INVESTMENT OPPORTUNITIES IN PERU January 2008 Why come

INVESTMENT OPPORTUNITIES IN PERU January 2008

Why come to PERU?

Indonesia and Peru today: Trade Peru’s main exports to Indonesia (2007): 1. Fishmeal and fish oil 2. Fresh grapes 3. Mangoes 4. Woven fabrics of silk Indonesia and Peru: total trade (millions of US$) Indonesia’s main exports to Peru (2007): 1. Rubber 2. Printers, copiers and fax machines 3. Cathode-ray tube monitors 4. Digital cameras and video camera recorders Source: SUNAT.

Main Investment Opportunities by Sectors Forestry Plantations Agribusiness and Agro exports Fishing and Aquaculture Textile and other manufactures Mining and Hydrocarbons Tourism and other services INFRASTRUCTURE

Agribusiness sector

Advantages of the Agribusiness and agro-exporting Sector Ø 1 st exporter of asparagus and 2 nd of paprika worldwide. Ø Specialization in cultivation of high-value fruits and vegetables. Ø High levels of productivity worldwide of the following products: Ø mango, asparagus, grape, avocado, sugar cane and apple. Ø 8 million hectares of fertile lands, high possibility to program crop periods to obtain the maximum price per season. Ø Diversity of ecosystems (84 life zones recognized) Ø Stable weather. Ø 20% growth of non-traditional agriculture exports (2006). Ø Skilled workforce available. Ø More information Source: Pro. Inversión.

Knitting and Sewing the future …

Textile Sector Advantages Ø High quality of Peruvian Pima cotton. Ø 1 st producer of fine Alpaca and Vicuna fiber. Ø Highly competitive products based on quality. Ø Development of Peruvian textile chain enabling rapid service to “full package” orders. Ø Opportunity to benefit from the ATPDEA – Andean Trade Promotion and Eradication of Drugs Act / Free Trade Agreement, to enter the USA apparel market. Ø More information Source: Pro. Inversión.

Fishing and Aquaculture Power

Fishing and Aquaculture Advantages Ø 1 st world producer of fishmeal and fish oil. Ø Hydro biological wealth and variety of microclimates Ø 8 million MT per year of exploitable biomass. Ø More than 2500 species in 3000 km of coast line zone. Ø Strategic location to access Asian market, great consumer of fishing products. Ø Large export growth for human consumption, sub-sector with great development potential. Ø Only 19% of usable species are currently processed and trade. Ø Promotion Law on the Development of Aquaculture. Ø More information Source: Pro. Inversión.

Forestry Sector

Forestry Sector Advantages Ø 2 nd Latin American country with larger extensions of natural woods and tenth position worldwide. Ø 53, 5 millions hectares of forest reserves and 6 million hectares for reforestation. Ø High-commercial valued woods: mahogany, tropical cedar, cumula (virola sp. ), among others. Ø Great exporter potential: Ø Estimated potential: US$ 4000 millions/annual. Ø Opportunity to export fine wood furniture and to invest in the packing industry (before the increase of exportations of fresh and frozen foods). Ø Potential to increase up to 17 times the current wood supply. Ø Forestry concessions to private production sector. Ø More information Source: Pro. Inversión.

Bet on the future … Tourism Sector

Tourism Sector Advantages • Cultural and historical wealth and great biodiversity make Peru a unique in its own around the world. • High potential to generate investment oriented to expand tourism services. • Possibility to develop private investment not only in tourism infrastructure, but also in providing traveler services. • Peru is promoting the northern tourist circuit which offers new investment opportunities. • Important increase of foreign arrivals. • Peruvian gastronomy is one of the most delicious and varied in the world. • More information Source: Pro. Inversión.

Investment opportunities through concessions SECTOR Energy Land Transport ESTIMATED INVESTMENT (US$ MM) 710 372 Sanitation 50 Ports 285 Agriculture 278 Airports 199 Hydrocarbons 60 Telecommunications Others TOTAL 50 183 * 2 187 *Decentralized (US$ 62 millions), Sugar processing companies (US$ 60 millions), support to private investment (US$ 25, 4 million ), mining (US$ 30, 0 millions) and tourism (US$ 5 millions). Source: Pro. Inversión.

Infrastructure: Investment Opportunities Costa Sierra Paita Port Road Infrastructure Airports Ports Sanitation Hydrocarbons Energy Telecommunications Iquitos Port Piura Salaverry Port Yurimaguas Port Road Network 4 Chimbote Port Pucallpa Port IIRSA Center Branch Supply drinking water for Lima Puerto Maldonado Electric Train Regional Pipelines Andahuaylas Ayacucho Pisco Port Nazca Marcona Port Arequipa Juliaca Ilo Source: Pro. Inversión. Ilo Port Tacna

Main infrastructure projects in development Project North Amazonas Corridor (960 kms) South Amazonas Corridor (2, 500 kms) ESTIMATED INVESTMENT (US$ MM) 230 1, 100 Callao Port 640 Road Network 5 140 Road Network 6 220 Lima Internat´l Airport 1, 000 Olmos Irrigation Project 220 North Regional Airports 180 TOTAL Source: Pro. Inversión. 3, 730

Investment plays an important role in the country’s economic growth and signals a promising future *Estimates. Source: Pro. Inversión.

Sustainable economic growth with annual forecasted rate greater than 7% Peru 8 7, 6 8, 3* (Annual variation %) GDP Growth 6, 7 6 5 5, 1 4 4 Developed 2 World 0 80 82 84 86 88 90 92 94 *Estimated for 2007 by the Ministry of Economics and Finance of Peru. Source: Pro. Inversión. 96 98 00 02 04 06

Annual Exports growth greater than 30% Accompanied by private investment growth (average annual % variation) 27, 434 Private investment grew 25, 5% in 2007 Source: Pro. Inversión.

Rise in the commercial exchange Increase in capital goods imports (Millions of US$) Capital goods for the industry Capital goods for Transport Equipment the Industry Others Source: Pro. Inversión.

Peru is progressively reducing its fiscal deficit (% of GDP) 2000 2001 2002 2003 2004 2005 2006 2007* *Estimated by the Ministry of Economics and Finance. Source: Pro. Inversión. By increasing its Central Government tax revenues

Public debt Domestic and external public debt 2002 -2007 e (as % of GDP) Forecasts Domestic External Source: BCRP.

…in a framework of macroeconomic stability… Exchange rate in Latin America (Index January 2001=100, vs. US$) Inflation in Latin America (Annual var. %) *Forecasted by the IMF. Source: Pro. Inversión. .

Just one step away from the Investment Grade Peru: Risk Rating Firms Opinion Firm Fitch (BB+) Strengths Weaknesses Healthy macroeconomic policies Narrow export base and vulnerability to metal prices Quick export, GDP and fiscal revenues growth High dollarization level albeit decreasing High NIR Appropriate government liability management (swaps, reprofiling, local currency issuing) S & P (BB+) Moody´s (Ba 2) Macroeconomic stability deepening Still evolving political institutions Strong commitment with fiscal stability Foreign vulnerability , although decreasing, due to high dollarization and foreign public debt. Responsible fiscal and monetary management High foreign debt ratios Total debt ratios under its comparable group (Ba) High debt rate in foreign currency Favorable growth and positive export perspectives Presence of a highly dollarized banking system Solid position concerning NIR

Peru offers a favorable legal framework foreign investment Non discriminatory treatment Ø Unrestrictive access to most economic sectors. Ø No performance requirements. Free transfer of capital Ø Free competition. Ø Guarantee for Private Property. Ø Freedom to purchase stocks from locals. Ø Freedom to access internal and external credit. Ø Freedom to pay royalties. Ø Network of investments agreements and member of ICSID and MIGA. Legal Framework: Constitutional provisions, “Law for the Promotion of Foreign Investment”, Legislative Decree N° 662, “Framework Law for Private Investment Growth”, Legislative Decree N° 757, “Law for the Promotion of Private Investment in Infrastructure and Public Service Works”, Approved by Supreme Decree N° 059 -96 -PCM. Source: Pro. Inversión.

Access to several markets EFTA Canada USA. Japan Korea China Singapore APEC China India Mexico: ACE 8 Thailand European Union CARICOM Central CAN America MERCOSUR ACE 58 Australia Chile: ACE 38 ACE Plus New Zealand Countries with ongoing agreements Countries with signed agreements Countries under negotiation process Countries close to start negotiations Countries for future negotiations Free market access to the United States and the European Union

Why come to Peru? GDP growth: 7, 6% annually (2006) • Sustainable growth since 2002 and forecasts above 7% annually 2008 -10. • Exports tripled in 5 years. • Investment is increasing 20% annually. Regional Hub/ APEC 2008 Venue • Third largest country in South America / 28 million inhabitants. • Located in the center of the South American Pacific Coast. Favorable investment climate: • Attractive legal framework for Foreign Direct Investment, based on freedom and equality. • First place in Latin America regarding the State receptiveness to investment (WEF). • Second place in Latin America for protecting Foreign Direct Investment (WB). Vast Natural Resources: Ores, hydrocarbons, available lands having proper climates, forests, 2 500 km of coast, thousands of lakes, snowcapped mountains. Economy committed to the trade integration process: • Preferential access to MERCOSUR, USA and EU. CAN, • 32 agreements on investment. Country risk below the Latin American average • Lowest inflation in Latin America and a very stable exchange rate (free). • Domestic capital market’s sound growth. • Fiscal surplus of 2. 9% (2007).

Peru Strong figures Strategic location Excellent opportunities Welcome to APEC CEO Summit 2008

Agribusiness Products Agribusiness exports (US$ MM) Productivity of the Peruvian Agribusiness Product Mango Asparagus Sugar Cane Grape Avocado Coffee Paprika pepper Exports of Agribusiness products (Millions of US$ FOB) Source: Pro. Inversión. Position by Product World Latin America 1 1 1 3 1 5 4 6 4 10 3 Agribusiness Exports Markets (2006)

Textile and Apparel Sector 1 600 Textile Exports Million US$ 1 400 1 200 1 000 800 600 400 200 0 19951996 19971998 199920002001 20022003 20042005 2006 Garmet Yams Fabrics. Textile fibers “Proximity to the USA and same time zone, provide Peruvian exporters shorter delivery and replenishing times” Textile Exports – 2005 Main Markets Source: Pro. Inversión.

Fishing and Aquaculture Advantages “El Niño” Phenomenon Species under-worked with high potential: Horse Mackerel, Giant Squid or “Pota”, among others. Ø World’s first exporter of fishmeal and fish oil since 1993. Source: Pro. Inversión.

Forestry Sector Peru is a country with excellent conditions forestry. 2 nd in Latin America and 1 oth worldwide thanks to its rich natural resources. Forestry Exports (US$ millions) • Forestry exports have increased from US$ 26 MM in 1996 to US$ 168 MM in 2005. This shows a 26% growth rate per year in the last 9 years. • Peru has potential to export US$ 3 bn per year in woods and byproducts. Source: Pro. Inversión.

Some figures… 2 002 700 000 Tourist entry (millions of people) 600 000 International Arrivals by 500 000 400 000 Continent 300 000 200 000 100 000 2 005 0 2 003 South America North America Europe Asia Oceania Years 2003 -2005 : registered arrivals Years 2006 - 2013 : projected arrivals 2 004 Central America International arrivals: main origin countries (in thousands of tourists) A wide range of attractions: handcrafts, celebrations and popular rituals, music and typical dances, as well as its gastronomy, make Peru an amazing place to visit. Source: Pro. Inversión. Country Chile USA Ecuador Bolivia Spain United Kingdom France Argentina Colombia Brazil 2 000 2 001 2 002 2 003 2 004 2 005 2 006 201 99 99 68 99 5 10 26 31 25 167 108 69 108 5 10 32 28 30 239 190 62 59 30 42 37 36 33 25 249 240 81 59 30 48 40 38 34 28 307 287 111 63 42 51 46 45 49 43 353 291 88 71 58 60 54 54 49 43 410 311 85 83 67 61 57 57 53 45