Peru is one of the most important countries in Latin America, being one of the fastest growing Latin American economies for the past ten years. Peru’s economy has grown by an average of 6.4 percent per year since 2002 and is projected to continue on an upward trajectory in 2017, fueled by external demand and the return of fixed investment to growth. LatinFocus panelists expect GDP to accelerate and increase 4.2%. Today, Peru is under “new management” with President Pablo Kuczynski, who is committed to keep the country open to foreign trade and investment.
Below we provide a list of five areas of opportunity for foreigners looking to do business in Peru in 2017.
Kuczynski’s government has been extremely focused on improving Peru’s infrastructure, especially in the transportation sector, and the results have already appeared. With such a vast territory, the country faces several communication problems, which account for the 22.7% poverty rate; accordingly, the government will continue its concession strategy into 2017.
Two clear opportunities for foreign investors are the three new regional airport concessions being prepared for next year and the concession for Lima’s Metro’s Line 3 (a 5 billion USD project), which is scheduled to be awarded next year.
In recent years, Peru has been experiencing a great increase in commodity exports.
According to Trading Economics the country’s major exports are copper which represents 19 percent of total shipments, gold with 17 percent, and gasoline represents 5 percent of total. Peru is great alliance for exports with United States (16 percent of total exports), China (14 percent), Chile (5 percent) and Canada with (4.8 percent).
To consolidate Peruvian foreign trade in goods and services, Peru has negotiated several trade agreements with large and medium-sized markets in recent years. Peru’s market openness in combination with these trade agreements have permitted an increase in the number of exported products and exporting companies. For example, nearly 95 percent of Peru’s exports are covered by Free Agreements (FTA’s), or also the US-Peru Trade Promotion Agreement (TPA) which eliminates barriers and tariffs to US services, provide a secure and predicable legal frameworks for investors, and reinforce protection for intellectual property, workers and the environment.
Another area included in the Peruvian infrastructure gap is IT. Although Peru’s rugged terrain has made it difficult to connect rural areas in the Andes and Amazon, the country, with help from foreign investment has found different solutions to this problem. For example, the mobile phone industry has grown swiftly in the past 10 years, with more and more international involvement every year, and now has a penetration rate of around 60%.
Last year, the Peruvian congress passed laws that require mobile network operators (such as Telefónica, Movistar, Claro and Entel) to rent space to mobile virtual network providers. This is what persuaded Virgin Mobile to enter the country in 2016, and opens the market to similar providers.
According to the Australian Trade and Investment Commission, Peru is the world’s second biggest producer of silver, third biggest producer of copper and zinc, fouth biggest of tin and lead and finally the sixth biggest in gold has a well-established mining, equipment, technology ans services (METS) sector.
Mining is the driving sector of Peru’s economy and it is open to foreign investment (there is currently over US10 billion of FDI in the mining sector). Private parties may own surface land, while the subsurface land and mineral resources are reserved for the government. Private parties may purchase irrevocable mining concessions, which can be transferred to other private parties.
Although mining projects in Peru have been stagnated over the last few years due to social conflicts, Kuczynski’s administration has pledged to straighten out the delays and loosen environmental regulations in order to encourage foreign investment.
Peru is working hard to create a new startup ecosystem with initiatives such as Start Up Peru, an accelerator program for small technology companies, and a public support mechanism for startups. These, added to the country’s ease for opening a company, means great things for entrepreneurs looking to startup internationally. Incorporating in Peru takes 15 days and there is no minimum capital required, plus, the country has several visa schemes that facilitate doing business there as a foreigner.
These visa schemes (business, work, immigrant) can sometimes be complicated and can make a situation unnecessarily troublesome. Therefore, anyone looking to relocate to Peru should contact a visa or immigration lawyer to find the best option for them. At Biz Latin Hub we can help with your visa process, company incorporation and more.