Foro XXIII : Perspectivas Economicas para el 2014 (Santander)

1,043 views

Published on

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,043
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
11
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Foro XXIII : Perspectivas Economicas para el 2014 (Santander)

  1. 1. XXXII Foro: “Las perspectivas económicas para el 2014“ Lima – December, 2013
  2. 2. p.1 Section 1 The Macro Outlook
  3. 3. The Global Scenario: Muddling Through p.2 US and Europe: GDP Growth Commodity Price Evolution Tapering by the Federal Reserve China: GDP Growth 3.0 90 80 Hawkish 70 Base case 60 Dovish 2.5 Hawkish Base case 2.0 Dovish 50 1.5 40 1.0 30 20 0.5 10 0.0 0 4Q13 2Q14 Source: Santander 4Q14 2Q15 4Q15 4Q13 2Q14 4Q14 2Q15 4Q15
  4. 4. p.3 The Weight of Emerging Markets and LatAm in the World Weight of EM in Different Parameters (% of World) Weight of LatAm in Different Parameters (% of World) 7.2% 7.1% 4.7% 3.3% 2.6% 2.1% GDP-PPP Sources: IMF, World Bank, Bloomberg and Santander Population Market % in MSCI Capitalization ACWI Listed Companies % of Global Funds AUM 1.8% Traded Volume
  5. 5. The Weight of Emerging Markets and LatAm in the World Sources: IMF, World Bank, Bloomberg and Santander p.4
  6. 6. The Weight of Emerging Markets and LatAm in the World Sources: IMF, World Bank, Bloomberg and Santander p.5
  7. 7. The Weight of Emerging Markets and LatAm in the World Sources: IMF, World Bank, Bloomberg and Santander p.6
  8. 8. Latin America: A Varied Group of Peculiar Emerging Economies Private Consumption USA 68.6 Mexico 64.7 Brazil 63.0 Colombia 60.9 Japan 60.5 Peru 60.0 EU 27 58.0 Chile 57.3 Argentina 57.3 India 56.5 Russia 52.0 China 34.8 0.0 20.0 40.0 60.0 Source: IMF, World Bank, Bloomberg and Santander 80.0 p.7
  9. 9. p.8 The Weight of Emerging Markets and LatAm in the World Weight of EM in Different Parameters (% of World) Weight of LatAm in Different Parameters (% of World) 7.2% 7.1% 4.7% 3.3% 2.6% 2.1% GDP-PPP Sources: IMF, World Bank, Bloomberg and Santander Population Market % in MSCI Capitalization ACWI Listed Companies % of Global Funds AUM 1.8% Traded Volume
  10. 10. LatAm Market Liquidity p.9 Latin America market liquidity – country view Trading Volume ADTV (3M) Mk cap (MM USD) 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 Country Source: Santander , Bloomberg as of December 6th, 2013 (1) Based on Santander rated universe of 217 LatAm companies
  11. 11. Latin America: A Varied Group of Peculiar Emerging Economies Private Consumption Gov. Spending USA USA 68.6 Mexico Mexico 64.7 Brazil Colombia 60.9 Colombia Japan 60.5 60.0 Peru 16.2 22.2 Japan Peru 10.2 EU 27 19.2 EU 27 EU 27 Chile 23.5 Argentina 23.9 Argentina Argentina EU 27 Chile 57.3 Chile Argentina 57.3 Argentina India 56.5 India 19.2 India Russia 19.0 Russia China China 34.8 0.0 20.0 40.0 60.0 Source: IMF, World Bank, Bloomberg and Santander 80.0 21.7 13.1 13.2 0.0 10.0 20.0 30.0 China Japan 23.1 Peru 4.4 15.2 Chile 6.1 32.9 18.4 Argentina 3.9 India Russia China China 26.7 China 4.3 0.0 -10.0 -5.0 0.0 20.0 40.0 5.0 26.8 14.5 20.2 28.0 50.0 100.0 15.9 18.7 EU 1.2 27 16.4 11.0 13.5 RussiaRussia 47.7 0.0 29.2 15.0 -0.9 India India -6.1 14.1 30.4 19.0 Mexico Colombia 0.7 Chile Chile 58.0 52.0 Peru Peru 25.4 16.5 0.0Brazil Colombia 14.2 Colombia Japan Japan USA -0.3 28.9 Brazil Brazil 11.0 20.0 EU 27 Russia Mexico Mexico 17.0 Colombia 20.4 14.9 -3.1 USA USA 13.4 23.8 Brazil 20.0 Exports Net Exports Imports 15.7 Mexico 11.8 Japan Peru USA 18.8 Brazil 63.0 Investments p.10 10.0 18.0 22.4 10.0 15.0 0.0 20.0 40.0
  12. 12. LatAm Economies: Fundamentally Sound … p.11 Leverage, 2012 (as % GDP) Unemployment Rate, 2013E Source: Santander Fiscal Deficit, 2013E(% GDP) International Reserves (% Gov. Debt)
  13. 13. LatAm, Under-Leveraged in a Deleveraging World DM: Total Debt Evolution Source: Santander p.12 EM vs DM: Low Leverage Ratios
  14. 14. 13 p.13 LatAm Low Private Debt Levels Persist Despite Growth Private Credit (% of GDP) Mortgages (% of GDP) 85% UK 180% Consumer Mortgages Corporates 140% 77% US 64% Spain 54% DM Av. 47% Germany 41% France 40% Japan 100% 23% Italy 20% Chile 18% EM Av. 60% 15% China 10% Mexico 7% India 20% Brazil Colombia -20% Peru Japan US Germany China Chile Brazil Mexico Colombia Peru Source: IMF, BIS, central banks, governmental entities and Santander estimates Russia 6% 5% 4% 3%
  15. 15. LatAm Economies: … But Some Concerns in the Horizon p.14 Current Account 2013E (% GDP) Inflation 2013E (%) Investments (as % of GDP) Real Wages vs Productivity 33% AR BZ CH 30% MX PE UR 27% 24% 21% 18% 15% 12% Source: Santander CO
  16. 16. 15 p.15 The Constantly Growing Middle Class Population Segmentation Source: IMF, SEDLAC and Santander estimates Population Segmentation Evolution
  17. 17. 16 Financial Markets, Quick to Embrace but also to Exit LatAm: Equity Markets LatAm: Government Bonds LatAm: Commodities vs Equity Markets 2000 LatAm: FX 600 1800 500 1600 1400 400 1200 1000 300 800 200 600 400 100 200 LatAm Equity/ World Commodity Index 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Bloomberg, FactSet and Santander. p.16 0
  18. 18. p.17 Section 2 Equity Markets & Fund Flows
  19. 19. LatAm: Underperforming and Outflows p.18 Main Global indices performance (in US$) 2011 20.2% 2012 2013YTD 18.3% 16.5%15.1% 5.5% Latin America main indices performance (in US$) 27.0% 2011 27.0% 10.8% 9.5% 7.3% 2012 2013YTD 11.7% 11.6% 5.4% -2.0% -4.2% -1.2% -14.7% -6.1% -27.1% -14.0% -16.8% -19.1% Dow Jones FTSE EuroStoxx MSCI Asia -17.4% -13.1% -23.0% -23.6% -28.2% Brazil -21.9% -19.6% -31.8% Mexican Colombia Peru Chile MSCI LatAm Fund Flows as % of AUM by Latam Market(1) Weekly Fund Flows to LatAm LTM (in US$ MM) 40% 1,500 Fund Flows 4 per. Mov. Avg. (Fund Flows) 24% 30% 1,000 27% 20% 500 10% 0 -500 2013YTD 8% 0% -10% 11% 9% 8% 6% 2012 -5% -2% -2% -20% -1,000 -30% -1,500 -40% -50% D-12 F-13 A-13 J-13 Source: Santander, EPFR Global and Bloomberg as of December 16th, 2013 (1) Data as of October 2013 S-12 N-13 Brazil Chile Colombia Mexico Peru
  20. 20. 19 p.19 QE Liquidity Benefited Most GEM Dedicated Funds GEM Dedicated Funds (US$ millions and % of AUM) LatAm Funds (US$ millions and % of AUM) 60,000 700,000 600,000 120% 50,000 500,000 100% 40,000 400,000 60% 140% 80% 40% 20% 0% 30,000 300,000 200,000 40% 100,000 20% -20% 60% 20,000 0 0% D-08 J-09 D-09 J-10 D-10 AUM (LHS) J-11 D-11 J-12 Cumulative Flows (RHS) Source: EPFR Global, MSCI, Bloomberg and Santander D-12 J-13 -40% 10,000 -60% 0 -80% D-08 J-09 D-09 J-10 D-10 AUM (LHS) J-11 D-11 J-12 D-12 Cumulative Flows (RHS) J-13
  21. 21. 20 Fund Flows: The ‘Big Rotation’ Has Started p.20 US: Flow of Funds: Fixed Income vs Equity Global: Flow of Funds in Credit Weight of LatAm in Global and GEM Funds Cumulative Flows to EM vs. DM, 2013YTD 26 3.5 180,000 25 EM 3 DM 160,000 24 2.5 140,000 2 120,000 1.6% 1.5 100,000 23 22 21 20 80,000 19 1 18.1% 18 0.5 17 16 200,000 60,000 40,000 20,000 J-05 O-05 J-06 A-07 J-08 O-08 J-09 Weight of LatAm in GEM Fund A-10 J-11 O-11 J-12 A-13 Weight of LatAm in Global Funds Sources: ICI, Lipper, Fitch, EPFR Global, Bloomberg and Santander estimates.. 0 0 J-13 F-13 M-13 A-13 M-13 J-13 J-13 A-13 S-13
  22. 22. Fund Flows to Peru – emerging as an alternative to Brazil & Mexico Fund Flows to Peru: Evolution since 2007 (Base 1) Weight of accumulated inflows by Country p.21
  23. 23. LatAm Primary Markets: More Active than Last Year p.22 LatAm ECM activity since 2007(1) (in US$ m) 22 Deals 35 Deals 60 Deals 55 Deals 62 Deals 51 Deals 26,467 31,350 29,876 1,261 15,757 21,313 11,787 8,486 8,248 11,162 12,240 2010 2011 2012 2013YTD 13,062 2008 17,257 17,980 17,065 7,062 548 1,789 7,158 1,057 772 30,045 24,210 24,898 2009 IPO Follow-On Convertibles Petrobras Offering Total Latam current pipeline for equity deals Date Country Sector Issuer Type Size ($ MM) Range / Sub. Expected Date Price (Local) 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 Souce: Dealogic, Santander as of December 16th, 2013 (1) Includes FOs > US$ 100 MM, IPOs > US$ 50 MM
  24. 24. p.23 Mexico taking Brazil position in Primary Markets LatAm - Priced IPOs > $50 MM (2013 YTD) Date 6-Dec-13 25-Oct-13 24-Oct-13 15-Oct-13 Countr Sector y Professional Services Professional Brazil Services Professional Brazil Services Brazil Mexico Food & Beverage Aftermarket Performance (%) Type Size ($ MM) Free Float (%) Offer Price (Local) Range Rel. to Midpoint (%) 1 Day 1 Week 1 Month Since Offer Rel. to MSCI Latam CVC Brasil Operadora IPO 226.87 26.02 16 18.00 - 22.00 -20 -3.13 -3.13 - -3.13 -1.95 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 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 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 -5.54 -5.15 -0.01 17 -0.06 21.33 -5.77 26.69 5.04 Issuer 8-Oct-13 Mexico Real Estate/Property Fibra Danhos IPO 396.02 21 26 26.00 - 28.00 -3.7 17-Sep-13 23-Jul-13 Mexico Transportation Volaris SA Mexico Real Estate/Property Fibra Shop IPO IPO 398 378.97 33 76.78 12 17.5 12.00 - 14.00 17.50 - 19.50 -7.69 -5.41 -1.423076923 3.76923076 9 16.75 21.08 -0.74 -0.29 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 26-Mar-13 Mexico Construction/Building 26-Mar-13 Mexico Utility & Energy Biosev SA OHL SA (OHL Mexico Underlying) Ienova (Sempra) 21-Mar-13 Mexico Real Estate/Property Fibra Terra IPO 355.49 22.56 15 I 0.25 0 -14.3333 -12.67 -6.67 -35.8 -21.33 CONV 388.98 - - - - - - - - 51.21 IPO 519.6 16.85 34 30.00 - 34.00 6.25 16.53 15.71 27.41 61.38 -10.46 IPO 663.4 77.61 28 28.00 - 32.00 -6.7 -2.21 -1.14 2.11 -16.21 -13.62 18.5 17.25 - 19.75 - 2.76 1.57 10.92 -9.41 -3.57 28 27.00 - 32.00 -5.08 1.64 -0.21 0 -1.11 49.07 27 23.00 - 27.00 8 18.52 15 17.07 84.19 -4.92 (4.6) (5.4) 1.8 (1.1) 2.9 0.7 7.6 6.1 11.0 1.4 8.0 (1.0) 19-Mar-13 Mexico Real Estate/Property FIBRA INN IPO 316 12-Mar-13 Mexico Retail Computers & Brazil Electronics IPO 831 92.5687536 6 16 230 37.89 7-Feb-13 Grupo Sanborns Linx IPO Total $ 12,788 Average Median $ $ 639 384 15 | 0.01 - 2.00 Source: Bloomberg and Dealogic. Includes IPOs > 50 MM as of December 16th, 2013 36 28
  25. 25. Peru’s Graña y Montero Follow On p.24 LatAm - Priced Follow-On Offerings > $100 MM (2013YTD)(1) Date Country Sector Issuer Type Size ($ MM) % of Co. Sold Last Close FO FO FO FO 1066.58 62.88 670.29 408.52 25 10.06 23.66 21.76 25.60 - 33.60 14.6 1329.9 16.6 From Anncmt to Offer (%) -22.3 -4.19 -13.39 -18.92 FO 356.72 7.43 6702.6 - FO 281.88 22.53 74 -17.57 FO FO 208.68 329.64 18.53 43.64 18.59 0.05 -29.94 - FO 292.83 6.62 26.68 -5.93 FO FO FO FO FO 113 412.77 2177.82 185.16 824.31 9.47 14.89 14.33 15 6.35 194 22.24 72.21 41.68 26.32 -1.72 -12.32 -8.74 -11.5 Retail Finance Finance Transportation Aftermarket Performance (%) 1 Day 1 Week 1 Month Since Off. 1.43 -6.67 -1.67 -4.2 1.43 -4.33 Rel. to MSCI Latam 1.24 1.52 - - - - - 0 0 -0.41 -4.54 4.25 2.86 - 5.09 - 6.29 - 17.77 - 26.56 - 1.54 3.46 5 -8.96 -4.92 0 11.51 0.78 3.46 -0.99 15.55 2.43 15.31 -5.3 17.08 21.43 16.96 -7.24 32.07 11.7 31.54 -5.10 32.07 7.92 27.24 12-Dec-13 12-Dec-13 22-Nov-13 6-Nov-13 Brazil Mexico Chile Colombia 16-Oct-13 Chile 16-Oct-13 Mexico 16-Oct-13 24-Sep-13 Brazil Chile 13-Sep-13 Chile 26-Jul-13 24-Jul-13 16-Jul-13 9-Jul-13 25-Jun-13 Chile Peru Mexico Mexico Mexico Via Varejo SA Corporacion Actinver Quinenco SA Avianca Holdings SA Comp. Cervecerias Unidas Food & Beverage CCU (2) Grupo Financiero Finance Interacciones Metal & Steel Tupy SA Transportation CSAV (2) Comp. Cervecerias Unidas Food & Beverage CCU Finance Grupo Security (2) Construction/Building Grana y Montero SAA Finance GF Banorte Transportation OMA Finance GF Inbursa SAB de CV 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 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 FO 252.05 4.92 45.88 -8.07 -1.13 -4.44 0 -26.89 -12.02 18-Apr-13 Brazil FO 165.01 30.61 18.21 -17.18 -4.74 -2.86 1.37 -18.29 -4.88 28-Mar-13 27-Mar-13 Chile Brazil Professional Services Abril Educacao SA BHG SA Brazil Hospitality Real Estate/Property Group Utility & Energy Enersis (2) Real Estate/Property Multiplan FO FO 2375 259.7 16 4.78 182.41 58.4 6.03 0 -2.79 -2.52 -16.22 0.52 15-Mar-13 21-Feb-13 30-Jan-13 30-Jan-13 29-Jan-13 Chile Chile Mexico Argentina Mexico Retail Finance Consumer Products Agribusiness Real Estate/Property FO FO FO FO FO 1634 464 269 111 1732 11.83 3.75 14 12 38 2930.5 69.82 39.5 8.18 38.32 -6.67 -11.11 4.52 0 6.25 8.49 0 6.25 8.14 0 0 8.19 -24.83 -3.25 12.76 -5.54 16.04 32.95 23-Jan-13 16-Jan-13 26-Dec-12 Brazil Professional Services Estacio Participacoes Chile Finance Corpbanca (2) Colombia Construction/Building Constructora Conconcreto FO FO FO 326 159 137 17 4 39 42.75 21.11 1340 7.28 4.65 1.9 0 5.07 -0.74 14.55 0.74 47.57 -0.74 67.51 15.93 16.7 14.2 (5.1) (4.0) (8.8) (9.0) 2.2 1.5 3.7 3.5 5.7 2.1 2.1 (1.7) 10.7 4.6 Empresas CMPC SA (2) Cencosud (2) Banco de Chile (2) Organizacion Cultiba Adecoagro Fibra Uno Total Average Median Source: Bloomberg and Dealogic. Includes FOs > 100 MM as of December 16th, 2013 (1) Excludes Block Trades (2) Denotes Chilean Rights Offerings $ $ $ 17,394 544 309
  26. 26. p.25 Section 3 2014 Perspectives
  27. 27. p.26 LatAm GDP Growth: Brazil Bucks the Trend LatAm GDP Growth (YoY, %) 7.0 6.3 6.0 5.7 5.6 5.3 5.0 4.5 4.2 3.9 4.0 4.5 4.2 4.0 3.7 4.0 3.8 3.0 3.0 3.0 2.3 2.0 1.9 1.7 1.6 1.5 1.2 1.0 0.9 0.5 0.0 Argentina Brazil 2012 Source: Santander Chile 2013E Colombia 2014E Mexico 2015E Peru 5.5
  28. 28. 27 LatAm Fairly Valued vs. Other Global Markets p.27 12-Month-Forward P/E vs. EPS CAGR 13-15E 18 Nikkei 225 16 12M Forward P/E S&P 500 14 MSCI LatAm STOXX 600 12 MSCI EM Asia 10 8 MSCI EM Europe 6 4 7% 9% 11% 13% 15% EPS CAGR 13-15E Source: Companies, FactSet and Santander 17% 19%
  29. 29. p.28 Highlights: Upgrading Peru to Overweight Recent upgrade of Peru to Overweight by Santander LatAm Sector recommendations
  30. 30. 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. ii. iii. iv. Investments should continue to drive growth in the country, with 10.0% growth rates driven by mining and infrastructure sectors; Exports should rebound strongly from -2.6% in 2013 to 5.0% in 2014, given the stabilization in commodity prices and improving global growth; We continue to see the inflation scenario remaining benign, at 2.5-3.0%; 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. ii. iii. the stabilization in metal prices; export revenue growth will increasingly come from volume increases vs. price increases (the country intends to double copper output by 2016); and 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.29
  31. 31. p.30 Peru: An Exports and Investments Story Peru: Infrastructure Projects Peru Copper Production, 2011-16E Railroads 2,474 1,814 1,519 1,235 1,299 Number of Projects 1 Expected Awarding 4Q13 Power and Gas 2,204 5 4Q13 4.1 Sector Est. Amm. 6.5 Current Antamina 2013 Cerro Verde Antapaccay 2014 Toromocho Sources: Proinversion, SNM, Bloomberg and Santander estimates 2015 Constancia 2016 Las Bambas 2Q14 0.9 1 4Q13 0.6 1 4Q13 0.6 Water and Sewerage 2012 3 Ariports 2011 Roads Agricultural 3 4Q13 0.5 Telecomm. 1 4Q13 0.3 Others 10 4Q14 3.5 Total 25 US$ 17 bn
  32. 32. Appetite for Peruvian assets p.31 Commentary & Considerations  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 Peru Investors Trip 2013  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 Press and other feedback from investors “Appetite to gain exposure to the strong internal demand growth expected in Peru. Positive macro environment , with the fastest GDP growth for 2013” “Capital Inflows will continue to be strong during 2013 given attractive investment opportunities and strong macro fundamentals (high growth, controlled inflation, fiscal surplus)” “Positive views on the outlook for commodities prices, specially copper, although volatility is always a risk factor” 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 “Peru, in my opinion, is by far the most interesting country nowadays. […] The challenge here is find liquid enough investable ideas” “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” “We find Peru very attractive at the country level and Consumer Discretionary at the sector level”
  33. 33. Global Economic Forecast Source: Santander estimates p.32
  34. 34. LatAm Economic Forecast Source: Santander estimates p.33
  35. 35. p.34 Appendix
  36. 36. LatAm Economic Forecast Source: Santander estimates p.35
  37. 37. LatAm Economic Forecast Source: Santander estimates p.36
  38. 38. LatAm Economic Forecast Source: Santander estimates p.37
  39. 39. LatAm Economic Forecast Source: Santander estimates p.38
  40. 40. 39 p.39 Effect of Liquidity Injections on LatAm Relative Performance of LatAm vs. Global Equities QE1 LTRO1 QE2 Twist 140 OMT Tapering Talks LTRO2 ABE QE3 130 120 110 100 90 80 70 60 J-08 M-08 S-08 J-09 M-09 S-09 Source: EPFR Global, MSCI, Bloomberg and Santander J-10 M-10 S-10 J-11 M-11 S-11 J-12 M-12 S-12 J-13 M-13 S-13
  41. 41. Earnings Estimates Remain Too High… p.40 Earnings Growth Expectations, 2013E and 2014E 29% 26% 26% 21% 19% 17% 16% 18% 12% 11% 5% -3% -3% -21% LatAm Chile Brazil Argentina 2013 Mexico 2014 Colombia Peru
  42. 42. …Downward Revisions to Continue; Mostly for Brazil p.41 2013 Earnings Revisions in Last 3M, 6M and 12M -7% LatAm -11% -17% -19% Argentina -27% -27% -13% Peru -30% -34% -8% Brazil -11% -16% -7% -6% Chile -14% -5% Mexico -11% -17% -3% Colombia -11% -12% 3M Source: Companies, FactSet and Santander 6M 12M
  43. 43. 42 Asset Classes: Fixed Income p.42 Normalized Policy Rates (last / 6-year average) 2.0 Brazil Chile Colombia Mexico Peru tight policy 1.5 1.0 (%) 0.5 EM Local Rates Spreads Mov e (UST v olatility ) index 5Y EM - 5Y UST (%, RHS)* Fed's balance sheet (US$ tn, RHS) 300 250 6.5 5.5 150 -0.5 100 -1.0 -1.5 loose policy -2.0 Jan-07 4.5 3.5 2.5 50 1.5 0 Jul-08 Jan-10 Jul-11 Jan-13 0.5 Jun-06 Dec-07 Source: Santander. 5Y CDS (bps) 186.7 79.7 65.5 121.0 270.7 211.8 92.7 133.2 106.7 79.9 162.5 198.2 56.3 123.0 196.3 29.1 132.07 Core CPI (y/y%) 5.81 1.60 1.60 2.28 3.50 4.80 2.56 3.32 2.80 1.40 4.50 10.20 1.80 0.85 7.22 1.11 3.46 5Y rate-CDSCore CPI (%) 4.73 2.46 2.23 0.96 (1.38) 1.12 1.61 (1.84) (0.87) 1.48 1.08 (5.01) 1.02 1.48 (0.09) 0.14 0.57 Dec-10 Jun-12 Dec-13 B r a zil C h ile C o lo m b ia M e xic o Peru 5 10Y rates - 12m CPI - 10Y CDS Brazil Chile China Colombia Hungary Indonesia Mexico Peru Phillipines Poland Russia S. Africa S.Korea Thailand Turkey* U.S. Average 5Y Rate (%) 12.40 4.86 4.48 4.45 4.82 8.03 5.10 2.81 3.00 3.68 7.20 7.17 3.38 3.56 9.09 1.53 5.35 Jun-09 Linkers vs. Nominal Adjusted LatAm Rates Country 8.5 7.5 200 0.0 9.5 4 3 2 y = 2.77x - 4.11 R2 = 0.83 1 0 -1 - 1.0 2.0 10Y CDS + TIPS 3.0 4.0
  44. 44. p.43 Appendix 2 Peru p.43
  45. 45. Peru: A “5.5% Growth” Story p.44 Peru GDP Growth, 2004-14E 9.8% 8.9% 12 8.8% 10.0 7.7% 10 7.0% 6.8% 9.5 8.8 8.6 6.3% 5.4% 5.6% 8 6.9 6.2 5.0% 6.6 6.9 6.1 6.4 6.7 6.3 5.6 6 5.4 II 5.6 IV(E) 4.5 4 2 0.9% 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E I II III 2010 Sources: Bloomberg and Santander estimates. IV I II III 2011 IV I II III 2012 IV I 2013 2014 (E)
  46. 46. Peru: Credit Dollarization Remains High Consumer Credit Dollarization (% of Total) p.45 Consumer Credit Composition (% of Total) 59% 54% 50% 49% Other Consumer 31% 11% 2009 10% 2010 Consumer 9% 2011 Mortgages 9% 2012 Sources: CNC, Banco Central do Brasil, governmental entities and Santander estimates. Mortgages 46% Credit Cards 23%
  47. 47. p.46 Peru: Earnings Expectations Reflect Bearish Sentiment 2013 Earnings Revisions, Last 12 Months -14% -17% -16% Mexico Brazil -12% -17% -27% -34% Peru Sources: Bloomberg and Santander estimates. Argentina Chile Colombia LatAm
  48. 48. p.47 Peru: Cheapest Valuations in LatAm Peru 12 Month Forward P/E Last: 13.35 High: 23.25 Avg: 14.51 Low: 4.33 24 21 18 15 12 9 6 3 '05 Sources: Bloomberg and Santander estimates. '06 '07 '08 '09 '10 '11 '12 '13
  49. 49. p.48

×