ECR: Which way next for Peru?

Peru’s investor safety has come under close scrutiny from economists over the past year, forcing it down to 45th in the global rankings. Although its risk rating remains far better than it was 10 or 15 years ago, several of the country’s economic and political risk indicators have slipped recently, mostly in response to falling minerals prices, weakening production and investment in the mining sector. This, in conjunction with lower state capital spending has pushed GDP growth down to around half the 6%-plus average recorded for the past decade. The resignation of finance minister Luis Miguel Castilla and impending sub-national elections are unsettling the political environment, and there are question marks hanging over corruption in Peru and its institutional strengths – two of the political risk assessment factors scoring fewer than half the points available. Yet the sovereign’s prospects remain favourable, with orthodox policies and large infrastructure projects continuing, including a gas pipeline, new copper and gold mines scheduled to start production over the next few years, and expansion of the Lima metro railway system.