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Capital Markets

Peru: Nervy investors waiting for signs from Humala

Fears over market-unfriendly policies rise; But are not justified says BAML banker

International investors gave their initial verdict on the presidential election victory of Ollanta Humala in Peru as the country’s five-year credit default swap widened to 180 basis points from being flat to higher-grade Latin American sovereigns at 105bp to 110bp. Despite attempts to portray himself more as an heir to Brazil’s Lula rather than Venezuela’s Hugo Chávez, investors clearly believe that Humala’s administration brings an increase in political risk.

"We see some encouraging signs. The new administration has stated that it wants to continue some of the policies that have proved effective in encouraging growth and stability"

Augusto Urmeneta, Bank of America Merrill Lynch

Augusto Urmeneta, head of Latin American debt capital markets at Bank of America Merrill Lynch, says it’s too soon to know what the impact will be on international capital markets issuance from Peruvian borrowers as there is little in the pipeline to be affected by the election. "We don’t expect a lot of activity," he says of international DCM in the rest of 2011. "We saw some activity by banks and the sovereign late last year and the beginning of this year – including Inkia Energy in January [a $300 million bond that BAML led with Credit Suisse] – but we expect maybe just one or two [Peruvian] financial institutions."

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