Peru to Finalize $10 Billion Sovereign Wealth Fund by 2013: Finance Minister
The pre-requisites for Peru to establish a $10 billion sovereign wealth fund are in place but the mineral rich country wants to see stabilization in global commodity markets before it can finalize its plans, Luis Miguel Castilla, Peru's Finance Minister told CNBC on Friday.
"We have a fiscal surplus, we have low debt levels, and we're thinking of being able to do some asset management on those surpluses that we have," Castilla said in an interview on CNBC Asia's "Squawk Box" on Friday, adding that details will be announced sometime in 2013.
"Given that this world is uncertain, we're still dependent on commodity prices...20 percent of our fiscal revenues come from mineral revenues. So I think once this period subsides we can look into developing our own sovereign wealth fund."
Peru is the world's second biggest silver, copper and zinc producer and the sixth biggest gold producer. In all, mining accounts for 60 percent of Peru's exports.
But the slowdown in global growth and falling commodity prices are likely to hit the country's export earnings this year. Peru's central bank has cut its forecast for this year's trade surplus to $6.7 billion from $9 billion previously.
The narrower trade surplus will contribute to a wider current account deficit, which has been covered by ample foreign investments.
Castilla is currently touring Asia to promote investments in Peru's mining and infrastructure sectors by China and sovereign investors such as Singapore's Temasek Holdings and sovereign wealth fund GIC.
Peru's international reserves have doubled since the global financial crisis of 2008-2009 and now total nearly $60 billion. The country's net public sector debt load is just 6 percent of gross domestic product, and its public sector surplus in the first quarter of the year was 7 percent of GDP.
Proceeds from mineral exports, deposited in the planned sovereign wealth fund, will be "invested abroad and it will ease appreciation pressures we're seeing on our currency," Castilla said, adding that Chile and Norway could provide the model for a Peruvian sovereign fund.
Peru's central bank has been intervening in the currency market in recent months to ease the appreciation in the Peruvian nuevo sol (PEN) against the U.S. dollar. The central bank bought $151 million on Thursday at an average of 2.629 PEN, Dow Jones reported. The Peruvian sol has gained 4.12 percent against the greenback in the last 12 months.
—By CNBC's Sri Jegarajah