There's money to spend in Peru. Interest rates are low and confidence in the region is back. Overseas demand for Peruvian commodities such as fishmeal, metals and natural gas has soared, a shot in the arm to the economy. But the domestic stock market is largely void of serious money, making it difficult for companies to raise money through equity. Institutional investors such as pension funds and insurance companies have come to the rescue, racing to finance Peruvian companies. The financial tools of choice have been fixed-income instruments, mainly bonds, and terms have never been better. Maturities on bonds are longer than they have ever been, and demand for these instruments is skyrocketing over the amount available for financing.

"Investment funds like these are going to help push up the economy," says Reynaldo Roisenvit, assistant general manager of Centura SAB, the brokerage unit of Interbank, one of Peru's largest banks. "There is still much room to grow." When an instrument does hit the market, demand soars, Roisenvit says.

Such was the case of Transportadora de Gas del Peru (TGP), a pipeline consortium of seven companies that sold US$270 million in bonds in August 2004. TGP is building a pipeline that will link the multibillion dollar Camisea gas plant to Lima. "The initial offering was going to be somewhere between $100 and $150 million, but along the way we realized that the demand was much greater. We ended up practically doubling the value of the issue," says Gianfranco Ferrari, general manager of corporate banking for Banco de Credito del Peru (BCP), the financial institution that structured the deal, which was carried out in both dollars and in Peruvian sols.

TGP's 25-year placement was Peru's largest bond issue ever. "Ten years ago, issues were plain vanilla, $3 million at three years, and that was it," says Ferrari. "The amounts, tenors and complexity of the issues you see today are an entirely different story.... Although a comparatively small market, it can handle large deals."