Doing Business in Peru
In 2010, the Peruvian market rebounded strongly after the 2008 and 2009 Global Economic Crisis. In fact, after a rapid decline in their GDP from 9% in 2008 to 1% in 2009, Peru’s economy saw a remarkable recovery in 2010 at 8.8 percent. Peru experienced one of the strongest market recoveries in Latin America after the Global Economic Crisis. However, the Peruvian market was not immune to the economic downturn that impacted much of the global economy. The country experienced a sharp drop in international trade activities, including a steep decline in imports from the United States. However, Peru’s 8.8 percent growth in 2010 showed a country not on the mend, but a country in the economic forefront with other regional leaders. During the Global Crisis, Peru’s overall exports declined by approximately 18% while imports fell by 28%. In contrast, in 2010, exports grew by 31.8% with a total value of $35.6 billion and imports grew by 37.1 with a total value of $28.8 billion. In the same year, Peru was America’s 33rd largest export market. The U.S.’s exports to Peru grew by 37% over 2010 and totaled $6.7 billion in trade.
By late 2009 and early 2010 developments suggested that trade and economic performance was back on track. In 2010, U.S. exports were up 45% over 2009 levels and imports from Peru were up by 15% over that same period. Signs of such a turn-around appeared in late 2009, with December showing economic growth at an annualized rate of 6.4%. Even during the depth of the economic slowdown, consumer confidence in Peru remained strong and the increase in unemployment felt in many countries was largely avoided in Peru. The first quarter of 2011 suggests that Peru’s economy will stay strong at 7% GDP growth, which is still another record level since before the economic crisis. However, on June 5, 2011, Peruvian citizens elected Ollanta Humala as their new President. He will take office on July 28. Until the new Administration is in office and a cabinet is in place, it is difficult to predict if or how they might change Peru’s current economic model. It will undoubtedly take six months to a year to fully assess the goals and policies of the incoming President and the role of the new Congress, which saw approximately 80 percent turnover this year.
Looking forward, the mining sector will continue to present important marketing opportunities for U.S. firms. While the global slowdown and dip in many metals prices led to a pause in many planned mining projects, there are still over $20 billion in proposed new investment in Peru’s mining sector. Mining continued to be Peru’s main export sector, counting for approximately 61% for all exports in 2010. The sector received some $4 billion in new investment during 2010.
Infrastructure development remains a priority as well, with several major projects expected to be awarded in 2011. In late 2010, ProInversion, Peru’s Private Investment Promotion Agency announced “Urgent Decree 001-2001”, which specifically targets 33 projects as national priority and establishes the guidelines for the tendering process. The prioritized projects include Roadways and Waterways, Ports, Natural Gas, Infrastructure, and Energy Generation and Distribution projects. These include an $884 million multi-purpose terminal at Lima’s main port in Callao being developed by APM Denmark, an international airport project in Chinchero-Cusco valued at $379 million, a $110 million project to finance and design the construction, maintenance and operations of a 500Kv Transmission Line Trujillo-Chiclayo. Continued development of the oil and gas sector, as well as strong demand in the construction industry, are also fueling demand for U.S. goods and services.
Peru continues its strong push toward integration with the global economy. Implementation of the U.S. Peru Trade Promotion Agreement (commonly referred to as the Free Trade Agreement, or FTA) in February 2009 has been followed by a series of negotiations in which the Peruvian Government has concluded or is seeking to conclude trade agreements with its other major trading partners, including China, the European Union and Japan. Peru was also a participant in efforts begun in early 2010 to negotiate a regional trade agreement under the Trans-Pacific Partnership, which also includes the United States and others. Despite the decline in bilateral trade between the U.S. and Peru in 2009, the U.S. in 2010 retained its share of the Peruvian market, which actually increased slightly, to 19%. China was the second largest supplier of goods to Peru, with a 17% market share, while Brazil was a distant third at 7%.
In its Doing Business 2010 publication, the World Bank ranked Peru 56 among 183 countries surveyed in terms of ease of doing business. This represented a nine place jump in Peru’s rating from 2009, when it was ranked 65 among the countries surveyed. Challenges cited by the 2010 report included enforcing contracts, dealing with construction permits, employing workers and starting a business. On all of these items Peru’s ranking was below 100. In other areas, such as obtaining credit and protecting investors, Peru was in the top 20 worldwide. The full text of the Peru report can be accessed at:
http://www.doingbusiness.org/data/exploreeconomies/peru
