Peru’s growing confidence as new mega-port opens

Peru's economy is on a roll, recovering strongly after four consecutive quarters of contraction in 2023, and its businessmen think things will only get better. With inflation under control, its borrowing costs are the lowest in Latin America and GDP growth is exceeding expectations.

We can see the positive story reflected in business confidence, too.

CEIC has recently added indicators that dig deeply into the confidence dataset, including executives' expectations for their companies' own demand as well as their near- and medium-term outlook on the Peruvian economy more broadly. We've plotted four measures of confidence in our first chart.

The perception of companies' current conditions has been in optimistic territory for three consecutive months; in October, this measure reached a four-year high of 52.32. (A reading of 50 indicates that survey respondents have a net neutral outlook on the economy.)

When executives consider the overall economy, looking 3 months and 12 months into the future, the longer-term indicator is the most optimistic: the 12-month reading stood at 60.3 in October, versus a three-month index of 51.7.

This pattern holds when executives consider the demand outlook for their own companies. The 12-month reading of this measure rose to 67.2 in October from 65.3; that's higher than the 3-month readings, which rose to 58.4 from 56.8 in September.

Optimism about the new port of Chancay is undoubtedly a factor. This facility – South America's largest deep-sea port and a venture with China – opened on Nov. 15. Located 80 km north of Lima, it's expected to be a major gateway for the entire continent, handling commodity exports from Chile, Ecuador and even Brazil.

Indeed, one of the largest sectoral increases in the 12-month demand outlook occurred in Peru's mining and hydrocarbons sector. Its October reading jumped ahead of the other lines in our chart – reaching 70, up from 60.5 in August.

Our second chart tracks Peruvian monetary policy and the successful battle against inflation. The central bank has been cutting interest rates since mid-2023; in October, Peru's inflation was rising at a 2% year-on-year pace, exactly at the midpoint of 1-3% target band.

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