Bloomberg News

Peru’s Public Works Boom Drives Faster Economic Growth

April 16, 2012

Peru’s economic growth quickened more than analysts expected in February after the government stepped up investment in public works and business sentiment rebounded.

Annual growth accelerated to 7.2 percent from 5.4 percent the month before, the government’s statistics agency said today in an e-mailed report. The median estimate of 11 analysts surveyed by Bloomberg was for growth of 6.1 percent. Expansion last exceeded 7 percent in August.

The central bank kept its benchmark rate unchanged at 4.25 percent April 12 citing indicators showing that economic growth has stabilized after slowing in the fourth quarter. Business sentiment climbed to a one-year high in February, according to the central bank, after the outlook for global growth improved and President Ollanta Humala took measures to quell protests that have delayed investment in the mining industry, said Cesar Perez-Novoa, a managing director at Celfin Capital.

“The rise in business confidence tells you companies are going to step up investment,” Perez-Novoa said by phone from Santiago. “We’re seeing a very strong momentum in the economy.”

The government’s infrastructure-heavy economic stimulus measures spurred construction growth of 14 percent in February from the same month last year, up from 4.4 percent in January. The retail industry expanded 8.9 percent, while manufacturing, the largest segment of the $176 billion economy, gained 1.3 percent.

The sol was little changed at 2.6570 per U.S. dollar at 11:34 a.m. in Lima, from 2.6580 on April 13, according to Deutsche Bank AG’s local unit.

Stimulus Measures

Humala’s government is implementing stimulus measures worth almost 2 percent of gross domestic product to offset slower global growth.

The stimulus helped increase investor confidence, which coupled with “very dynamic” consumer demand, will fuel growth of 5.7 percent this year, Finance Minister Miguel Castilla said at a news conference in London today.

The government has also moved to allay industry concern after protests forced Newmont Mining Corp. (NEM:US) to suspend construction of its $4.8 billion Minas Conga project in November.

Humala revamped his cabinet Dec. 11 and commissioned a review designed to suggest environmental improvements to Minas Conga, which would be Peru’s largest-ever investment.

Peru’s annual inflation rate will slow to between 2.4 percent and 2.6 percent this year from 4.7 percent in 2011, central bank President Julio Velarde said at the conference in London today.

The central bank had said Feb. 9 inflation would slow to 2 percent this year.

In a separate report today, the statistics agency said the unemployment rate rose to 8.7 percent last month from 8.3 percent in February.

To contact the reporter on this story: John Quigley in Lima at

To contact the editor responsible for this story: Joshua Goodman at

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