After a nail-biting run-off presidential election between two market-friendly contenders in Peru, Latin American investors view Pedro Pablo Kuczynski’s victory as a positive outcome that will benefit one of the region’s fastest growing economies.
Kuczynski, widely known under his initials PPK, is a 77-year-old former prime minister and finance minister who supports continuity of Peru’s resource-driven, relatively orthodox economic model, which has consistently delivered strong growth since the early 2000s.
‘Private led investments will be the engine of growth, the new administration understands this and their growth agenda should rally widespread support’, portfolio manager Roberto Lampl told Citywire Americas.
Lampl, the head of Latin American investments at Alquity and manager of the Alquity Latin America fund, was enthusiastic about Peru’s upcoming change.
‘I believe Peru will be one of the fastest growing economies in Latin America and perhaps even in all emerging markets,’ he said. Lampl has 12% of his portfolio allocated to Peru.
PPK narrowly defeated right-wing, populist Keiko Fujimori in the final vote count announced on June 9. A 41-year-old former congresswoman, Fujimori went into the first round of voting in April with a strong lead and was ahead in most opinion polls a week ago.
While she lost by a mere 40,000 votes in a country of 18 million citizens with compulsory voting, her party, Fuerza Popular, will hold a wide majority in congress.
‘The market will look at his ability to face a congress where he does not hold a majority. So, the attitude of the “Fujimoristas”, with 40% of the seats, will be the key to governability issues,’ said Alfredo Mordezki, head of Latin American fixed income at Santander Asset Management.
However, Melvin Escudero, the Peru-based founder and chief executive of El Dorado Investments, a consultancy company in assessment management, thinks governability will not be a big issue for PPK given both parties’ goals of economic prosperity.
‘There are expectations from the public and the media that this new government will be about team work,’ he said.
‘Peru has the opportunity to become the growth leader in the region,’ Escudero told Citywire Americas.
He expects investments in the Andean country have a positive impact on all sectors, naming infrastructure, real estate, and mining as areas to look out for. He also expects private investment to surge.
‘There are many mining projects, which are global ventures, which can actually become operational under PPK. This is a great opportunity for investors,’ he said.
On the other hand, Mordezki does not foresee much change in Peru’s opportunities, but rather a continuation of a well-capitalized financial system.
‘Peru was already growing beyond its Andean neighbors’ rate in the first quarter of 2016. We are not foreseeing many changes on the regulatory framework for banks or utilities so, these sectors remain attractive,’ he continued.
Peru represents around 17% of Mordezki's Santander Latin American Corporate Bond fund, which has exposure to banks, quasi-sovereigns bonds, utilities, cement and retail.