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Peru plans to set up a sovereign wealth fund, taking advantage of record foreign reserves and metal prices to finance investments in infrastructure and education, Finance Minister Ismael Benavides said.

The Andean country may tap its $44 billion in foreign currency reserves and tax revenue to create the fund before the President Alan Garcia’s term ends in July, Benavides said in an interview in New York today.

“We have not only reserves but extraordinary revenues from mineral exports,” the 65-year-old Benavides said, without providing details about how the fund would work. “We might come up with something in the first quarter next year.”

The fund would be modeled after a $12.8 billion fund Chile created in 2006 to hoard windfall profits from surging copper prices, Benavides said. Peru is the world’s largest producer of silver and second-largest producer of copper after Chile. Metals accounted for 62 percent of exports in the first half of 2010.

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Additionally, Peruvian exports may rise to record levels as Chinese demand alone has helped boos Peruvian exports by 17%, totaling $31.6 billion USD.

Chinese demand will help boost Peru’s exports 17 percent to $31.6 billion after last year’s 15 percent decline, Juan Carlos Mathews, export director at the government’s trade promotion agency Promperu, said in an interview in Lima yesterday. Exports may rise 9 percent next year, he said.

China overtook the U.S. as Peru’s top export destination for the first month on record in July, aided by a free-trade agreement signed in 2009, Mathews said. China accounted for 17 percent of Peru’s exports according to preliminary data for July, compared with 16.8 percent for the U.S., as the world’s second-largest economy increased purchases of fruit, fresh fish and wood products, Mathews said.

“We’ve found an alternative market at a time of global crisis,” Mathews said. “The Asian market has been one of the ways out.”

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Click here to access the full article direct from SeekingAlpha.

Travel to any country in Latin America and you will see the visible hand of China at work: a computer manufacturing plant in Mexico, a copper mine in Peru, a football stadium in Costa Rica. In the year 2007, the thought of China in Latin America would have appeared, at best, improbable. But in a three-year stretch, China signed free trade agreements with Chile, Peru and Costa Rica, inked billions of dollars worth of deals in oil and mining projects throughout the region, and supplanted the US as Brazil’s biggest trading partner. Once almost unseen in Latin America, China’s bilateral trade has risen from $12bn in 2000 to well over $150bn today.

Given the importance of its new Asian friend, Latin Americans are rolling out the red carpets to Chinese business delegations and jumping on planes not only to Beijing but also to Shanghai, Shenzhen, and Tianjin.

Rationale Behind Chinese Investments in Latin America [...]

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Here are the basic facts and forecasts, provided via this article from Nasdaq.com. For the record, author Sophie Kevany, is a superb journalist who is actually based in Peru. This article does not do justice to her credo of true investigative journalism I have read in the past, but no less is always a good source for all that is Peruvian finance.

Check out her other articles on the WSJ, Decanter (yes she even writes about Peruvian wines and spirits), and well, just google her name and you’ll be greeted with a swarm of informative pieces about Peru and the greater South American region.

LIMA -(Dow Jones)- Peru’s free trade agreement with China is set to come into force early February, and it is expected to boost total trade values to an estimated $8 billion in its first year.

The treaty was ratified earlier this month by a supreme government decree, meaning Peru’s congress will not vote on it, state newspaper El Peruano said Wednesday.

The treaty excludes so called “sensitive products” such as textiles, shoes and clothing, Peru’s Vice Minister for Trade and Tourism, Eduardo Ferreyros, told El Peruano.

Trade between the two countries is expected to total about $5.5 billion in 2009. Of that, exports to China from Peru are expected to reach $3 billion, Ferreyros told state news agency Andina, while imports from China should total about $2.5 billion.

-By Sophie Kevany, Dow Jones Newswires; 51-198-903-8043; sophie.kevany@ dowjones.com

(Oct 26-30, 2009)

*metals commodity prices obtained via Kitco Metals
*energy commodity prices obtained via Yahoo Finance
*agriculture commodity prices obtained via Yahoo Finance
*wheat futures via Bloomberg

Toledo comments on Peru’s FTA with China

Former President Alejandro Toledo criticized the free trade agreement that Peru and China signed in April this year. Toledo was at the Club de la Banca in San Isidro, Lima this afternoon after talks with a group of businessmen on the financial crisis and opportunities for Peruvians.

Remember, Toledo was instrumental in rebuilding Peru’s market economy and in promoting the signing of the Free Trade Agreement between the United States and Peru. It is curious as to why a man who was once labeled a lap dog of US policy in promoting free trade and free market economics is now expressing concern about Peru’s FTA with China.

If you can understand Spanish I suggest watching this short video to get his full commentary. If not, the general gist of his message is that Peru simply needs to be careful and help empower Peru’s micro-enterprises with the skills necessary to compete Chinese labor and cheap manufacturing.

Second, in the midst of this crisis, Peru can not forget the pains and ills of the everyday Peruvian on the street. Although the agreement with China is something which can potentially bring long term investment and growth in trade, it is important to not forget about the Peruvians which will be affected (economically) by the growth in exchange with China.

libcom.org

“The position of the workers is to go on strike on Monday starting at 9 a.m. (1400 GMT) and leave the mines,” Luis Castillo, the federation’s director, told Reuters.

Reuters reports some unions have agreed to stay on the job, but considering that Peru is the largest producer of silver in the world, #2 of zinc, #3 of copper, #4 of lead, and #6 in gold—such a walk out does have the potential ripple over into global spot prices for the above mentioned metals.

When miners held a similar strike in mid-2008 and the strike helped push copper prices toward a record high—although this was at the peak of bull markets, the market effect is no less noted. The underlying point; markets are watching and investors pay attention to these kinds of things.

Company’s which will be affected include, Volcan (VOL_pb.LM), Newmont (NEM), Freeport-McMoRan’s (FXN), Xstrata’s (XTA.L), Buenaventura (BVN), Southern Copper (PCU) and BHP Billiton (BHP).

Click here to access a more details story on this topic from Reuters.

As always, CSA will keep you up to date with relevant developments as they unfold.

~ Benito

“I don’t see any adequate-supply situation in any commodity market over the next decade or two,” Rogers, the chairman of Singapore-based Rogers Holdings, said today in an interview in New York. “The commodities boom is not over and the bull market has several years to go.”

“I own some cotton,” Rogers said. “I own some sugar,” he said. “Sugar will go much, much higher over the course of the bull market.”

“Oil could reach between $150 and $200 a barrel,” because known reserves of crude are declining, Rogers said. He said international relations, particularly between the U.S. and Iran, will help guide prices.

“Natural gas is very cheap,” he said in the interview between sessions at an ETF Securities Ltd. investor conference.

Commodities ‘Best Place’

“Commodities are the best place to be, if you ask me, based on supply and demand,” Rogers said. He said he hasn’t invested in equities outside of China in two years.

“Everything has gone through the roof,” Rogers said of equities prices, adding that he may consider buying stocks “if something collapses.”

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According to this Bloomberg article, guess who’s stands poised to benefit from this? You guessed it Asia’s smelters, who despite the global slow down remain hungry for
more.

Alex Emery in Lima down in Lima writes:

Glencore International AG, the world’s biggest commodities trader, and Trafigura Beheer BV are benefiting as suppliers of Doe Run Peru’s shut lead and zinc smelter seek international traders to sell their concentrates.

“We’re looking for more clients abroad, particularly Asian smelters,” to buy the extra production, Glencore’s Peruvian manager Fernando Cafe said in a July 3 interview.

Cia. De Minas Buenaventura SA, Pan American Silver Corp. and about 30 other miners in the central Peruvian Andes have had to seek alternative buyers after the Renco Group Inc. unit smelter ran out of cash and halted all operations on June 2…

To read the complete article please visit the complete Bloomberg article.