Room for Mistakes
Jan 19, 2012
Peruvian political risk is back in the headlines. But so far investors are taking such events in their stride as President Humala pursues market friendly policies.
by Raúl Gallegos
November was not a good month for Peruvian President Ollanta Humala. In a matter of weeks, Humala’s administration faced corruption scandals, led failed negotiations with striking miners, declared a state of emergency, and handled an ensuing cabinet reshuffle. It was all quite a handful for someone with four months on the job.
The resulting headlines coming from the Andean country suggest that the president’s honeymoon period is over and they remind investors that Peru’s respectable financial profile is threatened by bouts of social unrest.
Indeed against this backdrop, Barclays moved Peru from overweight to neutral in its credit portfolio in mid December, keeping an underweight position in local bonds as well. The government’s ability to negotiate successfully with miners is seen as key given the importance of this sector to the country’s GDP growth.
Markets have so far taken renewed political risk...
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