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Peru Shipping Report Q1 2011
Business Monitor International, Jan 2011, Pages: 99
Peru Shipping Report provides industry professionals and strategists, corporate analysts, shipping associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Peru's shipping industry.
Peru's economy continues to stand out as one of the strongest performers across the emerging market sphere, and although there are some significant risks to its growth trajectory over the next 12 months, we believe the outlook remains one of still-sound fundamentals and massive investment potential. Although growth is unlikely to maintain the rampant pace set in the first half of 2010, our core view remains that Peru will continue along its longer-term path of developed-state convergence, providing significant opportunities for investors along the way. This is good news for the country's port sector, as further foreign investment in infrastructure, such as that we have seen in Callao, will be necessary to deal with increasing traffic.
Our country risk team maintains the view that the economy will be a regional outperformer in 2010,supported in large part by robust domestic demand, which will see increasing container throughput at the country’s main ports as demand for imports grows.
Headline Industry Data2011 port of Callao tonnage throughput forecast +6.51% following projected growth of 5.09% in 2010.2011 port of Paita tonnage throughput forecast +0.15% following projected growth of 16.51% in 2010.2011 port of Callao 20-foot equivalent unit (TEU) throughput forecast +6.13% following projected growth of 5.26% in 2010.2011 port of Paita TEU throughput forecast +0.18% following projected growth of 19.96% in 2010.2011 total trade forecast +8.44%.
Key Industry Trends
Peru On Course To Position Itself As Regional Logistics Hub - BMI believes that attempts to increase private investment in Peruvian ports could help them reach their potential of becoming transhipment hubs for South America's east coast, serving not only the hinterland around Lima, but also the northern ports of Chile to the south and Ecuadorian ports to the north.
Port Of Callao Continues To Attract International Investment - The strong international interest in constructing and operating terminals at Peru's main port of Callao reflects its position as a major trade hub in the Pacific region. It is the largest port on South America's pacific coast and one of the most important container terminals in South America, offering access to Lima, as well as Chile and Ecuador. The port looks set to register stable growth in the coming years and as such BMI expects international terminal operators to continue vying for concessions there.
Further Investment Needed To Bring Infrastructure Up To Standard - While BMI welcomes the participation of international terminal operators as a positive step for the Peruvian port sector, we stress that continued investment in infrastructure is badly needed. While the country rose 13 places in the international infrastructure ranking of the 2010 Global Competitiveness Index, published by the World Economic Forum, to 97 out of 134 countries, BMI notes that it lags behind regional peers such as Chile(23) and Mexico (71). Ositran, Peru's supervisory board for investment in public transport infrastructure, this year estimated the gap in infrastructure investment at US$14bn - US$7.4bn for roads, US$3.6bn for ports, US$2.4bn for railways and US$571m for airports.
Risks To Outlook Potential downside risks to our outlook include a possibility of reduced Chinese demand in 2011. Our Asia Country Risk team predicts that China's real GDP growth will drop from 9.7% in 2010 to 7.5% in2011. This will have a knock-on effect on its demand for raw materials. As China is second only to the US in the list Peru's main export partners, any slowdown in Chinese spending will have a negative effect on the country's port sector.
A second downside risk is the possibility that Peru will not be able to improve its port infrastructure in order to keep up with global demand for commodities. Congestion has become a problem at the main port of Callao and we believe that if the country does not improve efficiency and capacity there is a possibility that importers will look elsewhere for their supplies. We acknowledge, however, that importers are traditionally repeat customers and supply contracts take some time to develop, therefore this is a mid-term rather than a short-term risk.
The main upside risk to our forecasts comes from increasing consumer demand from Peru's growing population of 15- 34-year-olds. With average annual real GDP growth of 5.3% predicted during our forecast period, demand for containerised consumer goods could rise, resulting in more port traffic.
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