The Peruvian service sector is one of the main drivers of the economy. In the digitalization era, Peru is opening up to new technologies that help create, improve and optimize services. In 2017, the service sector accounted for 41% of the nation’s gross domestic product (GDP), and in 2018 the service sector accrued 16 years of continued, sustained growth. The applications of technology in Peru are impacting all industries in the service sector, bringing up more opportunities to provide better service and innovate.
We provide an economic overview of the service sector, and explore how digitalization is disrupting a variety of industries.
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Digitalization in Peru – Service Sector: Economic Overview
According to the World Trade Organization (WTO), services will contribute to 25% of world trade by 2030. Additionally, World Bank data shows that trade of services for 2018 in Peru (sum of exports and imports/GDP) reached 7.6%, which is small compared to developed countries such as the United Kingdom that have a reported trade of service above 20%. Given the impact of technology disruptiveness, the Peruvian service sector is already absorbing digitalization in several industries, however, there is room for development.
The Peruvian service sector needs more innovation to continue its upward growth. Improving technology in Peru is one of the government’s main concerns. The Peruvian government has been developing policies and projects to enhance the immersion of technology and digitalization into the public sector. For instance, the government has current plans to pass a US$1.9 billion dollar project to provide broadband internet connectivity to the population, which will bring benefits for educational institutions, the health sector and police stations.
Currently, the main contributors in the Peruvian service sector are transportation, lodging and restaurants, finance, telecommunication, and an aggregated ‘other services’ group, which includes education, health, and real state activities. The ‘other services’ group contributed 13.7% to Peru’s GDP in 2017, similar to that of mining activities, which was 14%. Additionally, transportation, telecommunication and finance have reported great growth rates.
How digitalization creates opportunities
Peruvians have more access to the internet than in previous years, which has a positive correlation to digital inclusion and impact. In 2017, only 45% of the population had access to the internet, however, in 2018, this metric increased to 53%. This demonstrated a reported growth of 13% since the last year. Statistics for 2019 are yet to be published.
Technology in Peru has made great impacts on the finance and lodging and restaurant industries. It is well known the impact fintech has had in the nation, with several startups innovating currency exchange, digital brokerage, leasing, remittances, and other staple financial activities. On top of that, the country’s banks are implementing a strong campaign to provide services that are accessible online, encouraging customers to become digital citizens. On the other hand, the restaurant industry has been disrupted by external delivery services, such as Rappi and Glovo, making their products more readily available to people outside of their local zones of convenience.
Technology in Peru: Automation
Since 2017, the Jorge Chavez airport in Lima has implemented the “Tarjeta Andina” (Andean card) that eliminates hard copies of forms travelers needed to fill out. As a consequence, this automation is simplifying migration control. It has reportedly removed the need for 4.5 million physical forms, which amount to great savings in paper, human, and other resources. On top of that, electronic doors installed at the airport enable automatized migratory control that checks passport information, and travel documents previously registered with accuracy and speed. Through these implementations the airport reduced the time for a process of 3 minutes to 45 seconds, reducing queues and wait time, and improving security.
Automation with robotics could have a great impact on companies doing warehousing services as it helps to automate repetitive tasks, freeing up employees for other human-oriented tasks. This advantage will help businesses outperform competitors and improve their quality of service. This is something that is already being applied abroad, for instance, Shopify just bought 6 River Systems, a company that improves warehouse staff productivity and training through robotics.
Currently, these automation projects are happening at large-scale levels, however, automation has the potential to help businesses of all sizes. It is well known that businesses in Peru have been demanding cloud technologies and agile expertise to improve their efficiency. For instance, the Bank of Credit of Peru has already implemented agile methodology for data warehouse, in addition, it is reported that in 2018, 36% of businesses implemented projects with agile methodology, which represented a growth of 5 points as compared to the previous year. Demand for technology in Peru is geared towards improving efficiency. Peruvians are highly interested in becoming more efficient and there is a great demand for agile methodology and cloud technology for businesses of all sizes. Investors seeking to expand their business in Peru will benefit from the demand of technologies that could increase efficiency, reduce human error and bring people online.
Internet of Things and Blockchain
The applications to technology in Peru are reaching all service sector’s industries. It has been reported that Peruvian ports will soon begin working with BlockChain technologies. The National Port Authority announced that they have big innovation projects underway that include Community Systems, Blockchain, and the Internet of Things. This implementation will improve efficiency and transparency as Blockchain technologies display information in a public ledger.
The testing of this technology has shown it can enhance communication between shipping companies, customer authorities and freight forwarders at ports. This will support streamlined shipping operations, but also build trust and transparency, as all transactions will be public. Thanks to this implementation trade will improve in terms of exchange of information, speed and quality, as a consequence, exporting and importing from Peruvian ports will be an efficient process.
An area in which businesses have been applying the internet the most is publicity. The internet reaches millions of people and thanks to personalized data collected by information providers, it is possible to find and reach people that have greater interest and likelihood of becoming customers.
YouTube advertising is becoming more important in Peru. According to Google’s General Manager in Peru, Julio Coulter, Peruvians watch more Youtube videos than other countries in the region, which evidences great consumption of entertainment and increasing the importance of online marketing. In Peru, marketing is one of the most demanded professions, on top of that, digital marketing knowledge accounts for 41% of the overall demand. This shows that businesses must adapt, and start investing more in their marketing strategies through the internet, and apply and demand digital technologies to do so.
This creates demand for metric providers so businesses can track the results of their online campaign efforts. Data collection and analytic technologies improve online marketing performance and are therefore a hot commodity in the Peruvian commercial environment.
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