Coatings World - August 2017

Latin America Sponsored by

By Charles W. Thurston Latin America Correspondent

International investors are respond- ing positively to Peru’s strong growth record and its plans to rebuild after last winter’s devastating El Niño floods, which may require $9 billion in recovery funds over the next five years, according to President Pedro Kuczynski.

With plans to boost infrastructure spending for housing, roads and bridges, and other projects, the demand for architectural and industrial paints and coatings should rise markedly.

Last year, the national market for paint was estimated at $350 million, and based on a recent Moody’s Investor Service prediction of 2017 economic expansion at 3. 7 percent in Peru, the market could normally grow by $20 million this year. However, billions of dollar worth of recovery spending and investment could accelerate that figure substantially. Peruvian paint companies with strong industrial sales, like Peru Paint, are well positioned to grow with recovery spending.

Peru’s growth is expected to be stronger in the near future, in keeping with past performance. The IMF, which completed a country assessment in June, said “with average growth of over 5. 25 percent since 2000, Peru has significantly reduced unemployment and poverty.” Moody’s pegs 2018 growth at 4.2 percent and 2019 growth as fast as 4. 5 percent.

Per Capita Income Growing

With GDP growth, per capita income in Peru also is rising, with the current $12,600 estimate similar to that in Colombia, and closing in on the regional $15,600 average, according to IMF figures. Homeowner spending on architectural paint – and automobiles – is expected to rise along with the per capita income level.

Lending by Peru’s banking industry
also is up: May loans were 2.4 percent
higher than in the same month last year,
the national association of banks reported.

With greater consumer spending, manufacturers with company stores like Sherwin-Williams should gain sales over the near term. Chile’s Pinturas Ceresita, and domes-tically-owned Pinturas Vencedor, distributed within the Sodimac home improvement chain, also are positioned for improved sales.

Private Investment in
Infrastructure Key

One separate private sector investment tool that the Peruvian government is said to be earmarking $14 billion for this year is public-private partnerships (PPP), favored by Kuczynski, who has held top posts at the World Bank, First Boston and several private investment funds. Next year PPPs may also receive $10 billion in government funds, according to a statement by Minister of Finance Alfredo Thorne. PPPs typically involve very large private investments in public infrastructure in exchange for long-term operating agreements.

The Ministry of Economy and Finance
has released a plan to spend 1.3 percent
of the country’s $750 billion GDP for re-
construction and other public investment.

A goal of adding 150,000 housing units is also among the government’s recovery plans this year. Private sector investors, in turn, are predicted to finance some $1.2 billion worth of hotels in Peru over the next five years, double the value of investments over the past five years.

Multilateral Investments Rise Banks, especially multilateral banks, are willing to lend money into Peru, thanks to its strong credit rating – at A3 per Moody’s, the second-highest among Latin American investment-grade countries, following neighbor Chile.

The International Finance Corp., for example, is considering a $2 billion green bond issue to finance environment-linked projects in Peru, according to a statement by Thorne.

Among other multilateral banks offering fresh funding to Peru is the European Investment Bank, which is considering a $150 million loan for 330 MW of renewable energy projects that would be developed by Enel Green Power SpA. CW