Peru: Latin America’s growth engine

In Latin America, investors tend to concentrate on Brazil or Mexico, but they’re overlooking one of the region’s “most consistent growth engines” – Peru, says Shuli Ren in Barron’s.

Since 2000, Peru’s economy has expanded at an average annual rate of 5.6%, compared to a South American average of 3.3%.

Peruvian stocks are largely a commodities play. The country produces large quantities of gold, silver, copper, oil and gas, and that means raw materials dominate the stock market index.

Sadly, the index has fallen along with metals prices, but the money from the raw-materials boom, along with sound economic management, is allowing the country to diversify, as James McKeigue of LatAm Investor, and MoneyWeek’s The New World free email, points out.

Much of the commodities cash has been channelled into infrastructure, thus helping other sectors to gain strength. Inflation is under control and there is a budget surplus.

All this means that the domestic economy is gathering strength, says Ren. Lending to businesses and consumers is growing fast, but there’s still scope for further growth: credit is only worth 30% of GDP in Peru, compared to 56% in Brazil and 98% in Chile. Moving away from credit, the retail sector is worth only 25% of GDP and that figure will rise fast.

JPMorgan estimates that the proportion of households entering the $10,000-and-above wage bracket will jump from 41% to 61% by 2018.

Two good plays on Peru, says McKeigue, are Credicorp (US: BAP), a highly profitable bank, and cement producer Cementos Pacasmayo (US: CPAC), a beneficiary of the infrastructure building push.

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

MoneyWeek magazine

Latest issue:

Magazine cover
Party's over for Putin

The only portfolio safe from Russia's rout

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Hedge fund manager Hugh Hendry: 'It felt like the sun rose only to humiliate me'

In a series of three short videos, Merryn Somerset-Webb talks to Hugh Hendry, manager of the Eclectica hedge fund, about everything from China to the US, Europe, and Japan.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


19 December 1932: BBC World Service begins

The first royal Christmas message by George V gave the fledgling World Service an early boost six days after it was founded in 1932.