foro xxiii : perspectivas economicas para el 2014 (santander)
TRANSCRIPT
XXXII Foro: “Las perspectivas económicas para el 2014“
Lima – December, 2013
p.1
Section 1
The Macro Outlook
p.2 The Global Scenario: Muddling Through
US and Europe: GDP Growth
Source: Santander
Commodity Price Evolution
Tapering by the Federal Reserve China: GDP Growth
0
10
20
30
40
50
60
70
80
90
4Q13 2Q14 4Q14 2Q15 4Q15
Hawkish
Base case
Dovish
0.0
0.5
1.0
1.5
2.0
2.5
3.0
4Q13 2Q14 4Q14 2Q15 4Q15
Hawkish
Base case
Dovish
p.3
Weight of LatAm in Different Parameters (% of World)
Sources: IMF, World Bank, Bloomberg and Santander
7.2%
7.1%
4.7%
3.3%
2.6%
2.1%1.8%
GDP-PPP Population Market Capitalization
% in MSCI ACWI
Listed Companies
% of Global Funds AUM
Traded Volume
The Weight of Emerging Markets and LatAm in the World
Weight of EM in Different Parameters (% of World)
p.4
Sources: IMF, World Bank, Bloomberg and Santander
The Weight of Emerging Markets and LatAm in the World
p.5
Sources: IMF, World Bank, Bloomberg and Santander
The Weight of Emerging Markets and LatAm in the World
p.6
Sources: IMF, World Bank, Bloomberg and Santander
The Weight of Emerging Markets and LatAm in the World
p.7
Source: IMF, World Bank, Bloomberg and Santander
Latin America: A Varied Group of Peculiar Emerging Economies
Private Consumption
34.8
52.0
56.5
57.3
57.3
58.0
60.0
60.5
60.9
63.0
64.7
68.6
0.0 20.0 40.0 60.0 80.0
China
Russia
India
Argentina
Chile
EU 27
Peru
Japan
Colombia
Brazil
Mexico
USA
p.8
Weight of LatAm in Different Parameters (% of World)
Sources: IMF, World Bank, Bloomberg and Santander
7.2%
7.1%
4.7%
3.3%
2.6%
2.1%1.8%
GDP-PPP Population Market Capitalization
% in MSCI ACWI
Listed Companies
% of Global Funds AUM
Traded Volume
The Weight of Emerging Markets and LatAm in the World
Weight of EM in Different Parameters (% of World)
p.9
Source: Santander , Bloomberg as of December 6th, 2013
(1) Based on Santander rated universe of 217 LatAm companies
Country Mk cap
(MM USD)
Trading Volume ADTV (3M)
Local ADR Local ADR
Argentina 74,085 16.1 69 28.0 100.0
Brazil 717,588 2,930.0 1,580 3,003.0 1,776.0
Chile 183,966 123.0 98 149.4 98.6
Colombia 188,990 75.7 33 86.7 24.7
Mexico 351,237 956.0 484 946.5 476.5
Peru 41,900 7.0 140 10.4 121.0
Latin America market liquidity – country view
LatAm Market Liquidity
p.10
Gov. Spending
Source: IMF, World Bank, Bloomberg and Santander
Latin America: A Varied Group of Peculiar Emerging Economies
Private Consumption
34.8
52.0
56.5
57.3
57.3
58.0
60.0
60.5
60.9
63.0
64.7
68.6
0.0 20.0 40.0 60.0 80.0
China
Russia
India
Argentina
Chile
EU 27
Peru
Japan
Colombia
Brazil
Mexico
USA
13.2
19.0
19.2
14.9
13.1
21.7
10.2
20.4
16.2
20.0
11.8
18.8
0.0 10.0 20.0 30.0
China
Russia
India
Argentina
Chile
EU 27
Peru
Japan
Colombia
Brazil
Mexico
USA
47.7
19.0
30.4
23.9
23.5
19.2
25.4
20.0
22.2
17.0
23.8
15.7
0.0 50.0 100.0
China
Russia
India
Argentina
Chile
EU 27
Peru
Japan
Colombia
Brazil
Mexico
USA
26.7
28.0
14.1
18.4
32.9
16.4
23.1
15.0
14.2
11.0
28.9
13.4
0.0 20.0 40.0
China
Russia
India
Argentina
Chile
EU 27
Peru
Japan
Colombia
Brazil
Mexico
USA
22.4
18.0
20.2
14.5
26.8
15.2
18.7
15.9
13.5
11.0
29.2
16.5
0.0 20.0 40.0
China
Russia
India
Argentina
Chile
EU 27
Peru
Japan
Colombia
Brazil
Mexico
USA
Investments Exports Imports
4.3
10.0
-6.1
3.9
6.1
1.2
4.4
-0.9
0.7
0.0
-0.3
-3.1
-10.0 -5.0 0.0 5.0 10.0 15.0
China
Russia
India
Argentina
Chile
EU 27
Peru
Japan
Colombia
Brazil
Mexico
USA
Net Exports
p.11 LatAm Economies: Fundamentally Sound …
Source: Santander
Leverage, 2012 (as % GDP) Fiscal Deficit, 2013E(% GDP)
International Reserves (% Gov. Debt) Unemployment Rate, 2013E
p.12 LatAm, Under-Leveraged in a Deleveraging World
DM: Total Debt Evolution EM vs DM: Low Leverage Ratios
Source: Santander
p.13 LatAm Low Private Debt Levels Persist Despite Growth
13
Source: IMF, BIS, central banks, governmental entities and Santander estimates
Private Credit (% of GDP) Mortgages (% of GDP)
-20%
20%
60%
100%
140%
180%
Japan US Germany China Chile Brazil MexicoColombia Peru
Consumer
Mortgages
Corporates
3%
4%
5%
6%
7%
10%
15%
18%
20%
23%
40%
41%
47%
54%
64%
77%
85%
Russia
Peru
Colombia
Brazil
India
Mexico
China
EM Av.
Chile
Italy
Japan
France
Germany
DM Av.
Spain
US
UK
p.14 LatAm Economies: … But Some Concerns in the Horizon
Investments (as % of GDP)
Source: Santander
Real Wages vs Productivity
Inflation 2013E (%) Current Account 2013E (% GDP)
12%
15%
18%
21%
24%
27%
30%
33% AR BZ CH CO
MX PE UR
p.15 The Constantly Growing Middle Class
15
Source: IMF, SEDLAC and Santander estimates
Population Segmentation Population Segmentation Evolution
p.16 Financial Markets, Quick to Embrace but also to Exit
LatAm: Equity Markets
Source: Bloomberg, FactSet and Santander.
16
LatAm: Government Bonds
LatAm: Commodities vs Equity Markets LatAm: FX
0
100
200
300
400
500
600
0
200
400
600
800
1000
1200
1400
1600
1800
2000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
LatAm Equity/ World Commodity Index
p.17
Section 2
Equity Markets & Fund Flows
p.18
Source: Santander, EPFR Global and Bloomberg as of December 16th, 2013
(1) Data as of October 2013
Weekly Fund Flows to LatAm LTM (in US$ MM)
Main Global indices performance (in US$) Latin America main indices performance (in US$)
Fund Flows as % of AUM by Latam Market(1)
6% 8%
24%
11% 8%
-5% -2%
27%
9%
-2%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Brazil Chile Colombia Mexico Peru
2012 2013YTD
5.5%
-6.1%
-14.0%
-19.1% -21.9%
7.3%
10.8%
16.5% 18.3%
5.4%
20.2%
9.5%
15.1%
-1.2%
-16.8%
Dow Jones FTSE EuroStoxx MSCI Asia MSCI LatAm
2011 2012 2013YTD
-27.1%
-14.7% -19.6% -13.1%
-23.6%
-2.0%
27.0% 27.0%
11.7% 11.6%
-28.2%
-4.2%
-17.4%
-31.8%
-23.0%
Brazil Mexican Colombia Peru Chile
2011 2012 2013YTD
LatAm: Underperforming and Outflows
-1,500
-1,000
-500
0
500
1,000
1,500
D-12 F-13 A-13 J-13 S-12 N-13
Fund Flows 4 per. Mov. Avg. (Fund Flows)
p.19 QE Liquidity Benefited Most GEM Dedicated Funds
19
GEM Dedicated Funds (US$ millions and % of AUM)
Source: EPFR Global, MSCI, Bloomberg and Santander
LatAm Funds (US$ millions and % of AUM)
0%
20%
40%
60%
80%
100%
120%
140%
D-08 J-09 D-09 J-10 D-10 J-11 D-11 J-12 D-12 J-130
100,000
200,000
300,000
400,000
500,000
600,000
700,000
AUM (LHS) Cumulative Flows (RHS)
-80%
-60%
-40%
-20%
0%
20%
40%
60%
D-08 J-09 D-09 J-10 D-10 J-11 D-11 J-12 D-12 J-130
10,000
20,000
30,000
40,000
50,000
60,000
AUM (LHS) Cumulative Flows (RHS)
p.20
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
J-13 F-13 M-13 A-13 M-13 J-13 J-13 A-13 S-13
EM DM
Fund Flows: The ‘Big Rotation’ Has Started
20
US: Flow of Funds: Fixed Income vs Equity
Sources: ICI, Lipper, Fitch, EPFR Global, Bloomberg and Santander estimates..
18.1%
1.6%
0
0.5
1
1.5
2
2.5
3
3.5
16
17
18
19
20
21
22
23
24
25
26
J-05 O-05 J-06 A-07 J-08 O-08 J-09 A-10 J-11 O-11 J-12 A-13
Weight of LatAm in GEM Fund Weight of LatAm in Global Funds
Global: Flow of Funds in Credit
Weight of LatAm in Global and GEM Funds Cumulative Flows to EM vs. DM, 2013YTD
p.21 Fund Flows to Peru – emerging as an alternative to Brazil & Mexico
Weight of accumulated inflows by Country Fund Flows to Peru: Evolution since 2007 (Base 1)
p.22
LatAm ECM activity since 2007(1) (in US$ m)
7,062 13,062
8,486 8,248 11,162 12,240
17,065
15,757 17,980 21,313 11,787
17,257 772
1,057 7,158 1,789
1,261
548
26,467
24,898
29,876 31,350 24,210 30,045
2008 2009 2010 2011 2012 2013YTD
IPO Follow-On Convertibles Petrobras Offering Total
Souce: Dealogic, Santander as of December 16th, 2013
(1) Includes FOs > US$ 100 MM, IPOs > US$ 50 MM
55 Deals
Latam current pipeline for equity deals
22 Deals 35 Deals 60 Deals 62 Deals 51 Deals
Date Country Sector Issuer Type Size
($ MM)
Range / Sub.
Price (Local) Expected Date
19-Nov-13 Colombia Finance Banco de Bogota FO 514 63,000.00 16-Dec-13
25-Nov-13 Colombia Finance Bancolombia FO 1,414 - TBD
1-Nov-13 Colombia Finance Grupo Aval FO 1,250 - TBD
21-Oct-13 Mexico Real Estate/Property Fibra Prologis IPO - - TBD
23-Aug-12 Brazil Auto/Truck AutoBrasil Participacoes IPO - - TBD
23-Jan-13 Paraguay Oil & Gas Dahava Petroleos SAECA IPO 100 - TBD
17-May-13 Chile Retail Farmacias Ahumada FO 376 - TBD
20-Aug-13 Brazil Auto/Truck Sascar Participacoes IPO - - TBD
27-Aug-13 Argentina Computers & Elect Globant SA IPO 86 - TBD
LatAm Primary Markets: More Active than Last Year
p.23
Source: Bloomberg and Dealogic. Includes IPOs > 50 MM as of December 16th, 2013
LatAm - Priced IPOs > $50 MM (2013 YTD)
Mexico taking Brazil position in Primary Markets
Date Countr
y Sector Issuer Type
Size
($ MM)
Free Float
(%)
Offer Price
(Local) Range
Rel. to
Midpoint (%)
Aftermarket Performance (%)
1 Day 1 Week 1 Month Since Offer Rel. to MSCI
Latam
6-Dec-13 Brazil Professional
Services CVC Brasil Operadora IPO 226.87 26.02 16 18.00 - 22.00 -20 -3.13 -3.13 - -3.13 -1.95
25-Oct-13 Brazil Professional
Services Grupo Ser Educacional SA IPO 245.37 25.04 17.5 19.50 - 23.50 -18.6 -1.83 10.29 22.29 25.14 33.53
24-Oct-13 Brazil Professional
Services Gaec Educacao (Anima) IPO 215.06 31.27 18.5 16.50 - 22.00 -3.9 3.84 7.57 16.76 11.08 18.77
15-Oct-13 Mexico Food & Beverage Grupo Industrial Lala SA de
CV IPO 938.81 18.46 27.5 23.50 - 27.50 7.84 7.6 7.2 6.07 4.36 12.31
8-Oct-13 Mexico Real Estate/Property Fibra Danhos IPO 396.02 21 26 26.00 - 28.00 -3.7 -1.423076923
-
3.76923076
9
-5.54 -5.15 -0.01
17-Sep-13 Mexico Transportation Volaris SA IPO 398 33 12 12.00 - 14.00 -7.69 16.75 21.08 17 21.33 26.69
23-Jul-13 Mexico Real Estate/Property Fibra Shop IPO 378.97 76.78 17.5 17.50 - 19.50 -5.41 -0.74 -0.29 -0.06 -5.77 5.04
17-Jul-13 Brazil Utility & Energy CPFL Energias Renovaveis
SA IPO 403.94 16.34 12.51 12.51 - 15.01 -9.08 -3.916866507 -7.99 -0.08 3.84 -15.67
13-Jun-13 Mexico Dining & Lodging Hoteles City Express SAB
de CV IPO 208.2507 40 24 24.00 - 29.00 -9.43 -6.38 -8.46 -4.38 -10.5 -6.12
29-Apr-13 Brazil Auto/Truck Iochpe-Maxion CONV 159.2 - - - - - - - - 45.29
25-Apr-13 Brazil Insurance BB Seguridade
Participacoes SA IPO 5046.63 30 17 15.00 - 18.00 3.03 -2.35 4.41 7.94 42 38.94
25-Apr-13 Brazil Transportation Smiles SA IPO 497.92 39.85 21.7 20.70 - 25.80 -6.67 5.99 9.91 16.82 47.88 -9.73
22-Apr-13 Brazil Utility & Energy Alupar Investimento SA IPO 368.48 19.62 18.5 18.50 - 21.50 -7.5 -5.41 -2.22 1.03 -15.41 -33.13
15-Apr-13 Brazil Chemicals Biosev SA IPO 355.49 22.56 15 I 0.25 15 | 0.01 - 2.00 0 -14.3333 -12.67 -6.67 -35.8 -21.33
26-Mar-13 Mexico Construction/Building OHL SA (OHL Mexico
Underlying) CONV 388.98 - - - - - - - - 51.21
26-Mar-13 Mexico Utility & Energy Ienova (Sempra) IPO 519.6 16.85 34 30.00 - 34.00 6.25 16.53 15.71 27.41 61.38 -10.46
21-Mar-13 Mexico Real Estate/Property Fibra Terra IPO 663.4 77.61 28 28.00 - 32.00 -6.7 -2.21 -1.14 2.11 -16.21 -13.62
19-Mar-13 Mexico Real Estate/Property FIBRA INN IPO 316 92.5687536
6 18.5 17.25 - 19.75 - 2.76 1.57 10.92 -9.41 -3.57
12-Mar-13 Mexico Retail Grupo Sanborns IPO 831 16 28 27.00 - 32.00 -5.08 1.64 -0.21 0 -1.11 49.07
7-Feb-13 Brazil Computers &
Electronics Linx IPO 230 37.89 27 23.00 - 27.00 8 18.52 15 17.07 84.19 -4.92
Total $ 12,788
Average $ 639 36 (4.6) 1.8 2.9 7.6 11.0 8.0
Median $ 384 28 (5.4) (1.1) 0.7 6.1 1.4 (1.0)
p.24
Source: Bloomberg and Dealogic. Includes FOs > 100 MM as of December 16th, 2013 (1) Excludes Block Trades (2) Denotes Chilean Rights Offerings
LatAm - Priced Follow-On Offerings > $100 MM (2013YTD)(1)
Peru’s Graña y Montero Follow On
Date Country Sector Issuer Type Size
($ MM) % of Co. Sold Last Close
From Anncmt to
Offer
(%)
Aftermarket Performance (%)
1 Day 1 Week 1 Month Since Off. Rel. to MSCI
Latam
12-Dec-13 Brazil Retail Via Varejo SA FO 1066.58 25 25.60 - 33.60 -22.3 - - - - -
12-Dec-13 Mexico Finance Corporacion Actinver FO 62.88 10.06 14.6 -4.19 1.43 - - 1.43 1.24
22-Nov-13 Chile Finance Quinenco SA FO 670.29 23.66 1329.9 -13.39 - - - - -
6-Nov-13 Colombia Transportation Avianca Holdings SA FO 408.52 21.76 16.6 -18.92 -6.67 -1.67 -4.2 -4.33 1.52
16-Oct-13 Chile Food & Beverage Comp. Cervecerias Unidas -
CCU (2) FO 356.72 7.43 6702.6 - - - - - -
16-Oct-13 Mexico Finance Grupo Financiero
Interacciones FO 281.88 22.53 74 -17.57 0 0 -0.41 -4.54 4.25
16-Oct-13 Brazil Metal & Steel Tupy SA FO 208.68 18.53 18.59 -29.94 2.86 5.09 6.29 17.77 26.56
24-Sep-13 Chile Transportation CSAV (2) FO 329.64 43.64 0.05 - - - - - -
13-Sep-13 Chile Food & Beverage Comp. Cervecerias Unidas -
CCU FO 292.83 6.62 26.68 -5.93 1.54 3.46 5 -8.96 -4.92
26-Jul-13 Chile Finance Grupo Security (2) FO 113 9.47 194 - - - - - -
24-Jul-13 Peru Construction/Building Grana y Montero SAA FO 412.77 14.89 22.24 -1.72 0 -0.99 -5.3 -7.24 -5.10
16-Jul-13 Mexico Finance GF Banorte FO 2177.82 14.33 72.21 -12.32 11.51 15.55 17.08 32.07 32.07
9-Jul-13 Mexico Transportation OMA FO 185.16 15 41.68 -8.74 0.78 2.43 21.43 11.7 7.92
25-Jun-13 Mexico Finance GF Inbursa SAB de CV FO 824.31 6.35 26.32 -11.5 3.46 15.31 16.96 31.54 27.24
25-Jun-13 Mexico Real Estate/Property Vesta FO 186.63 22.57 23.67 -13.63 10.44 11.33 18 3.96 -0.34
20-Jun-13 Mexico Construction/Building OHL Mexico SAB de CV FO 470.99 12.32 29.82 -15.25 -1.34 5.1 21.69 15.45 11.53
12-Jun-13 Chile Forestry & Paper Empresas CMPC SA (2) FO 184.45 6.26 1695.4 - - - - - -
5-Jun-13 Brazil Real Estate/Property Iguatemi SA FO 176.7 7.41 24.02 -2.08 2.13 0.43 -5.23 -2.72 4.88
30-May-13 Mexico Real Estate/Property FibraHotel FO 335.26 36.62 26.5 -3.52 5.61 7.98 2.08 -19.56 -8.81
9-May-13 Colombia Construction/Building Cementos Argos SA FO 764.73 13.65 22.91 -9.29 5.974 4.52 3 9.46 25.99
24-Apr-13 Brazil Professional Services Abril Educacao SA FO 252.05 4.92 45.88 -8.07 -1.13 -4.44 0 -26.89 -12.02
18-Apr-13 Brazil Real Estate/Property BHG SA Brazil Hospitality
Group FO 165.01 30.61 18.21 -17.18 -4.74 -2.86 1.37 -18.29 -4.88
28-Mar-13 Chile Utility & Energy Enersis (2) FO 2375 16 182.41 - - - - - -
27-Mar-13 Brazil Real Estate/Property Multiplan FO 259.7 4.78 58.4 6.03 0 -2.79 -2.52 -16.22 0.52
15-Mar-13 Chile Retail Cencosud (2) FO 1634 11.83 2930.5 - - - - - -
21-Feb-13 Chile Finance Banco de Chile (2) FO 464 3.75 69.82 - - - - - -
30-Jan-13 Mexico Consumer Products Organizacion Cultiba FO 269 14 39.5 -6.67 0 0 0 -24.83 -5.54
30-Jan-13 Argentina Agribusiness Adecoagro FO 111 12 8.18 -11.11 6.25 6.25 0 -3.25 16.04
29-Jan-13 Mexico Real Estate/Property Fibra Uno FO 1732 38 38.32 4.52 8.49 8.14 8.19 12.76 32.95
23-Jan-13 Brazil Professional Services Estacio Participacoes FO 326 17 42.75 7.28 1.9 5.07 14.55 47.57 67.51
16-Jan-13 Chile Finance Corpbanca (2) FO 159 4 21.11 - - - - - -
26-Dec-12 Colombia Construction/Building Constructora Conconcreto FO 137 39 1340 4.65 0 -0.74 0.74 -0.74 15.93
Total $ 17,394
Average $ 544 16.7 (5.1) (8.8) 2.2 3.7 5.7 2.1 10.7
Median $ 309 14.2 (4.0) (9.0) 1.5 3.5 2.1 (1.7) 4.6
p.25
Section 3
2014 Perspectives
p.26 LatAm GDP Growth: Brazil Bucks the Trend
LatAm GDP Growth (YoY, %)
Source: Santander
1.9
0.9
5.6
4.0 3.8
6.3
3.0
2.3
4.2
3.7
1.2
5.3
0.5
1.7
3.9
4.5
3.0
5.7
1.6 1.5
4.5 4.2
4.0
5.5
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Argentina Brazil Chile Colombia Mexico Peru
2012 2013E 2014E 2015E
p.27
27
12-Month-Forward P/E vs. EPS CAGR 13-15E
Source: Companies, FactSet and Santander
LatAm Fairly Valued vs. Other Global Markets
S&P 500
STOXX 600
Nikkei 225
MSCI LatAm
MSCI EM Asia
MSCI EM Europe
4
6
8
10
12
14
16
18
7% 9% 11% 13% 15% 17% 19%
12
M F
orw
ard
P/E
EPS CAGR 13-15E
p.28
Recent upgrade of Peru to Overweight by Santander LatAm Sector recommendations
Highlights: Upgrading Peru to Overweight
p.29 Highlights: Upgrading Peru to Overweight
1. Peru to continue growing at the fastest pace in LatAm in 2014 (5.6%) and is the best vehicle to play the rebound in
global growth: i. Investments should continue to drive growth in the country, with 10.0% growth rates driven by mining and infrastructure sectors;
ii. Exports should rebound strongly from -2.6% in 2013 to 5.0% in 2014, given the stabilization in commodity prices and improving
global growth;
iii. We continue to see the inflation scenario remaining benign, at 2.5-3.0%;
iv. Although the country’s current account deficit remains elevated (4.9% of GDP) in current liquidity conditions, we believe this is
manageable due to Peru’s high international reserves (30.6% of GDP), long maturity of external debt (12 years), and
increased mining production that will place downward pressure in the upcoming years.
2. Concerns about the mining sector’s effect on GDP growth are overdone, as we see: i. the stabilization in metal prices;
ii. export revenue growth will increasingly come from volume increases vs. price increases (the country intends to double copper
output by 2016); and
iii. Peru remains one of the most cost-efficient global metal producers (92.7 cents/lb for copper)
3. Peru’s equity market currently trades at an excessive equity yield gap compared with the rest of LatAm, which more than
prices in the risk of a growth slowdown in China and lower commodity prices. Current valuations (12-month-forward P/E of
13.3x and equity yield gap of 3.2%) have been driven by risk aversion (QE tapering liquidity implication for EM and fears of
end of commodity super-cycle) vs. underlying fundamentals of the country’s equities. Companies in Peru have responded
aggressively to the lower global growth conditions by cutting costs to sustain profitability and growth moving forward. The most
notable examples have been Credicorp and Buenaventura.
4. Earnings expectation in the last 12 months have been revised downward quite significantly (by 34% vs. 17% for
LatAm), which could leave some room for surprises in upcoming quarters, with more stability in commodity prices and FX. We
currently expect a fall of 12% in earnings for 2013, with a rebound to 13% in 2014.
p.30 Peru: An Exports and Investments Story
Sources: Proinversion, SNM, Bloomberg and Santander estimates
Peru Copper Production, 2011-16E
1,235 1,2991,519
1,814
2,2042,474
2011 2012 2013 2014 2015 2016
Current Antamina Cerro Verde Antapaccay Toromocho Constancia Las Bambas
Sector Number of
Projects
Expected
Awarding Est. Amm.
Railroads 1 4Q13 6.5
Power and Gas 5 4Q13 4.1
Roads 3 2Q14 0.9
Agricultural 1 4Q13 0.6
Ariports 1 4Q13 0.6
Water and Sewerage 3 4Q13 0.5
Telecomm. 1 4Q13 0.3
Others 10 4Q14 3.5
Total 25 US$ 17 bn
Peru: Infrastructure Projects
p.31 Appetite for Peruvian assets
Commentary & Considerations
Source: Santander Equity Research based on feedback during recent Andean Trip
Wall street research analyst views and discussions with several buy-side accounts.
Positive about Peru and
its macro-economics
outlook
Particular interest in
stories related to
construction and
consumption to benefit
from dynamics in the
country
Offering size and
liquidity is key to
investors
“Appetite to gain exposure to the strong internal demand growth expected in
Peru. Positive macro environment , with the fastest GDP growth for 2013”
“Positive views on the outlook for commodities prices, specially copper,
although volatility is always a risk factor”
“In the past five years Peru has grown 7.2% on average, significantly better
than the average for Latin America, which was 4.1% in the same period”
“Peru is shifting to a consumption driven growth as authorities boost social
spending . He challenge is thus whether the current economic model will be
sustained in the medium term”
“Capital Inflows will continue to be strong during 2013 given attractive
investment opportunities and strong macro fundamentals (high growth,
controlled inflation, fiscal surplus)”
“We find Peru very attractive at the country level and Consumer Discretionary
at the sector level”
Press
and
other
feedback
from
investors
“Peru, in my opinion, is by far the most interesting country nowadays. […] The
challenge here is find liquid enough investable ideas”
Peru
Investors
Trip 2013
Foreign Perception:
- Peru is still the shining star of Latin America,
- Highest growth rate among major economies in the region
- Sound macro environment and room for maneuver: the government is doing the right things
Companies are quickly adapting to the new environment
- Capital “became” a scarce resource
- Focus changed from expansion to efficiency
- Growth opportunities still exist, but companies are becoming more selective in what they pursuit
Investment becomes even more important:
- Peru has sustained the highest rates of investment/GDP in Latin America
- Expected shift from private to public investment
- Mining investment should sustain growth despite lower commodity prices
- Peru is an efficient copper and gold producer, therefore major projects should be still profitable at current prices.
- Infrastructure will be key to sustain growth in the short term and increase productivity over the medium/long term
Concerns:
− Further deceleration in China and/or further decreases in commodity prices
- Delays in infrastructure projects
- Price of land in certain areas of Lima
- Too much efficiency can strangle growth
- Decreases in business and consumer confidence
p.32 Global Economic Forecast
Source: Santander estimates
p.33 LatAm Economic Forecast
Source: Santander estimates
p.34
Appendix
p.35 LatAm Economic Forecast
Source: Santander estimates
p.36 LatAm Economic Forecast
Source: Santander estimates
p.37 LatAm Economic Forecast
Source: Santander estimates
p.38 LatAm Economic Forecast
Source: Santander estimates
p.39 Effect of Liquidity Injections on LatAm
39
Relative Performance of LatAm vs. Global Equities
Source: EPFR Global, MSCI, Bloomberg and Santander
60
70
80
90
100
110
120
130
140
J-08 M-08 S-08 J-09 M-09 S-09 J-10 M-10 S-10 J-11 M-11 S-11 J-12 M-12 S-12 J-13 M-13 S-13
QE1 QE2
Twist
LTRO1
QE3
ABE LTRO2
OMT
Tapering Talks
p.40 Earnings Estimates Remain Too High…
Earnings Growth Expectations, 2013E and 2014E
17%
29%26% 26%
5%
-3%
-21%
16%
21% 19% 18%
11%
-3%
12%
LatAm Chile Brazil Argentina Mexico Colombia Peru
2013 2014
p.41
2013 Earnings Revisions in Last 3M, 6M and 12M
Source: Companies, FactSet and Santander
…Downward Revisions to Continue; Mostly for Brazil
-12%
-17%
-14%
-16%
-34%
-27%
-17%
-11%
-11%
-6%
-11%
-30%
-27%
-11%
-3%
-5%
-7%
-8%
-13%
-19%
-7%
Colombia
Mexico
Chile
Brazil
Peru
Argentina
LatAm
3M 6M 12M
p.42 Asset Classes: Fixed Income
Adjusted LatAm Rates
Source: Santander.
42
Normalized Policy Rates (last / 6-year average) EM Local Rates Spreads
Linkers vs. Nominal
0
50
100
150
200
250
300
Jun-06 Dec-07 Jun-09 Dec-10 Jun-12 Dec-13
0.5
1.5
2.5
3.5
4.5
5.5
6.5
7.5
8.5
9.5Mov e (UST v olatility ) index5Y EM - 5Y UST (%, RHS)*Fed's balance sheet (US$ tn, RHS)
Country 5Y Rate 5Y CDS Core CPI 5Y rate-CDS-
(%) (bps) (y/y%) Core CPI (%)
Brazil 12.40 186.7 5.81 4.73
Chile 4.86 79.7 1.60 2.46
China 4.48 65.5 1.60 2.23
Colombia 4.45 121.0 2.28 0.96
Hungary 4.82 270.7 3.50 (1.38)
Indonesia 8.03 211.8 4.80 1.12
Mexico 5.10 92.7 2.56 1.61
Peru 2.81 133.2 3.32 (1.84)
Phillipines 3.00 106.7 2.80 (0.87)
Poland 3.68 79.9 1.40 1.48
Russia 7.20 162.5 4.50 1.08
S. Africa 7.17 198.2 10.20 (5.01)
S.Korea 3.38 56.3 1.80 1.02
Thailand 3.56 123.0 0.85 1.48
Turkey* 9.09 196.3 7.22 (0.09) U.S. 1.53 29.1 1.11 0.14
Average 5.35 132.07 3.46 0.57
y = 2.77x - 4.11
R2 = 0.83
-1
0
1
2
3
4
5
- 1.0 2.0 3.0 4.0
10Y CDS + TIPS
10Y
rate
s -
12m
CP
I -
10Y
CD
S
B r a zilC h ileC o lo m b iaM e xic oP e r u
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
Jan-07 Jul-08 Jan-10 Jul-11 Jan-13
(%)
Brazil ChileColombiaMexicoPeru
loose
policy
tight
policy
p.43
p.43
Appendix 2
Peru
p.44
5.0%
6.8%
7.7%
8.9%
9.8%
0.9%
8.8%
7.0%
6.3%
5.4% 5.6%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E
Peru: A “5.5% Growth” Story
Sources: Bloomberg and Santander estimates.
Peru GDP Growth, 2004-14E
6.2
10.09.5
8.8 8.6
6.9 6.6 6.96.1 6.4 6.7
6.3
4.5
5.6 5.4 5.6
0
2
4
6
8
10
12
I II III IV I II III IV I II III IV I II IV(E)
2010 2011 2012 2013 2014 (E)
p.45 Peru: Credit Dollarization Remains High
Consumer Credit Dollarization (% of Total)
Sources: CNC, Banco Central do Brasil, governmental entities and Santander estimates.
Consumer Credit Composition (% of Total)
11% 10% 9% 9%
59%
54%50% 49%
2009 2010 2011 2012
Consumer Mortgages
Credit Cards23%
Other Consumer
31%
Mortgages46%
p.46 Peru: Earnings Expectations Reflect Bearish Sentiment
Sources: Bloomberg and Santander estimates.
2013 Earnings Revisions, Last 12 Months
-34%
-27%
-17% -16%-14%
-12%
-17%
Peru Argentina Mexico Brazil Chile Colombia LatAm
p.47 Peru: Cheapest Valuations in LatAm
Sources: Bloomberg and Santander estimates.
Peru 12 Month Forward P/E
-
3
6
9
12
15
18
21
24
'05 '06 '07 '08 '09 '10 '11 '12 '13
Last: 13.35
Avg: 14.51
High: 23.25
Low: 4.33
p.48