Growing Economic Ties Between Peru and Asia

In this article, we will be reviewing Peru’s economic boom and the increasing economic and trade ties between the country and Asia. Over the last years, Peru has accomplished remarkable economic growth, driven by its richness of minerals and natural resources. Moreover, the current Peruvian president, Pedro Pablo Kuczynski, is going to attract investments and work to address longstanding bridges between urban and rural populations.

In the last decade, Peru has increased its political and economic relations with Asia demonstrated by the various trade agreements they have made within the region. An impressive amount of Peru´s exports is covered by Free Trade Agreements, reaching 90%. Additionally, Peru is a member of the  Asia Pacific Economic Cooperation(APEC) which is a forum that promotes economic cooperation and expands trade and economic growth with 21 member economies who make up half of the world´s GDP. Furthermore, Peru is a member of other inter-regional organizations with East Asian countries, such as the forum for East Asia and Latin American Cooperation (FEALAC) and the Pacific Economic Cooperation Council (PECC). These associations and alliances strengthen economic relations between the regions and positions the country as a key player in international business opportunities.

The potential for more relations with Asia is huge considering that China is becoming a strong economic power, as well as Japan, South Korea, Singapore is other notable Asian economies.

Peru-Asia Economic Ties – Signs pointing to the strength of the Asian economy.

 The World Bank has published key findings and some of them include: 

• China’s economy will grow 6.5 percent in 2017 toward consumption and services.
• The economies of developing East Asia and Pacific are projected to expand at 6.2 percent in 2017 and 6.1 percent in 2018.
• Growth in the region will continue to be driven by strong domestic demand, including public, and increasingly private, investment. This trend will also be supported by gradually rising demand for exports, as emerging markets and developing economies recover.
• Poverty is likely to continue to fall, driven by sustained growth and rising labor incomes.

Recent Investments in the Peruvian economy

Peru´s economy has changed much over the last few decades and has become more attractive for investments. According to the World Bank, Peru’s poverty rate decreased from 58 to 22 percent between 2004 and 2015.

But Peru still faces many economic challenges, specifically in its lack of innovation and poor quality of public services. This is about to change, however, with the new Reconstruction Plan Peru that has been implemented in the country. The Reconstruction plan has seen a significant increase in investments in the sector of reconstruction in areas like Coastal El Niño which has been destroyed by unusually high torrential rains, landslides, and floods. Pedro Pablo Kuczynski affirmed recently that investment activities are going to increase all over the country due to damaged infrastructure.The plan includes an upgrade of 7,500km of highways and 46,000 social dwellings for victims of natural disasters that have been devasting the Peruvian infrastructure. 

China is also investing in the Peruvian reconstruction plan which assists to rebuild the damaged infrastructure. Mainly, the Chinese are investing in projects to rebuild bridges, highways, waterways, and housing. In addition to this, in 2018, China will be the biggest investor in the Peruvian mining sector with its companies planning to spend US$10.189 billion in the Peruvian economy.

Moreover, the Peruvian government influences initiatives like the StartUp Peru initiative which has the objective of promoting emerging Peruvian companies. Peru Startup was launched in 2012, and this year saw an incredible 837 projects apply to the organization. Peru is focusing on companies that offer innovative products and services with a focus on technological advances and potential for international growth. Over the years, the amount of funding has grown and for now, Peru boasts a massive US$100 million fund to promote micro, small and medium-sized enterprises (SME). 

Business opportunities in Peru for the Asian Market

MINING SECTOR OPPORTUNITIES

Peru is renowned as one of the countries with the greatest opportunities in the mining business. This is due to the government’s ongoing support for investment from foreigners in the profitable sector. Peru is a mining powerhouse at the regional and global level, although only 2% of its territory is occupied by mining activities. Furthermore, China is one of the major investors in the Peruvian mining industry – the company that invests in Peru from China is called CHINALCO. CHINALCO is the second largest aluminum producer and the third most important for primary aluminum worldwide. CHINALCO recently announced that they would increase their investment in mining copper in Peru, because of China’s increase in demand for the mineral.

AGRICULTURE SECTOR OPPORTUNITIES

Aside from the opportunities in the mining industry, agriculture plays an important role in the Peruvian economy. Recently, Super Food Peru´s brand was launched in Beijing as well as at the Asia Fruit Logistica, which is the leading fresh fruit and vegetable trade show in the Asia Pacific. Superfoods Peru is drawing attention to develop and explore more business opportunities in Asia. Peru has emerged to be one of the fresh fruit exporters to China and is about to become one of the principal suppliers to Japan, Korea, Thailand, Indonesia, and Singapore.

Steve Barnard, who is the founder and CEO of Mission Produce, has become the world´s leader in producing, distributing and marketing avocados. Peru produced 36 thousand tons of avocados of the 230 thousand tons produced worldwide. 

Tips for Asians wanting to Invest in Peru

Peru has lots of cultural ties with Asian countries, making it more attractive for Asian economies looking to invest. However, doing business in Latin America always comes with its challenges, especially if you are not a Peruvian national. Here are some tips for those of you interested in tapping into this market.

1. Peruvians speak little English. Don’t go to Peru expecting to do business in English. You should either bring a business associate who speaks Spanish or hire an interpreter on the ground.
2. Peruvians are proud of their culture. Ceviche and Pisco is a must in the country and you will get on their good side if you tell them it is the best food you have ever had.
3. Security. You really shouldn’t go walking around a sketchy neighbor with your new iPhone to your ear while you are exploring the country. You also should not take taxis off the street, as there have been cases of robberies and kidnaps in uncertified taxi cars.
4. Peruvians know how to negotiate. Peruvians can be aggressive negotiators. You shouldn´t expect any leniency because you’re a foreigner.

How the Biz Latin Hub can help?

If you found this article interesting and you want to know more about business opportunities in the Asia market for Peru, reach out to Biz Latin Hub for a free consultation. If you want more information on business opportunities or investments in Peru, please feel free to contact us now.