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Possible Future for a Peruvian 10 Billion SWF

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Luis Miguel Castilla

Luis Miguel Castilla

The Latin American country of Peru is the globe’s second largest silver, copper, and zinc producer. Regards to gold producing Peru ranks number six. 60% of Peru’s exports come from mining activities. 20% of Peru’s fiscal revenues are derived from mineral reserves. It is fair to say commodity prices have a significant impact on Peru’s economy and national budget.

Peru’s southern neighbor Chile has two sovereign wealth funds, one is a stabilization fund. Currently, Peru only has a fiscal stabilization fund.

Government officials are debating the requirements for establishing a sovereign wealth fund in Peru. The proposed fund could be US$ 10 billion in size. Peru’s Minister of Economy and Finance Luis Miguel Castilla wants to see stabilization in the global commodity markets before they can finalize plans. Like other commodity-based sovereign funds, proceeds from mineral exports would be deposited into the sovereign wealth fund. The sovereign fund would invest the money overseas. Peru’s international reserves have doubled since the onslaught of the global financial crisis to around US$ 60 billion.

Since 2002, Peru has been able to pay down public debt. Peru’s Fiscal Responsibility and Transparency Law (FRTL) also called Ley de Responsabilidad y Transparencia Fiscal has been effective in helping the country reduce its debt. Public sector gross debt was reduced from 44% of GDP in 2004 to 24% of GDP in 2010.

Peru’s Fiscal Stabilization Fund
Peru has a fiscal stabilization fund (FEF). [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

FIRRMA Bill is a Big Deal for Foreign Asset Owners

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The United States Treasury is analyzing options on further restricting investments into “sensitive” sectors, such as technology and defense, in the United States from Chinese state-owned capital. The U.S. Commerce Department, under the export control regime, banned U.S. companies from selling parts to ZTE Corporation, a Chinese telecommunications manufacturer, for seven years. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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AIMCo Posts 10.4% Return in 2017

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The Alberta Investment Management Corporation (AIMCo) posted its performance for the 12-month period trailing December 31, 2017, which saw its overall assets grow by 8.4% – or C$ 8.0 billion (US$ 6.1 billion) – to C$ 103.7 billion (US$ 82.3 billion). This represents returns net-of-fees on its C$ 88.2 billion (US$ 70.3 billion) worth of balanced fund investments in 2017 of 10.4%, against a 9.1% custom benchmark. Established in 2008, AIMCo represents the financial well-being of 32 pension, endowment, government, and specialty funds in the Canadian province of Alberta. This includes the Albert Heritage Fund.

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Mubadala Real Estate Targets JV Developers, Eyeing Local REIT Launch

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Mubadala Investment Company’s property arm is preparing to launch a local real estate investment trust (REIT) by 2020, and is currently in talks with several developers for international joint ventures on a plot-by-plot basis that are expected to be finalized in 2018, according to Ali Eid Al Mheiri, executive director of Mubadala Real Estate and Infrastructure. Ali Eid Al Mheiri is also Vice Chairman of ALDAR Properties PJSC and Chairman of Abu Dhabi Finance Company PJSC. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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