BMI View: We maintain our broadly positive view on Peru's freight transport sector. External headwinds stemming from lower metals prices associated with weak Chinese demand have intensified in Peru in recent quarters, and we expect this to continue to weigh on economic growth in the coming years. A dimming global outlook towards the industrial and precious will depress fixed investment in Peru. Slowing economic growth will encourage loose monetary policies by the Banco Central del Reserva del Perú (BCRP), and combined with expansionary fiscal policies ahead of the 2016 general election, it will support relatively strong private consumption growth in 2015. However, resilience in household spending will not be enough to offset the impact of a weaker mining sector on the economy, prompting us to downgrade our real GDP forecast to 3.0% in 2014 and 3.7% in 2015, from 3.8% and 4.0% previously.
Further upside risk comes from the recently announced plan to heavily invest in Peru's transport network, which BMI believes will help boost the country's freight transport volumes, through providing easier routes to market. However, we caution that the plan may be overly ambitious and might not quite hit the desired target by the scheduled date. According to Peru's transport and communications minister, Carlos Paredes Rodrígues, USD22bn is set to be invested in the Latin American country's transport and communications sectors by 2016.