In Peru: London

Roadshow

April, 2012

Luis Miguel Castilla

Minister of Economy and Finance

Peru – Key Investment Highlights

2

Highest growth in the region with

low inflation

Economic dynamism

across sectors

Exports at record levels

and increasing its

diversification

Healthy external debt

levels

Sound fiscal position allows countercyclical

policy

Reduced unemployment

and poverty

Outstanding economic

perspectives

Peru ranks among the fastest growing economies in the World and a low inflation

Source: MEF, IMF, Consensus Forecasts.

3

Real GDP per capita

(% cum ch 2008-2011)

LATAM: Inflation 2008-2011

(Average annual % change)

29.0

8.8

5.6 4.5 4.2 3.8 3.4

0

5

10

15

20

25

30

35

Venezu

ela

Arg

entina

Bra

zil

Mexic

o

Co

lom

bia

Chile

Peru

-14,6

-11,0

-7,0

-5,8

-5,2

-4,3

-3,9

-2,9

-1,9

-1,4

0,2

2,7

4,9

11,9

12,2

13,2

17,4

20,4

27,4

41,7

-25 -15 -5 5 15 25 35 45 55

Ireland

Greece

Italy

Spain

United Kingdom

Japan

Portugal

United States

France

Canada

Mexico

Germany

Russia

Korea

Brazil

Taiwan ROC

Indonesia

Peru

India

China

Low Debt and High Net International Reserves

Peru: Net Internacional Reserves1

(Millions of US$) LATAM: Net Internacional Reserves Feb-2012

(% of GDP)

4

Gross and Net Public Debt (% of GDP)

5

15

25

35

45

55

1999 2001 2003 2005 2007 2009 2011

Gross Debt Net Debt

8,180

17,275

0

10,000

20,000

30,000

40,000

50,000

2000 2006 2012

56,369

10.4 11.1

13.9 14.8

29.7

0

5

10

15

20

25

30

35

Colombia Mexico Brasil Chile Peru

1/ Up to April 4th 2012. Source: BCRP, Moody’s, MEF.

Debt profile: exchange and interest rate exposure

5

Source: DGETP-MEF

December 2006 December 2011

December 2006 December 2011

Public Debt Structure by Interest Rate (%)

Public Debt Structure by Currencies (%)

58.622.3

19.1

Dollars

Nuevo Sol

Others

46.1

47.1

6.8

86.9

13.1

Debt denominated in local currency has more than doubled in the last 5 years

Sharply decrease in debt attached to variable rates

58.6

22.3

Fixed

Variable

Peru Today: you can go Global or Sovereign

6

S/. Sovereign Global

• On Wednesday January 25th, Peru sold bonds for US$ 1.1 billion, the first offshore bid since 2010.

• US$ 500 million where sold in U.S. dollars, and US$ 600 million in Nuevos Soles. • The issue in Nuevos Soles represented 55% of the total issuing (an unexpected result). • The bond demand was 7.2 times the supply in dollars and 4.7 in Nuevos Soles.

Solid banking system and low exposure to European banks

1/ Capital Adequacy Ratio: risk weighted assets and contingent loans to regulatory capital. 2/. As of January, 2012. Source: BCRP, Goldman Sachs - Latin America Economic Analyst Nov. 2011.

7

European Banks as a Share of Total Bank Credit (% of total loans)

Dollarization Ratio2

(%)

Solvency indicator of banking1

(%)

Participation of European Banks in LATAM Financial System (% of bank capital)

48

30

22

0

10

20

30

40

50

60

Mexico Chile Peru

49

2927

0

10

20

30

40

50

60

Mexico Chile Peru

66

37

77

45

30

40

50

60

70

80

2002 2004 2006 2008 2010 2012

Liquidity Credit13.3

7

8

9

10

11

12

13

14

15

D-07 J-08 D-08 J-09 D-09 J-10 D-10 J-11 D-11

Banking Law

International Standard

J-12

International integration with the rest of the world fosters trade and investment

8

FTAs Breakdown By Status

Source: PROINVERSION, MINCETUR , MEF

Export boom and current account financed by long-term capitals

Total Exports (Millions of US$)

9

6 955

17 368

35 565

46 268

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

50 000

2000 2005 2010 2011

Current Account vs. FDI (% of GDP, Millions of US$)

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

-5

-4

-3

-2

-1

0

1

2

3

4

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Foreign Direct Investment (FDI) (right axis)

Current Account (lef t axis)

1/ This index takes into consideration: inflation, interest rate, exchange rate, current account balance, fiscal budget and public debt. Source:The Economist.

Egypt India Polonia Brazil Vietnam Pakistan Turkey Argentina Hungry South Africa Taiwan Venezuela Czech Republic Mexico Colombia Malaysia Thailand Philippines Hong Kong

Peru Russia Singapore South Korea Chile China Indonesia Saudi Arabia

0 10 20 30 40 50 60 70 80 90 100

Peru among the economies with better capacity to face a global slowdown

10

The Economist: Margin for Fiscal and Monetary Policies Maneuvering Index1

Limited space to adopt fiscal and monetary policies when facing a crisis. Ample space to adopt fiscal and monetary policies when facing a crisis.

Key Reforms Agenda

Tax reform to increase permanent tax revenues

Central Government Tax Pressure (% of GDP)

12

Tax burden objective: 18% of the GDP for 2016

11.111.5

12.812.7

13.614.1

14.514.5

13.6

12.812.4 12.312.1

12.913.113.6

15.0

15.615.6

13.8

14.8

15.515.315.615.8

9.0

10.0

11.0

12.0

13.0

14.0

15.0

16.0

17.0

18.0

19.0

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Average 1990/2009: 13.5%Average 2006/2011: 15%

18%

Our objective is to increase tax revenues without raising tax rates.

Public-Private Partnerships to close infrastructure gaps

Gap 2008 %

Transportation 13,961 37.0

Airports 571

Ports 3,600

Railways 2,415

Roads 7,375

Sanitation 6,306 16.7

Potable water 2,667

Sewage 2,101

Treatment of poluted water 1,538

Electricity 8,326 22.0

Generation 5,183

Transmision 1,072

Coverage 2,071

Natural Gas 3,721 9.9

Telecommunications 5,446 14.4

Landline telephone 1,344

Movil telephone 4,102

Total 37,760 100.0

Sector

Infrastructure Gap at 2008

(Millions of US$)

Source: The Global Competitiveness Report 2011-2012 (WEF), IPE.

13

Competitiveness Agenda for 2012-2013

14

Aim To step up the Peruvian competitiveness, through the increase of productivity and the improvement of the state efficiency

Strategic Lines :

(60 Goals)

i) Science, Technology and Innovation ii) Enterprise development, quality and

productive education

iii) Internationalization iv) Infrastructure

v)I nformation and Communication Technologies

vi) Facilitation of businesses

vii) Environment

Reporting

Results

July December

Budget by Results

Alignment of resources of the Technical Cooperation

Private Resources

Wider Private Pension Funds, Capital Markets and Financial System

Source: SMV, SBS

15

Private Pension Funds

• Deeper coverage, enhance efficiency and competition

Financial Inclusion

• Electronic money bill.

• Transparency and consumer protection

• Factoring financing for SME’s.

Wider Private Pension Funds, Capital Markets and Financial System

Source: SMV, SBS

16

• Alternative mechanisms to facilitate access to the Public and Private Offering Market: streamline the securities issuance process by implementing a Private Offering Regime and improving existent Public Offering regimes.

• Capital Market Internationalization focus on promoting the MILA (Latin American Integrated Market) by facilitating connectivity with other international markets.

• Broaden investment alternatives encouraging the securities issuance of medium size firms with mechanisms such as “My First Issuance” that will make the filing process more agile.

Capital Markets Reform

Wider Private Pension Funds, Capital Markets and Financial System

Source: SMV, SBS

17

• Simplify access for new Mutual and Investment Funds by reducing capital requirements, improving corporate governance practices and establishing segregation of duties between commercial and investment portfolio management.

• Listing of state-owned firms: Introduction of regulatory changes to allow public companies with at least 10% of private capital to operate under the private regime.

• Strengthen Corporate Governance by updating the Good Corporate Governance Practices Guide in accordance with international standards.

Capital Markets Reform

Wider Private Pension Funds, Capital Markets and Financial System

Source: SMV, SBS

18

Public Debt Market Development

• Develop a complete Sovereign Yield Curve:

Short Term: issuance of 3, 6 and 12 month Treasury Bills.

Medium & Long Term: issuance of 2015, 2017, 2023 and 2042 Treasury Bonds.

• Deeper Market Maker role to facilitate bond market internationalization.

• Introduce repo transactions with Treasury Bonds and Bills to guarantee minimum liquidity in financial distress scenarios.

• Create a Treasury Bond index to be used as a market risk free reference.

• Establish a retail Treasury Bond Market to favor financial inclusion and promote savings of small and medium size local investors.

Perspectives

Business confidence recovers and upward revision of GDP forecast for 2012

20

Hiring Expectations (Points)

Cement: Domestic Consumption

(Annual % change)

Peru’s Central Bank Forecasts: Real GDP 2012 (Annual % change)

Private Investment Expectations

(Points)

5.5

5.7

5.0

5.1

5.2

5.3

5.4

5.5

5.6

5.7

5.8

Forecast - Dec 2011 Forecast - Mar 2012

Source: BCRP

54

10

20

30

40

50

60

70

J-09 D-09 D-10 J-11 O-11 M-12

36

0

10

20

30

40

50

60

70

J-09 D-09 D-10 J-11 O-11 M-12

-10

-5

0

5

10

15

20

25

30

F-10 J-10 O-10 F-11 J-11 O-11 F-12

Private investment around 25% of GDP ensures a GDP growth of 6% per year

21

Source: MEF, BCRP.

Growth after Investment to GDP reached 25% (Annual % change)

Private and Public Investment

(% of GDP)

13.1

17.4 16.5 16.019.5 19.6 19.9 20.5 21.2 22.0

3.6

4.53.8

2.9

5.2 4.65.9 6.1

6.36.5

16.7

21.920.3

18.9

24.7 24.125.8

26.627.5

28.5

88-92 93-97 98-02 03-'07 08-'10 2011 2012 2013 2014 2015

Year when

Investment to

GDP reached

25%

Avg. Growth of

the next 5 years

World Avg. Growth

of the next 5 years

Chile 1989 7.3 2.6

Taiwan 1980 6.4 2.9

India 1990 5.1 2.6

Peru 2012 6.0 3.7

Country

Continue to promote private investment as the engine of growth

22

Announcement of Private Investments Projects in the next 2 years (Billions of US$)

Source: BCRP.

Private Investment Projects 2012–2013 (Millions of US$)

34

35

Dec-11 Mar-12

21 232

4 895

1 912 2 260

5 157

Mining & Hydrocarbons

Electricity Industry Infrastructure Other Sectors

23

LATAM: GDP 2012 (Annual % change)

Source: MEF, Consensus Forecasts.

LATAM: Inflation 2012 (Dec/Dec % change)

In 2012 Peru will remain as the fastest growing economy with the lowest inflation in the region

0

1

2

3

4

5

6

Peru Colombia Chile Venezuela Argentina Brazil Mexico

0

5

10

15

20

25

30

35

Peru Chile Colombia Mexico Brazil Argentina Venezuela

Ample growth and investment opportunities

24

Vehicle sales per capita 2010

(Vehicles per 1000 inhabitants)

Copper Production 2011 (Thousands of Fine Metric Tons)

Source: Sunat, UNWTO, Geological Service of USA, AEADE, ARAPER, ASBANC, FELABAN, CAVEM, ASOPARTES, CCL, Ripley FELABAN, SBS, Superinterdency of Banks and Financial Institutions (Chile), Apoyo, Maximize

Supermarkets’ Market Share 2011 (%)

Tourist arrivals 2011

(Millions of persons)

Banking System credits 2010

(% of GDP)

Exports 2010 (Billions of US$)

Vehicle sales per capita 2011

(Vehicles per 1,000 inhabitants)

Banking System Credit 2011

(% of GDP)

3.2

8.7

0

1

2

3

4

5

6

7

8

9

10

Peru Chile

0.4

4.9

0

1

2

3

4

5

6

Peru Chile

Agro Wood & paper

27

45

69

10

30

50

70

Peru Brazil Chile

1,220

5,420

0

1000

2000

3000

4000

5000

6000

Peru Chile

1.1

2.52.7

3.0

5.7

0

1

2

3

4

5

6

Ecuador Peru Colombia Chile Argentina

4.8

7.1

9.8

19.4

0

5

10

15

20

25

Perú Colombia Ecuador Chile

17

42 44

51

61

0

10

20

30

40

50

60

70

Peru Brazil Argentina Colombia Chile

Main Challenge:

Social Inclusion

Main challenge: Poverty erradication

26

Total Poverty by Districts (% of population)

Source: INEI

0-30%

30-60%

More than 60%

In 2010, poverty remains in 54% of the districts.

Total Poverty 2004 - 2010

(% of population)

48.2

20.0

83.4

61.058.7

30.8

0

10

20

30

40

50

60

70

80

90

2004 2010

Urban

Rural

Total

Improvement in the quality of life

27

Source: World Health Organization,ENDES, PpR, INEI, OECD. 1/ The OECD Programme for International Student Assessment (PISA). 2/ Average of all students average score in maths, language and science.

Gaps in access to services 2010 (% of population without services)

40.4

56.0 59.1

14.9

26.8 27.0

0

10

20

30

40

50

60

70

Electricity Sanitation Drinking water

Rural National

Chronic Undernourishment and Anemia

(% of children below 5 year old)

0

10

20

30

40

50

60

70

2000 2005 2007-2008 2009 2010 2011

Chronic Undernourishment

Anemia

International Student Assessment PISA1 Scores 2009 (Average Score2)

439

427420

401 399 396

369 368

320

340

360

380

400

420

440

460

Chile Uruguay Mexico Brazil ColombiaArgentina Panama Peru

Extreme Poverty 2004 - 2010

(% of population)

5.7

1.9

41.6

23.8

16.4

7.6

0

5

10

15

20

25

30

35

40

45

2004 2010

Urban

Rural

Total

Notes: The above table shows ranking of countries for which the Human Opportunity Index has been constructed. Source: World Bank, UNDP, Bloomberg 1/ http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/LACEXT/0,,contentMDK:21915362~pagePK:146736~piPK:146830~theSitePK:258554,00.html/ date 08/03/2012

28

LATAM: WB Human Opportunity Index vs. Doing Business Index (2012) vs. Investment Grades

The challenge is to have a country with equal opportunities for everyone

Human Opportunity

IndexDoing Business Index 2012 Investment Grade S&P

1 Chile Chile 1 Chile A+

2 Argentina Peru 2 Peru BBB

3 Costa Rica Colombia 3 Mexico BBB

4 Venezuela, RB Mexico 4 Brazil BBB

5 Uruguay Panama 5 Colombia BBB-

6 Mexico Jamaica 6 Panama BBB-

7 Colombia Uruguay 7 Uruguay BB+

8 Ecuador Guatemala 8 Guatemala BB

9 Jamaica Paraguay 9 Costa Rica BB

10 Brazil Dominican Republic 10 Paraguay BB-

11 Dominican Republic Argentina 11 Dominican Republic B+

13 Paraguay Nicaragua 12 Venezuela B+

14 Peru Costa Rica 13 Argentina B

16 El Salvador Brazil 14 Honduras B

17 Honduras Honduras 15 Jamaica B-

18 Guatemala Ecuador 16 Nicaragua B-

19 Nicaragua Venezuela, RB 17 Ecuador B-

In Peru: London

Roadshow

April, 2012

Luis Miguel Castilla

Minister of Economy and Finance