Forget Mexico—Is Peru the region’s secret success story?

With the world's finance ministers and central bank governors assembled in Lima for the annual meetings of the International Monetary Fund and the World Bank, host nation Peru is increasingly being hailed as Latin America's secret success story.

The South American country is a far smaller player on a global stage compared to Mexico, Brazil, or even Chile, but it has also escaped some of the eye-catching scandals and governance issues that have ensnared some of its larger neighbors.

Lima, Peru
Axel Fassio | Photographer's Choice RF | Getty Images
Lima, Peru

Patrick Mange, emerging market strategist at BNP Paribas Investment Partners, said that his first choice for short-term investment in Latin America would be Mexico, with the smaller Peru following in second place.

"Brazil might have potential, but not until next year, and Chile is difficult because of its over-reliance on commodities. So I'd still go for Mexico, but Peru is reforming really quite well in terms of economic governance," Mange told CNBC.

As of last year, Peru and Mexico — whose population is around four times the size of the former — share the same credit rating, A3, from Moody's Investors Service.

Peru was upgraded by Moody's in July 2014 on the back of the continued strength of its government balance sheet and measures to diversify revenue sources and widen its tax base. These measures have helped decrease the country's vulnerability to commodity price volatility, despite the importance of copper and silver to its economy.


"Peru's long-term economic achievements have been considered a model for other countries in the region," said Mark Mobius of Templeton Emerging Markets Investment Trust in a research note on Wednesday.

He added that worries about a near-term rise in U.S. interest rates, slowing growth in China — a significant market for many Latin American exporters — and currency weakness have weighed on South America, but that Peru seemed to be "weathering the challenges better than some other countries."

For instance, the country's currency, the nuevo sol, has fallen by around 22 percent against the U.S. dollar this year — a steep decline, but one that is dwarfed by the 43 percent slump in the Brazilian real.

In addition, the International Monetary Fund forecasts that Peru's economy will expand by 3.2 percent in 2015, compared with the 2.5 percent growth forecast for Chile, 3.0 percent seen in Colombia and 2.4 percent expected in Mexico.

Longer-term, Peru's economy should see a boost if and when the price of copper and silver — of which it is one of the world's biggest producers — and other metals recover.

"While lower commodity prices have recently hurt Peru, copper output is expected to rise as new mines come on line in the next few years —potentially pushing Peru ahead of Chile as the world's second-largest producer — and a rebound in prices could offer an economic boost," said Mobius.

Peru in brief:

  • Population: 30 million.
  • GDP growth forecast in 2015: 2.4 percent (IMF).
  • Inflation forecast in 2015: 3.2 percent (IMF).
  • Income level: Upper middle income (World Bank).
  • Currency: Peruvian nuevo sol.
  • Major industries: Mining, particularly copper, silver, gold and zinc. Tourism is a growth industry.

— By CNBC's Katy Barnato. Follow her on Twitter @KatyBarnato.