The Peruvian government seeks to attract investment -- both foreign and domestic -- in nearly all sectors of the economy. The U.S.-Peru Trade Promotion Agreement (PTPA) enables Peru to attract additional investment by clarifying rules for investors, increasing transparency, reducing barriers to trade, establishing faster customs procedures, and improving the dispute settlement process. The PTPA also contains provisions for a bilateral investment treaty (BIT) and a tax treaty between Peru and the United States.
In Peru, the business environment requires American companies to have a well-planned market-entry strategy. The following list of tips for doing business in Peru is general guidelines for an initial market evaluation.
1. Make certain your project is economically viable. The profitability of a project or the sale of goods and services in Peru should be based on sound economic criteria. Do not rely on promises of subsidies, incentives, special considerations, or non-market related sources of income from a prospective partner to create a profit. In Peru, it is difficult to predict the future. Therefore, try to ensure your strategy achieves profitability in the short to medium term (1-3 years) and can become a sustainable model for the medium and longer term. This requires market research of competing products.
2. Do a thorough risk analysis. Be realistic about how much risk you are willing to accept in your business venture. Make sure you use reliable sources for this assessment. Use more than news media sources or your immediate partners to evaluate the market. Do not have a corporate risk analysis policy for Peru that is different than you would have for any other country.
3. Know your partner. Do your "due diligence," and do it well. Be sure that your potential representative has the authority to make a decision. Establish ground rules at the outset of negotiations, including keeping minutes. Make certain your partner is able and willing to do all they say they will do in the contract. If the project is not a “win-win” proposition you can expect that enforcement of your contract will be difficult – regardless of your legal rights. If you have to go to court to enforce your contract, it is already too late. Is it in their interest to assist you to protect your brand and/or other intellectual property rights? Be careful that your partner is allowed by law to fulfill the promises in the contract. Check the reliability of the data on your partner or customer from independent sources. Avoid being "stovepiped" - talking only to those people to whom your partner or buyer directs you. You can lose a lot of money if you are represented with the wrong partner.
4. Have clear contract terms. Peru’s 6.5 percent economic growth reflects leads to continuous changes in the domestic economy. When entering into a contract with a Peruvian partner you must be careful to plan for all reasonable contingencies. Do not attempt to enter into an agreement without sound legal advice. Have your own legal counsel. In your contracts, specify exact terms of payment, and performance standards. Set time lines. Pay careful attention to details, such as initialing pages of contracts properly authenticated signatures. Do not assume that government officials actually have the authority to give you permits and permissions. Verify their claims of authority from independent sources.
5. Know the rules. Beware of offers to bend them in your favor. Be prepared to obey all Peruvian laws and regulations. Make sure your managers (or agents and distributors) know all relevant American laws (such as the U.S. Foreign Corrupt Practices Act-FCPA) are applicable to them. Peru is cracking down on corruption. Do not risk your business being associated with corrupt officials or illegal practices.
6. Watch Your Intellectual Property Rights. It has been said that, in Peru, if a product or service can profitably be copied; it will be. Also, foreign IPR holders (whether they are in the Peru market or not) suffer enormous losses to international pirates in the Peru market and, increasingly, in third country markets. For patents and trademarks, you must file your registrations with the INDECOPI-National Agency for the Competition and Intellectual Property Protection (www.indecopi.gob.pe) to receive protection. At a minimum, it is advisable to register copyrights in Peru, even though you may theoretically receive protection under the Berne Convention. Confirm this with your legal counsel, as the copyright treatment across industries is not identical.
7. Mind the store. Projects and sales in Peru require constant attention and clear lines of communication. It is a mistake to assume they will run themselves. There is often a gap between perceptions of the individuals managing your product or project and headquarters in the United States. U.S. based managers must visit often to evaluate the situation on the ground. Developing and nurturing personal relationships is important. Be prepared to provide good training and technical assistance to assure product and management quality. Keep an eye on the company’s account books, or if licensing, on the licensee’s account books. Joining the AmCham and other major businesses associations is highly recommended.
8. Prepare a Corporate Social Responsibility (CSR) Strategy. This is not a new concept for Peruvian businesses, as the mining companies have been active in their respective communities for years. However, having a definite CSR plan is becoming increasingly important as a key market entry strategy for Peru. It is also recommended that you find partners in the country who share this vision. This will have a great impact on your public image in Peru and significantly increase your chances for success. Look for more information about CSR projects that U.S. businesses have in Peru to be made available soon.