (approx. 100 MCM) o Pomacocha – Río Blanco Diversion Works (approx. 10 km of trans-Andean tunnel) o Drinking Water Treatment Plant (5 m3/s)* P H Túnel Trasandino Planta Potabilizadora Huachipa Río Rimac Río Blanco Línea de conducción Ramal Sur o South Branch Pipeline (approx. 25,6 km) compensation reservoirs of 24,000 cubic meters. II. and 6 Operation and maintenance of the current facilities: o Huachipa water treatment plant I (5m3/s) o North branch pipeline (27.2 Km) and 5 reservoirs. Estimated investment : US$ 400 million. Modality: Self-sustainable. Concession term : 20 to 30 years. Current status: The process to update the studies and hire a transaction consultancy are to be called. Estimated award: IV QT 2014. MANAGEMENT OF THE INSTITUTO NACIONAL DE SALUD DEL NIÑO – SAN BORJA TO BE CALLED Location: Lima. Description: The project comprises the management of the Instituto Nacional de Salud del Niño - San Borja (INSN), which will provide a highly qualified service to pediatric patients and will also guarantee an adequate sustainability, operation and maintenance of the infrastructure, the facilities and the equipment. Its main features are: It counts with 242 hospital beds and 10 surgery rooms. The services provided are, among others: external consultation, hospitalization, cardiovascular intensive care. neurosurgery, neonatology and general pediatrics, burn unit, sterilization, organs transplant and genetics. The provision of the comprehensive service estimated for the project comprises: • Maintenance of the facilities and infrastructure • Maintenance of the clinical and not-clinical equipment • General services (laundry, kitchen, cleaning service and security) • Support to the diagnose (Laboratory, clinical pathology, blood bank and sterilization center) Modality: Co-financed Contract term: 15 years. Current status of the process: The Bidding Documents are under way. Estimated award date: IV QT 2013. PROJECTS IN PROCESS OF INCORPORATION… LINE 3 OF THE BASIC METRO NETWORK OF LIMA AND CALLAO Location: Lima and Callao. Description: The project comprises the concession to design, finance, build, provision of system equipment, electromechanical equipment, purchase of rolling stock, operation and maintenance of Line 3 of the Metro of Lima, with an approximate extension of 32 Km. Infraestructure: tunnel and viaduct. Estimated investment*: To be defined Type of concession: Co-financing Concession term: 35 years Current project status: In April, MTC requested the incorporation of the project to the promotion process, and submitted the Reference Terms to commission the pre-investment studies. Estimated date of award: II QT 2015. * VAT not included LINE 4 OF THE BASIC METRO NETWORK OF LIMA AND CALLAO Location: Lima and Callao. Description: The project comprises the concession to design, finance, build, provision of system equipment, electromechanical equipment, purchase of rolling stock, operation and maintenance of Line 4 of the Metro of Lima, with an approximate extension of 30 Km. Infraestructure: tunnel. Estimated investment: To be defined Type of concession: Co-financing Concession term : 35 years Current project status: In June, MTC requested the incorporation of the project to the promotion process, and submitted the Reference Terms to commission the pre-investment studies. Estimated date of award: III QUARTER 2015. * VAT not included TACNA - ARICA RAILWAY Location: Tacna- Peru and Arica - Chile Description: The project involves the development of 3 commercial hubs under a train/tram approach for urban and inter-urban transportation of passengers and goods, on the existing route and right of way. It includes: Urban transportation in the city of Tacna and, potentially, in Arica Inter-urban transportation between Tacna and Arica (60 Km) Transportation of mostly containerized cargo and cement between Zofratacna and the Peruvian dock in Arica with diesel-electric locomotive. The building of a railway museum in Tacna. Estimated investment*: About US$ 120 million Type of concession: Co-financing Concession Period: 30 years Current project status: Proinversión has prepared the Reference Terms to hire the consulting firm that will be responsible for preparing the pre-investment studies, as well as the transaction advisor. It is currently waiting for MTC to transfer funds to announce the public bids. Estimated date of award: IV QT 2015 * VAT not included OTHER PROJECTS IN PROCESS OF INCORPORATION… Project Sector Type Umbilical Cord Blood Bank and National Register of Bone Marrow Donors Health Government Initiative Cablecar of Choquequirao (Cusco) MVCS Government Initiative MINCETUR Government Initiative La Puntilla Fishing Complex www.proinversion.gob.pe contact@proinversion.gob.pe