The document summarizes the strong fundamentals of the Peruvian economy as presented by Julio Velarde, Governor of the Central Bank of Peru. Some key points: - Peru experienced average annual GDP growth of 5.7% over the past decade, the fastest growth rate since the 1970s. Inflation has also remained low at an average of 2.3% annually over the past decade. - Private investment has increased to an average of 25% of GDP from 2010-2012, helping drive economic growth. Poverty levels have decreased as GDP has increased. - The Central Bank of Peru has accumulated substantial international reserves as a precautionary measure, with reserves expected to reach 30.

1. The strong fundamentals of the Peruvian
Economy
Julio Velarde
Governor
Central Bank of Peru
April 2012

2. 1. Long-run trends
2. Recent economic developments and
prospects
3. Monetary Policy Framework
4. Closing remarks
Agenda
2

3. Peru was the sixth-fastest growing economy in the past 11 years
3
4.2
4.2
4.3
4.3
4.6
4.6
4.7
4.7
4.7
4.8
4.9
5.3
5.4
5.4
5.6
5.8
7.5
8.1
8.8
10.4
13.5
Colombia
Hong Kong SAR
Thailand
Ukraine
Pakistan
Egypt
Argentina
Malaysia
Russia
Philippines
Islamic Republic of Iran
Indonesia
United Arab Emirates
Kuwait
Singapore
Peru
India
Kazakhstan
Nigeria
China
Qatar
Real GDP Growth
(Average % change 2001-2011)

4. 5.2
5.9
3.6
-1.0
4.0
5.7
50' 60' 70' 80' 90' 00'
GDP growth: 1951-2010
(Average percent change)
GDP grew 5,7% in the last decade, the fastest rate
since the 70’s
4

5. Average inflation rate in the last decade was 2,3%, the
lowest rate since the 40’s
5
1.0
15.1 7.4 9.5
32.6
369.5
24.6
2.3
30' 40' 50' 60' 70' 80' 90' 00'
Inflation: 1930-2010
(Average percent change)

6. 68
136
100
0
20
40
60
80
100
120
140
160
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
(1975 = 100)
Per capita GDP did
not recover its 1975
level until 2006
Avg.Growth 1950 – 1975:
2,7%
Avg. Growth 1976 – 1992:
-2,4%
Avg. Growth 1993 – 2011:
3,8%
Per Capita GDP
6

7. 15.5 14.8 15.0 15.1 15.5 16.4
18.2
21.5
17.7 19.2 19.6 19.8
3.1
2.8 2.8 2.8 2.9
3.1
3.4
4.3
5.2
5.9 4.6 5.8
18.6
17.6 17.8 17.9 18.4
19.5
21.5
25.9
22.9
25.1
24.1
25.6
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*
Gross Fixed Investment 2001-2012
(% GDP)
Private Investment Public Investment
Average investment 2010-2012 is 25% of GDP
7
*Forecast

8. 8.2
4.4
3.9 3.9
3.3 3.1 3.1 2.8 2.8 2.7 2.6
2.2
1.6 1.6 1.3 1.2 0.9 0.8 0.7 0.7 0.4 0.3
China(1)
India(4)
SouthKorea(7)
Taiwanprov.ofChina(8)
Malaysia(18)
Thailand(20)
Indonesia(22)
HongKongSAR(23)
Peru(24)
Chile(25)
Singapur(29)
Argentina(36)
UnitedStates(53)
Uruguay(54)
Bolivia(66)
Germany(73)
Brazil(80)
Colombia(85)
Japan(88)
Mexico(89)
Ecuador(98)
Venezuela(102)
Labor Productivity Growth *
(Average 1990-2011)
Source: The Conference Board, Jan. 2012.
* Number in parentheses indicates worldwide position
Peru among countries with the highest labor productivity
in Latin America
8

9. Employment has been growing strongly
-1.9
0.0
1.7
2.7
4.5
7.2
8.3 8.3
1.3
4.2
5.4
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Urban Employment 1/
(% Change)
1/ Enterprises with more than 10 employees
Source: Ministerio de Trabajo y Promoción del Empleo.
During 2003-2011 average GDP growth was 6,5% while average urban
employment was 4,8%
9

10. 58.5
55.6
49.1
42.4
37.3
33.5
30.8
25
30
35
40
45
50
55
60
65
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
2004 2005 2006 2007 2008 2009 2010
Per capita GDP and poverty
Per capita GDP (left axis) Poverty (right axis)
PercentNuevos Soles
1994
Poverty decreased as a consequence of GDP growth
10

11. -5.6 -5.9 -6.3
-4.7
-0.9 -0.4
1981-1985 1986-1990 1991-1995 1996-2000 2001-2005 2006-2011
Current Account of the Balance of Payments: 1981-2011
(% of GDP)
Strong external position reflects substantial long-term private
capital inflows
1.5
0.6 0.4
6.0
5.1
4.1
6.4
1981 1986 1991 1996 2001 2006 2011
Private Sector Financing: 1980-2011
(% of GDP)
Private Sector Financing: 1980-2010
(Billions of US$)
1980 1985 1990 1995 2000 2005 2011
268 90 109 3 251 2 709 3 225 11 300

12. Sound fiscal policies have improved public finances in
Peru
-7.8
-9.8
-3.2
-1.7 -1.6
1.2
1981-1985 1986-1990 1991-1995 1996-2000 2001-2005 2006-2011
Overall balance of the public sector: 1981-2011
(% of GDP)
12

13. Debt burden is sustainable: public net debt expected to be
6,1% of GDP in 2012
Public Debt Average Maturity
(years)
Year 2011
Domestic debt 14,6
Foreign debt 11,6
Total 12,7
Public Debt 2011*
(%GDP)
54.5
41.7
27.8
21.7
9.5
Brazil Colombia Mexico Peru Chile
* Source: Moody's Statistical Handbook, November 2011
45.9
37.7
21.7 19.9
37.5
30.1
8.2 6.1
2001 2005 2011 2012*
Gross Debt Net Debt
Public Debt
(% GDP)
13
•Forecast

14. The Central Bank of Peru has accumulated international reserves as a
precautionary measure
6.6
8.5
10.2 9.2 8.4 8.2 8.6 9.6 10.2
12.6
14.1
17.3
27.7
31.2
33.1
44.1
48.8
56.4
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*
Net International Reserves
(Billions of US$)
•As of April 4, 2012
2006 2010 2012 *
NIR (Millions of US$) 17 275 44 105 56 369
NIR / GDP (%) 18,7 28,7 30,9
NIR / Short-run debt (times) 2,9 5,2 6,6
NIR / Liquidity (%) 81,9 91,0 93,8
14

15. Financial dollarization has been decreasing and nearly halved since
the beginning of the decade
73 74
77 79
82 80 79 77
74
71
67
60
57
52
46 44 44
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Dollarization of credit to the private sector
(%) The declining credit dollarization
ratio has limited the effect of
exchange rate depreciations on
dollar debtors solvency.
15

16. 1. Long-run trends
2. Recent economic developments and
prospects
3. Monetary Policy Framework
4. Closing remarks
Agenda
16

17. Consumer expectations continued in the optimistic field
61
58
56
65
59
54
53
59 59
64
58
59 59 59
56
68
59
61
56
30
35
40
45
50
55
60
65
70
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Consumer Confidence Index
(Economic Household Situation)
Optimistic
Pessimistic
Source: Apoyo Consultoría
17

18. Investor expectations are in the optimistic field
70 71 70
68
66 65 65
46
49
47
51 51
58 58 58
56 57
60
64
20
30
40
50
60
70
80
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Investor Confidence Index
(3-month expectations on economic situation)
Optimistic
Pessimistic
Source: BCRP
18

19. Surveys: Growth would be around 5,5% 2012-2013
5.5 5.5 5.8
Financial Entities Economic Analysts Non-Financial Firms
Expectations of GDP growth: 2012
(%)
5.7 6.0 6.0
Financial Entities Economic AnalystsNon-Financial Firms
Expectations of GDP growth: 2013
(%)
Source: Survey on Macroeconomic expectations, BCRP.
19

20. 5.7
4.9
4.5
4.3 4.2 4.2 4.1
3.7 3.6
3.3
Peru
Colombia
Ecuador
Chile
Uruguay
Venezuela
Bolivia
Paraguay
Argentina
Brasil
GDP Growth: 2012
Source: Consensus Forecast (March 2012) and BCRP.
20
According to Consensus Forecast, during 2012 Peru would be the
fastest growing economy in the region

21. Source: Consensus Forecast (March 2012) and BCRP.
28.5
9.8
6.7
5.4 5.3 5.1 5.0
3.4 3.3
2.3
Venezuela
Argentina
Uruguay
Brasil
Paraguay
Bolivia
Ecuador
Colombia
Chile
Peru
Inflation rate: 2012
21
With the lowest inflation rate

22. 0.2
5.0
4.0
5.0
6.8
7.7
8.9
9.8
0.9
8.8
6.9
5.7
6.3
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012* 2013*
Gross Domestic Product
(Annual percent change)
GDP growth in 2011 reached 6,9%
22
*Forecast

23. 2008 2009 2010 2011 2012 * 2013*
GDP 9,8 0,9 8,8 6,9 5,7 6,3
Domestic demand 12,3 -2,8 13,1 7,2 5,9 6,5
Private consumption 8,7 2,4 6,0 6,4 5,8 5,8
Public consumption 2,1 16,5 10,0 4,8 5,3 5,1
Private investment 25,9 -15,1 22,1 11,7 8,2 8,7
Public investment 33,6 21,2 27,3 -17,8 34,3 7,3
Exports 8,2 -3,2 1,3 8,8 7,5 7,7
Imports 20,1 -18,6 24,0 9,8 8,3 8,3
* Forecast
Our baseline projection estimates a GDP growth of 5,7% for 2012
driven by domestic demand
23

24. 2008 2009 2010 2011 2012 * 2013*
GDP 9,8 0,9 8,8 6,9 5,7 6,3
Agriculture and livestock 7,2 2,3 4,3 3,8 4,0 4,3
Fishing 6,3 -7,9 -16,4 29,7 -4,7 2,8
Mining 7,6 0,6 -0,1 -0,2 2,8 10,7
Raw materials 7,6 0,0 -2,3 12,3 3,4 6,3
Non-Primary
manufacturing
8,9 -8,5 16,9 4,4 5,1 6,2
Electricity and water 7,8 1,2 7,7 7,4 5,5 5,9
Construction 16,5 6,1 17,4 3,4 11,3 7,6
Commerce 13,0 -0,4 9,7 8,8 5,9 5,4
Other services 9,1 3,1 8,0 8,3 5,8 6,3
Non-primary sectors would continue leading the
dynamism
* Forecast
24

25. Source: COES
Electricity production continues to show solid growth…
10.9
10.1
9.0
9.5 9.4
8.5 8.3
9.6
8.8
8.3
7.7
8.1
5.6
7.9
6.7
Jan.
2011
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan.
2012
Feb Mar
Electricity Production
(YoY growth rate)
25

26. 1/ Seasonally adjusted
*Preliminary
…similarly in cement consumption
13.4
-3.3
-4.8
-12.3
-2.9 -2.5 -1.3 -2.3
8.1
19.5
24.4
18.0
12.0 12.9
23.0
Jan.
2011
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan.
2012
Feb Mar*
Domestic consumption of cement 1/
(annualized QoQ growth rate)
26

27. 25.3
40.2
9.3
35.7
39.6
34.3
21.5
19.5
6.1
25.3
9.8
6.1
15.9
2.2
36.1
Jan.
2011
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dic Jan.
2012
Feb Mar*
Volume of Capital Good Imports
(YoY growth rate)
Capital good imports grew at double digits in the first
quarter
*Preliminary
27

28. 17 17
19
21
17
18
21 22
26
21
16 16 15
13
Jan.
2011
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dic Jan.
2012
Feb
Sales of supermarkets
(YoY growth rate)
Sales of supermarkets and department stores have been
growing at double digits
23
19 20
24
17 17
26
22
17
18
20
17
10
16
Jan.
2011
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dic Jan.
2012
Feb
Sales of department stores
(YoY growth rate)
28

29. * Forecast
3,1
1,4
-4,2
0,2
-1.7 -1.3 -1.5 -1.8
4.5
9.1
7.6
5.7
7.9
6.4
4.9 5.1
2006 2007 2008 2009 2010 2011 2012* 2013*
Current Account Balance and Long-term financing: 2006 - 2013
(% of GDP)
Current account balance Long-term gross financing (disbursements + foreign direct investment)
US$ Millions 2010 2011 2012* 2013*
Current account balance -2 625 -2 267 -2 955 -3 935
Private long term gross
financing
12 090 11 309 9 837 11 050
The current account deficit would remain in sustainable
levels…
29

30. 30
…supported by trade surplus
US$ Billions 2006 2007 2008 2009 2010 2011 2012* 2013*
Exports 23,8 28,1 31,0 27,0 35,6 46,3 48,7 53,4
Imports 14,8 19,6 28,5 21,0 28,8 37,0 39,6 43,5
*Forecast
9,0
8,5
2,6
6,0
6,8
9,3 7,9
10.0
0
20
40
60
80
100
120
140
160
0
2
4
6
8
10
12
2006 2007 2008 2009 2010 2011 2012* 2013*
1994=100
US$billions
Trade Balance and Terms of Trade
(US$ billions and index 1994=100)
Trade Balance Terms of Trade

31. 31
Fiscal surplus of 1,1% of GDP is expected in 2012
3,1
1,4
-4,2
0,2
2.4
-1.3
-0.3
1.9
1.1
1.4
2004 2005 2006 2007 2008 2009 2010 2011 2012* 2013*
Overall balance of the public sector: 2004-2013
(% of GDP)
* Forecast

32. 1. Long run trends
2. Recent economic developments and
prospects
3. Monetary Policy Framework
4. Closing remarks
Agenda
32

33. 33
The Peruvian monetary policy framework includes besides the usual
features of an inflation targeting scheme a set of tools to deal with the risks
of financial dollarization.
Hybrid Inflation Targeting Scheme
Inflation Targeting
Control of
Dollarization Risks
Normal Credit/GDP evolution
 Liquidity Risk
• Reserve requirement on foreign
currency liabilities
• Preventive NIR accumulation
 Exchange Risk (Balance Sheet
Effect)
• Sterilized FOREX Intervention to
reduce exchange rate volatility
Inflation target : 2% +/- 1%
• Operational Target: Overnight
interest rate
+
33

34. Source: BCRP.
1.25
4.25
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
Central Bank Policy Rate
(In percentage)
The Central Bank has kept its monetary policy
rate since May 2011
34

35. 25%
00
10
20
30
40
50
60
70
80
Jan-07
Jun-07
Nov-07
Apr-08
Sep-08
Feb-09
Jul-09
Dec-09
May-10
Oct-10
Mar-11
Aug-11
Jan-12
Reserve requirement in domestic currency
(In percentages)%
Pre-Lehman
Post-Lehman
Recovery
55%
60%
00
10
20
30
40
50
60
70
80
Jan-07
Jun-07
Nov-07
Apr-08
Sep-08
Feb-09
Jul-09
Dec-09
May-10
Oct-10
Mar-11
Aug-11
Jan-12
Reserve requirement in foreign currency
(In percentages)%
Pre-Lehman
Post-Lehman Recovery
Shortterm
creditlines
Deposits
The Central Bank has been using reserve requirements to FOREX banks’
liabilities (FX deposits and foreign short-term credit lines))
35

36. 19.0
16.7
18.0
-5
5
15
25
35
45
55
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Feb.12
Credit to the Private Sector
(12 month growth rate)
Soles US$ Total
Credit continues showing higher rates of growth
36
CREDIT TO THE PRIVATE SECTOR
Annual % change
Dec-10 Dec-11 Jan-12 Feb-12
Soles 21,2 20,4 19,6 19,0
US $ 20,8 17,3 18,4 16,7
Total 21,0 19,0 19,1 18,0

37. There is still room for capital market development
67.9
51.4
32.2 30.9
17.8
Chile Brazil Colombia Peru Mexico
Bank credit to the private sector: Latin America 2011
(% of GDP)
Source: IMF
37

38. Mortgage credit is low compared to other countries in
Latin America
18.0
11.0
5.0
4.0
3.0
Chile Mexico Colombia Brazil Peru
Mortgage credit: Latin America
(% of GDP)
38
Source: Morris (2009), with the exception of Chile and Peru (national sources, 2010)

39. Non-performing loans rate has been less than 2% in the
past five years
39
1.54
1.0
3.0
5.0
7.0
9.0
11.0
13.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Non-performing loans rate of the commercial banks
(percentage)

40. FOREX operations aim to moderate exchange rate volatility rather
than simply intervine to fix any specific trend.
40
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
2.50
2.70
2.90
3.10
3.30
3.50
3.70
FOREXintervention(MillonsofUSD)
ExchangeRate(PEN/USD)
FOREX intervention and exchange rate
FOREX Intervention Exchange Rate
Lehman crisis

41. Source: BCRP
65
70
75
80
85
90
95
100
105
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
EXCHANGE RATE INDEX
(December 2008=100)
Colombian Peso
ChileanPeso
Brazilian Real
Mexican Peso
Nuevo sol
PEN has been very stable
41

42. As of March, inflation is transitorily above the target
range
-1
1
3
5
7
mar/05 mar/06 mar/07 mar/08 mar/09 mar/10 mar/11 mar/12
INFLATION AND INFLATION TARGET
(12 MONTH % CHANGE)
Maximum
Minimum
Inflation
target
range
Inflation12 month %, March
Inflation: 4,23%
CPI ex food and energy: 2,47%
CPI ex food and
energy
42

43. 1. Long run trends
2. Recent economic developments and
prospects
3. Monetary Policy Framework
4. Closing remarks
Agenda
43

44. Closing remarks
44

45. The strong fundamentals of the Peruvian
Economy
Julio Velarde
Governor
Central Bank of Peru
April 2012