1- Quick Facts About Peru
Capital City: Lima
- Population: 30,444,999 (est. July 2015 ,The World Factbook)
- Language: Spanish, Quechua, and Aymara
- Unemployment Rate 2015: 6.1% (The World Factbook)
- Inflation 2015: 3.6%
- Currency: Peruvian nuevo sol
Peru’s Economic Figures
- GDP: $385.4 billion (2015)
- GDP growth rate: 2.4% (2015)
- GDP per capita PPP: $12,300 (2015)
- GDP Composition by sector (2015): Agriculture (7%), Industry (34.5%), Services (58.5%)
Export Partners (2014)
- China (18.3 %)
- US (16.1 %)
- Switzerland (6.9 %)
- Canada (6.6 %)
- Brazil (4.2 %)
- Japan (4.1%)
Import Partners (2014)
- China (21%)
- US (21%)
- Brazil (4.7%)
- Mexico (4.6%)
- Ecuador (4.2%)
Import Export Commodities
- Copper (19% of total shipments)
- Gold (17%)
- Gasoline (5% of total exports)
- Lead ore (4%)
- Textiles (3%)
- Crude and refined oil (11% of total imports)
- Trucks, buses and light trucks (7%)
- Industrial machinery and equipment (6%)
2 – Economic Outlook
The Peruvian economy will grow roughly 3.6% in 2016. Stronger figures are forecasted for 2017. Mining and tourism continue to contribute to the overall GDP. On the other hand, the mining industry is under scrutiny and the tourism industry is changing. With these factors, the Peruvian government is aware of the need to diversify their industries to be able to sustain growth in the long term. The government is working hard to create new jobs for both the skilled and unskilled labor populations.
Trade and Economic Challenges
Many of the economic challenges of Peru are like those of other developing Latin American nations. A few examples include income inequality, high poverty levels, underdeveloped infrastructure, and over dependence on one sector. Peru is dependent on minerals and must diversify to continue economic growth in the long term.
More challenges include a high importation of food for local consumption. Peru is also not taking advantage of the many trade agreements that have been implemented in recent years. Yet, the Peruvian government is working to resolve many issues such as ending poverty, creating greater incentives for foreign investment, improving equality in the workforce, and increasing competitiveness
Standard and Poor’s and Fitchs have given Peru a rating of BBB and Moodys rating is a Baa2. Recently, Peru is having a difficult time attracting more investment. The government is being slow to put in place reforms to boost investor confidence and to concentrate on commodity diversification. The government has passed several laws to counteract investor skepticism such as tax restructuring and business debt forgiveness.
Unlike a few other Latin American countries, Peru has been quite friendly to private foreign investment. Minerals remain a large sector for investment opportunities. More opportunities exist on a large scale in agribusiness, biofuels, tourism, ecotourism, and others. Infrastructure opportunities also exist in alternative energy and public transportation.
According to the World Bank’s Doing Business 2016, Peru ranks as the third best country in Latin America. The rankings depend on many factors such as ease of starting a business, ease of doing business, obtaining credit, paying taxes, enforcing contracts, and more.
Peru’s Technology and Connectivity
Peru has a much lower than average connectivity rate in Latin America. But their technology infrastructure and programs are more advanced with greater connectivity ratios. As of 15 November 2015, 16,000,000 people are connected to the Internet which is a connectivity penetration rate of 52.6 %. Much of populated Peru is located in challenging regions in the Andes and the Amazon. Another large percentage of the population is poor. This combination has affected the penetration rate, but the administration is working to solve these problems.
Generally speaking, Peru is a advanced nation in many regards. Over 50 percent of residents have mobile phones. Access to the Internet in rural areas is high despite a lack of any fiber optic connection. In the past, rural connections have often limited due to weather conditions. Mobile phone giant Ericsson is working with the government to bring 4G technology to the Amazon.
Larger towns and cities have modern conveniences such as Wi-Fi in public places, cafes, and shopping centers. The government is investing in the development of science and technology innovation. It is doing that by sponsoring many programs such as CienciActiva which has dedicated roughly $77.5 million in educating students in research and development to make Peru as a Latin American leader in science and technology.
E-Commerce and Startups
Lima has been the center of the startup community in Peru for several years now. The country is also looking to Arequipa, Trujillo, and Chiclayo as the new technology and startup centers of the country. Arequipa is attracting international technology business and has a growing IT education sector in both undergraduate and graduate degree programs. The government is a strong supporter of the startup community for years and has launched Startup Peru and other incubator and entrepreneurial-support programs.
E-commerce in Peru is not quite as big as other Latin American countries for a number of reasons:
- A large percentage of the population is still quite poor
- The technology and transportation infrastructure makes it quite difficult to reach a large percentage of the population
- The lack of connectivity makes it impossible for many to become regular e-commerce shoppers.
Peru does host an eCommerce day each year and has done so since 2010. Those who are connected to the Internet with a disposable income are active e-commerce shoppers. From 2012 to the end of 2014, e-commerce spending increased from USD $668 million to USD $1.868 billion. As connectivity penetration rates increase and income equality improves, the e-commerce industry in Peru will be even bigger business.
3 – Peru’s Key Industries
Peru relies heavily on the mining industry which many economists believe is preventing the economy from growing at a larger rate. Some of the largest industry sectors are as follows:
- Beer and Soft Drinks
- Electrical Machinery
- Fishing and Fish Processing
- Food Processing
- Metal Fabrication
- Mining and Refining of Minerals
- Natural Gas
The agriculture industry grew 19 percent in 2014. In the first half of 2015, the industry was responsible for roughly 6 percent of the overall GDP. The popularity of the grain quinoa brought global attention to Peruvian agriculture. While quinoa may have encouraged countries such as the US to begin importing more grain from Peru, it also had a direct affect on other produce such as artichokes, avocados, and sugarcane. Some of the biggest agricultural exports are asparagus, bananas, coffee, cocoa, cotton, corn, dry beans, fish, lemons, onion, oranges, palm oil, poultry, and tomatoes.
Mining is becoming a controversial topic in Peru. Mining makes just over half of all exports. The industry has been a strong and lucrative exportation commodity to Peru for some time, but the enormous number of growing Illegal mining activities, devastating environmental implications, and violent protests have been creating many negative political, social, and environmental reactions throughout the country. Local experts are saying that such actions are plummeting investor confidence in the industry. The future of the mining industry in Peru is likely to depend on the government.
Peru is embracing the growing interest in tourism. From 2013 to 2014, tourism experienced growth of 28 percent. From 2004 to 2015, the number of tourists visiting Peru each year has tripled. With this popularity brings new jobs and a greater contributing factor to the overall GDP. Because of such results, the government is working to develop ecotourism, maintain existing cultural and historical landmarks, and protect the country’s most cherished treasures.
While mining is one of the largest industries, some of the largest employers are in other industries. Some of such employers are in food and beverage and banking and finance. Below are several of the largest employers in Peru with varying numbers from several hundred to tens of thousands of employees:
- Alicorp S.A.A.
- Compania de Minas Buenaventura S.A.A.
- Credicorp Ltd.
- Corporación José R. Lindley S.A.
- Edegel S.A.A.
- Luz del Sur S.A.A.
- Minera Barrick Misquichilca S.A.
- Petróleos del Perú S.A.
- Saga Falabella S.A.
- Shougang Hierro Peru S.A.A.
- Sociedad Minera Cerro Verde S.A.A.
- Supermercados Peruanos S.A.
- Union de Cervecerias Peruanas Backus y Johnston S.A.A.
The employment sector of informal wage workers accounted for roughly 25 percent of the labor pool in 2015. Of the new jobs created, 60 percent were within the formal sector for highly skilled individuals. In 2013, roughly 44.6 percent of workers held a salary position and 35.2% of those employed worked in the private sector as opposed to just 9.4 percent working in the public sector.
Today, some of the largest employing industries are divided amongst mining, call centers, and financial services. In the coming years, a dramatic shift is expected and experts predict to see job growth in areas such as law, medicine, nutrition, software development, tourism, gastronomy, marketing and communications, construction, and more. It is important to note that Peru consists of both a formal and informal workforce. The informal workforce consists of up to 80 percent of the employment population; whereas, the formal workforce, which requires degrees and qualifications, consists of the remaining 20 percent.
4- Time and Cost to Import into Peru
The time and cost to import into Peru will vary. If the exporting country is part of a free trade agreement with Peru and the imported good is subject to the benefits of the agreement, it is likely minimal to no import tariffs or customs fees will apply. If the exporting country is not a member of any agreement or trade bloc with Peru, goods may be subject to import duties, sales tax, more fees, excise tax, tariff surcharge, and a municipal tax.
If the goods are shipped into a free trade zone, they can be accepted, repackaged, and exported without having to pay import fees. Do not forget to consider Incoterms before you sign any sales contracts. The transit time to Peru will vary from a few weeks for ocean vessels from Miami to over a month for shipments originating in Asia.
5- Tax Free Zones
Peru has two types of free trade zones. The first, which are referred to as CETICOS, allow for export, industry, trade and services, and transformation. All free trade zones are CETICOS and need no less than 92 percent of all products to be re-exported to qualify for tax-free status. The one exception being Loreto which only requires 80 percent of products to be re-exported.
The second kind of trade zone in Peru is referred to as ZOTAC which is only located at Tacna. This trade zone permits businesses in this zone to pay a significantly reduced customs duty fee of only 8 percent, rather than 12 or 20 percent. They are also exempt from excise, municipal, and sales taxes. The requirement being that the goods must have been unloaded at either the port of Ilo or the port of Matarani. The percentage of re-exportation is irrelevant at ZOTAC in order to qualify for the incentives. The following are the free trade zones in Peru:
- Zona Franca de Ilo
- Zona Franca de Loreto
- Zona Franca Matarani
- Zona Franca Paita
- Zona Franca de Tacna
6- General Business Taxes
The general corporate tax rate is 30 percent. Foreign corporations and branches are only taxed on income sourced in Peru. Any company incorporated within Peru is a Peruvian resident company and will be taxed on all generated income. It is important to note that any individual, foreign or Peruvian, who spends 183 days or more in Peru during any time during a traditional 12-month calendar year is considered a resident and subject to tax in Peru. Foreign residents are only subject to tax on Peruvian-earned income. Peruvians will be taxed on all income earned anywhere in the world.