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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. ]

Canadian Pension Giants Could Support Trans Mountain Pipeline Deal

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The British Columbian (B.C.) government and indigenous groups publicly oppose the Trans Mountain Pipeline project over a number of issues, which include environmental concerns (potential pipeline spills) and land protections. The threat of project derailment sent jitters to Houston-based Kinder Morgan, Inc., requiring the company to halt non-essential spending on Trans Mountain Pipeline L.P. Calgary-based Kinder Morgan Canada Limited, which owns the pipeline, is a listed company that is 70% owned by Kinder Morgan and 30% owned by stock market investors (float). Kinder Morgan Canada hired TD Securities to explore options regarding the future of the pipeline.

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Goldman Sachs Poised to Name David Solomon as New CEO

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Goldman Sachs is poised to name David M. Solomon, the firm’s president, as its new CEO, replacing Lloyd C. Blankfein. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Blackstone and Goldman Invest in Francisco Partners

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Larger alternative investment houses and banks are taking ownership stakes in specialist private equity firms. On July 13, 2018, Blackstone Group’s Strategic Capital Group and Goldman Sachs Asset Management’s Petershill program acquired a minority stake in San Francisco-based Francisco Partners. Francisco Partners is a private equity firm focused on tech-related companies, competing against Thoma Bravo, BC Partners, Vista Equity Partners, Bain Capital and other specialists.

Dipanjan (DJ) Deb is the Co-Founder and CEO of Francisco Partners. Before forming the company in 1999, he was a Principal at Texas Pacific Group (TPG).

Advisors

Francisco Partners was advised by Evercore and Kirkland & Ellis LLP. Simpson Thacher served as legal counsel to Blackstone and Fried Frank served as legal counsel to Goldman Sachs.

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