Peru is an economic example for other Latin American countries to follow. Between 2004 and 2012, the country experienced an average growth of 6%. In 2018, GDP grew by 4.1%, and according to the IMF, growth for 2019-2020 will remain at 4.1%.
The country is attractive to foreign investors seeking to start their business in the country, due to its diversified market and relatively open commercial environment. We give you five tips to successfully establish your company in this booming market.
Overview: Peru and foreign investment
Around US$6,175 million in foreign direct investment flows and a capital contribution reached US$25.931 billion, according to the Central Reserve Bank of Peru (BCRP). Investors in the United Kingdom are particularly keen on this destination as they represent 17% of the country’s total invested capital, or nearly US$4.408 billion. The country’s main agricultural products are cotton, sugar cane, coffee, wheat, rice, corn, quinoa, and barley. Peru is also one of the world’s leading exporters of artichokes, quinoa, mangoes, citrus fruits, avocados, and grapes.
The industrial sector generates 30.3% of GDP and employs 15.9% of the working population. The country also has significant natural gas and oil reserves, although Peru is a net importer of energy. The main manufacturing activities are textiles, consumer goods, food processing, and fishery products. The tertiary sector contributes 60% of GDP and employs 56% of the workforce. The industry consists of well-developed tourism, financial services, and telecommunications, all of which have grown as a result of the combined efforts of government and the private sector. The tourism and construction sectors, in particular, are very well developed.
1. Get a local legal representative to assist you
The first step to a successful start in Peru is to get in touch with a local legal representative. With expert local knowledge of the market and commercial law, a representative will guide you through all the necessary steps for company formation and ongoing commercial and corporate compliance in accordance with Peruvian law.
Your legal expert can handle the translation of official documents and act in your company’s best interests because in Peru, administrative documents and processes are completed in Spanish. It is essential that you verify that this person or entity is legally authorized to work and live in Peru.
It is crucial to choose your legal representative well because you give them the legal right to manage and make decisions on behalf of your company. Make sure to confirm in advance which rights you provide a local legal expert for them to act on behalf of your company, and to avoid any problems. This is the best way for you to reduce legal and commercial risk, and give your business the best start in a new market.
2. Register your company and brand the right way
Registering your company and brand in Peru is a crucial step. The process takes between 4-6 weeks until the authorities verify the information you or your representative has provided them.
How to register a company
The same applies to your legal structure; this depends directly on the type of company you want to implement. You will, therefore, choose this status when you create your company. This will determine many parameters for the rest of your adventure in Peru, including your tax regime or others. The organization that delivers the authorization for registering your company is the National Superintendence of Public Registries (SUNARP).
It is also imperative to create your company in Peru. You will have to invest a minimum of US$150, to have at least two shareholders. Also, your foreign team members cannot represent more than 20% of your total payroll staff.
Why you should register your brand
It is not mandatory to register your brand in Peru, but it is strongly recommended. It allows you to protect yourself from a legal point of view. Intellectual Property (IP) protection is managed by the Instituto Nacional de Defensa de la Competencia y de la Protección de la Propiedad Intelectual (INDECOPI). Without formally registering your logos, brand name, and other signs specific to your company, they’re at risk of being used by someone else. Make the investment to register unique elements of your company, as you’ll then have the right to take legal action against any others attempting to use them for their own commercial gain.
3. Choose a relevant entity structure and tax status
As in any country, in Peru, it will be necessary for you to define your legal entity structure clearly, as this affects your tax status and requirements. The Superintendencia Nacional de Aduanas y de Administración Tributaria (SUNAT) is in charge of all aspects of the corporate tax system. It is important to note that tax applications for individuals and companies are two different things in Peru. You must obtain your Registro Único de Contribuyentes (RUC) or tax number.
The amount you will pay each financial year (1 January – 31 December) will depend on dividends, net income, royalties, and whether you own subsidiaries or branches. The amount will also depend on your industry, your pollution discharge rate, and other parameters. To fully understand all these possibilities, we recommend that you seek advice from a local legal expert.
4. Respect and protect your employees
Your employees are the driving force behind your company; without them, you cannot run your business correctly. To do so, you must ensure that you comply with employment laws and regulations in force in Peru. You can build credibility as a good employer by staying fully compliant with labor law and showing that you value your employees. These considerations, combined with an excellent working atmosphere, can support and drive higher levels of staff productivity.
From a salary perspective, you need to understand compliance regulations that may differ from those in your home location.
For example, your employees cannot work more than 48 hours per week with a minimum of 45 minutes break each day. They must receive a minimum wage of PEN850 (approximately US$253). Your employees are also entitled to 30 calendar days of paid vacation per year for a medium or large company. For a small and micro company, they’re entitled to 15 calendar days of paid leave per year.
In Peru, the employer must contribute 9% of the employee’s monthly salary directly to the public health system. Similarly, if one of your employees has one or more children under the age of 18, you, as an employer, will have to pay them an additional monthly payment of about 10% of their monthly salary.
If you wish to employ a foreigner in your Peruvian company, you should be aware that a contract for a foreigner cannot exceed 3 years’ stay, though this timeframe can be extended. The Peruvian Ministry of Labour must validate the contract.
5. Understand Peruvian business etiquette
It’s vital to understand and respect the local business culture. Without this, you could lose potential contracts and business relationships.
Like many Latin American countries, in Peru, the notion of time is much more flexible than in many such a part of the world. Business dress codes in Peru are formal, and greetings can include an air kiss as well as a handshake.
To develop a strong working relationship, keep in mind the ethos that personal connection is comparatively more important to Peruvian business partners than in other parts of the worlds.
Your clients and partners will appreciate it if you have a business card in Spanish. It is vital to understand some Spanish and consider a more indirect way of speaking, as Peruvians are used to communicating indirectly. Negotiate tactfully and diplomatically, avoiding being too forward in your manner. This is another area where seeking local providers for your corporate activities has a benefit; you can get help bridging linguistic and cultural gaps, leading to a smoother integration and greater appeal to local partners.
Addressing title and position is important. During negotiations, pay attention to to the asks of the highest executive present, or those who will make final decisions. If they ask to discuss individual aspects point by point, do so. Taking the time to understand and acknowledge business culture and etiquette shows your willingness to embrace customs and build trust with commercial partners.
Need local support? Contact us
Peru is a promising country, with significant growth in recent years. The local government is successfully attracting more foreign investors to its shores.
Complying with local regulations and customs in a foreign country may seem daunting, but you have the opportunity to partner with people who can guide you through best practice and compliance regulations.
At Biz Latin Hub, we offer you customized market entry and back-office solutions specific to Peruvian regulations. Our team of local and expatriate experts focus on your company’s best interests and enable you to launch your business successfully.
Reach out to us for legal, accounting, recruitment, or commercial support during your expansion. Contact us at [email protected] today for a personalized quote.