GENERATING BENEFITS

Peru 2017 | FINANCE | VIP INTERVIEW

TBY talks to Rubens V. Amaral Jr., CEO of Banco Latinoamericano de Comercio Exterior (BLADEX), on TPP, the ins and outs of the Peruvian market, and plans for 2016.

Although projected economic growth in the region is falling, the IMF recently raised its projections for growth in Peru in 2016. What are your expectations for the Peruvian economy this year?

A stable economy with a steady investment flow in infrastructure is a key component of the successful growth Peru has experienced over past years. Our forecast points to GDP growth within a range of 3.7% to 4% for the current year.

Peru recently signed the TPP, a landmark trade agreement with 11 other Pacific Rim countries. What is the economic potential of this agreement and how will its impact be felt in Peru?

As any trade agreement, the TPP offers potential for Peru to increase its exports as it opens up access to a major trade region comprised of 11 countries, which together represent 40% of the global economy, 25% of global trade, the destination of 30% of FDI, and equally important a market with more than 800 million consumers. Several studies and analyses have been conducted, indicating that for Peru the TPP might generate direct benefits to the agro-business, fishing and mining industries, and the retail sector by reducing non-tariff barriers and facilitating increased integration in the production chain. The World Bank estimates that the TPP could boost exports by 10% and GDP growth by 2.1% in the next 15 years. The Trade Research & Development Area of the Chamber of Commerce in Lima estimates that exports will grow by 12% in the next five years. Undoubtedly there is tremendous potential for the country, but as in any trade agreement the definitive success depends on the determination of the countries in terms of its timely implementation.

BLADEX offers a number of financial solutions to increase international activity and support different sectors. What financial solutions have been most useful in the Peruvian market?

One of the main focuses has been on helping companies in the trade supply chain by offering solutions designed to allow them to improve their terms of purchasing from suppliers and offering better selling conditions to their to clients. We offer the Vendor Financing Facility, which is designed to achieve the goal mentioned above, whereby BLADEX assumes the credit risk without recourse, allowing more business to be conducted among the parties involved. Another key focus of our offering is to support a company's expansion plans, or their needs for liability management, by offering access to funds from investors in Latin America as well as outside of the region. To achieve this goal we set up a special syndications and distribution platform, which has brought already to market more than 30 transactions in past years, with eight transactions done with companies and financial institutions in Peru.

What are some of the most significant challenges the Peruvian market faces right now?

Among the so-called emerging markets, Latin America has been impacted very importantly in the last two years. Nevertheless, we have observed that this impact has not been even across the region. Peru, for instance, has been one of the exceptions as the focus on fiscal discipline, adequate and pro-active monetary policy, and investments in infrastructure are a reality. Therefore, the main challenge for the country is to keep this clear path toward sustainable growth with responsibility, irrespective of the changes in the political arena.

BLADEX recently arranged a $25 million, three-year loan to Agrobanco. What is the importance of the agricultural sector for international trade in the region?

The agricultural sector is Peru's second-largest export industry. The forecast for Peruvian exports related to this particular sector points to almost $6 billion in 2016, which will account for 17% of the total exports of the country. As we observe this sector in Peru, there has been an important increase in sales of non-traditional products such as grapes, quinoa, and blueberries, for instance. On the other hand, the irrigation projects in northern and southern Peru (Alto Piura and Majes Siguas II), will lead to a considerable increase in new crops, which, associated with the focus on increased productivity, bode very well for the country. We understand that Latin America is a strong player in agricultural exports, and as we can see from Peru's performance the country is not an exception to the rule. Peru is increasing its participation in the share of agricultural exports to the region, which is confirmed by 2015's performance when Peru exported about $1 billion in agricultural products to Latin America.

What are some new partnerships or international agreements BLADEX has joined recently and how will they advance its goals in Latin America?

BLADEX's focus has always been on teaming up with other financial institutions to promote trade finance in Latin America. As an example, we recently entered into an agreement with the International Financial Corporation (IFC), a member of The World Bank Group, to establish a risk-sharing contract with the objective of expanding access to trade finance available for agribusiness, within IFC's Critical Commodities Finance Program, which has translated into more financing over a three-year period for the production, processing, and trade of agricultural products in nine countries across Latin America, including Peru.

What are BLADEX's goals for Peru and the region in 2016?

Peru is a rising star in the region and we have set up a representative office to allow us to be closer to the Peruvian market and increase our participation in the trade finance spectrum, thus supporting our mission to offer financial solutions of excellence to our clients in the corporate world, and in the financial institutions area as well. We expect to increase our portfolio in the country, from today's level of 9% of the outstanding balances of BLADEX, to at least 12 to 15%. As far as the region is concerned, our target is to post more moderate growth ranging between 3 and 5% in 2016, as there is a divergent path of growth in Latin America, and the trade flows both regionally and globally reduced importantly in the last two years.