Cost of Peruvian trade finance to rise

The cost of trade finance in Peru will climb at least 20% this year amid higher reserve requirements by the central bank and tighter credit globally.

"There will be an increase in rates, probably leading us to migrate to the lower tiers within our client portfolio. [That is] a group of companies with a higher level of risk," Kathleen Rubin, manager of the international division at Lima-based lender Interbank, tells GTR.

The price of trade finance will jump at least a fifth in 2008 due to the beefed up reserve requirements and credit woes in international markets, Rubin says.

Nevertheless, Interbank plans to increase foreign trade lending by US$80mn this year, from US$225mn presently, she says.

In 2007, the bank lent almost US$500mn to support exports and imports that usually had around 180-day terms. Large Peruvian companies with revenues above US$15mn are paying between 3.5% and 4.5% over Libor for import and export financing with 180 days on average, according to Rubin. Medium-sized firms are charged from 4.5% to 9% above Libor.

Obtaining funding locally has been ruled out for being too costly, she adds. The six-month Libor had fallen to about 3% in mid-February from 5.4% in mid-June 2007.

Rubin expects investment grade Peru in the second half of 2008. Exports could fetch US$30.3bn and imports may total US$24.9bn at the end of 2008, she projects.

"We will remain very focused on the agro-industrial, textile and fishing sectors in Peru," she says.