Peru rose as the star of the South American economies in 2016. With a robust growth in metal exports and the election of business-friendly President Pedro Pablo Kuczynski (PPK), improvements in economic governance and political stability have emerged, foreign investment interest is on the increase and the country is set to have an extremely positive start to the year 2017!
Within this article, we will cover the potential opportunities for business in Peru, the advantageous considerations for starting a business in Peru, how to get started and finally, how to obtain permanent residency status as a foreign individual by means of having this Peruvian registered company.
Start a Business – Opportunities for Business in Peru
Peru can interestingly be viewed as pertaining, among many others, the following two business opportunity characteristics:
- A Resource-Rich Country: Peru is a country with an abundance of natural resource and this of course creates opportunity for, not only the trading of goods on a national scale, but also exportation worldwide. Due to favorable conditions in international trade, Peru has experienced average annual growth of 5.5% in the export of goods and services since the year 2000. Whilst raw resources make up a significant proportion of Peru’s exports, residents of the country (both local and foreign) are becoming increasingly aware of the ability to develop raw goods into high quality intermediate or final goods, and thus creating further start-up business opportunities.
- A Developing Country: Whilst Peru is a country boasting much natural resource, let’s not forget that Peru is still a developing country in need of considerable advances in technology, communications and variety of product supply. As such, there are endless opportunities for new start-up businesses to offer higher quality services and a wider range of products that are currently hard to find or even unavailable in the country at present. It will come as no surprise that Peru’s imports are, unlike the exports, mainly composed of final and intermediate goods, and approximately one quarter of the total imports value is derived from the import of machinery. The country will no doubt continue to experience an influx in the importation of goods and services as the demand for outside knowledge and experience grows, and the population seek wider, high quality product variety.
As such, within the import and export markets of Peru, there are a multitude of start-up business opportunities for both local and foreign business entrepreneurs and investors to explore.
Good international relations are of vital importance to the development of Peru, and indeed the economy of any country. The opening of new international markets and signing of Free Trade Agreements (FTAs) has allowed Peru to achieve a more dynamic economy and increased export trade. Peru currently has FTAs signed with Canada, Chile, China, the European Union, Mexico, Panama, the United States, the MERCOSUR countries of Argentina, Brazil, Paraguay and Uruguay, among others. Peru also benefits from being a member of the Andean Community of Nations (CAN) alongside Bolivia, Colombia and Ecuador, which has promoted trade liberalization between these regions and reduced tax obligations. Each of these named trade agreements, and others still to come into force, are of significant benefit to those looking to do business in Peru and involving trade between the associated countries.
In reference to the mining sector; Peru has been named as the best destination for mining investment in Latin America. This in turn creates demand for local start-up businesses, since a locally registered company is commonly used as the vehicle to manage the operations of a Peruvian mining project. In the case of foreign mining investors, it is typical for an overseas holding company to form a subsidiary company in Peru and then administer all local transactions via this legal entity. The primary concern of overseas investors and related stakeholders; within the mining sector or in fact any industry of Peru, is the need to have this local company reliably supported by experienced professionals and that these professionals present quality reporting for the understanding, monitoring and control by the overseas management and investors.
A further consideration for people when looking to do business in Peru is the quality of life that living in Peru can bring. You will always be able to find the work-a-holics of this world, but in most cases, people are ‘working to live’ rather than ‘living to work’! Peruvians themselves are extremely patriotic, proud of their country and especially their gastronomy. Foreigners are attracted to life living in Peru. For many, the Latino vibes and even the chaos are a welcomed change from home. Peru is a heavily diverse country that offers the opportunity to travel city, coast, mountain regions and jungle, and with each destination maintaining its own distinct traditions in terms of food, music, clothing, arts, crafts and lifestyle. The climate of Peru is fair and the locals are extremely friendly and welcoming of tourists and foreign residents. The international population of Peru; mainly concentrated in the capital of Lima and also Cuzco; the home of Machu Picchu, is continuously rising as foreigners become increasingly aware of what the country can offer in terms of adventure, quality of life and business opportunities.
Start-up Businesses in Peru; Where To Begin…
The Peruvian Government has taken measures to encourage foreign investment in Peru. The 2016 elected President PPK follows this with his intentions to improve the country’s business environment and boost foreign investment.
The following are some key advantages to starting a business in Peru:
- 100% Foreign Ownership – Many foreigners do not realize, but the shareholders of a Peruvian registered company can be 100% foreign (individuals or companies) AND without residence status. There is no requirement for the company owners to be resident in Peru, nor to involve a Peruvian investor, which would perhaps unwantedly dilute the control and share capital arrangement of the desired ownership structure.
- Minimal Capital Requirement – The minimum share capital requirement for a standard company in Peru is extremely low at just PEN500 (Peruvian Soles), or its equivalent in USD$ (approximately USD$150).
- Low Bank Account Opening Deposits – Again, the standard company bank account opening deposit requirements in Peru are minimal at just PEN500 for a Peruvian Soles bank account, USD$500 for a USD$ bank account and €500 for a Euros bank account. The company may choose whether to have just one or multiple currency bank accounts.
- Quick Formation Process – Whilst in other Latin American countries it can take a number of months to constitute a legal corporate entity, in Peru as with the support of experienced legal professionals, this process can take just 2-3 weeks. This not only includes the company legal constitution, but also registration with the local tax authorities (SUNAT), obtaining a unique company tax reference number (known as a RUC number), obtaining the company official legalized social and accounting books (obligatory in Peru) and also processing the application for the opening of a local company bank account.
- Visa Support – For foreigners looking to start a business in Peru and also stay in the country long term (more than 6 months in any one year), this Peruvian registered company can be used as a vehicle to obtain a longer term visa and residency in Peru (more details below).
In order to begin the process of forming a company in Peru, it is simply the case of contracting a legal professional who is experienced in the procedures involved. For many foreigners who may not be so confident with their grasp of the Spanish language, the contracting of an English speaking (or alternative suited language) service provider is essential for the understanding of the agreement to be reached with the provider and also the legal work and documents involved.
Permanent Residency Status in Peru; Visa Options
Starting with the simplest of the longer term visa options for foreign individuals, an application for a Family Resident Visa can be made on the basis of direct descendance or marriage to a Peruvian national.
Ruling out these circumstances and considering the options available in conjunction with a company start-up, the most common visa types are as follows:
The key requirement in order to obtain an investment visa in Peru, is the PEN500.000 (Peruvian Soles) capital investment into a Peruvian registered company. This investment must be a single-sum bank transfer to be made directly from a bank account in the name of the investor/visa applicant. In addition, a business plan must be presented for the company and certified as viable by a local Certified Economist. Finally, the investor/visa applicant must commit to employing a minimum of (5) local staff within the first year of business.
An investment visa is valid for (1) year and renewable on the basis that commitments are proved to have been met during this first year. A foreign individual with an investment visa does not have the right to work in Peru, but to reside in the country in their capacity as a business investor. It is required that this individual be present in Peru for at least (183) days in the year (although special permission may be granted by the immigration office for extra time out of the country under certain circumstances).
In order to apply for a working visa, a foreign individual must receive an employment contract with a Peruvian registered company for a minimum period of (1) year. The employer company is required to verify that the employee/visa applicant has the experience and skills required to perform the contracted job role.
As with an investment visa, a working visa is valid for (1) year and renewable on the basis that the employment contract of the individual is renewed or still valid for a further (1) year period. As the name of the visa suggests, a foreign individual with a working visa does have the right to work in Peru. It is also required that this individual be present in Peru for at least (183) days in the year (although special permission may be granted by the immigration office for extra time out of the country under certain circumstances).
In both cases, a foreign individual may form a company in Peru and use this company as a vehicle in which to invest or be employed in order to obtain the relevant visa and longer term stay in Peru. After two years as resident in Peru, foreigners can apply for Naturalization and permanent stay.
Finally, just to note that outside of these visa options linked to Peruvian ties or starting a business in Peru, the alternative resident visa options include a student visa, independent professional visa and a foreign income visa; each of which carry their own specific application requirements.
In order to fully understand the visa application requirements, the process, timeframe and costs involved, it is highly recommended to contract a well experienced immigration lawyer who is familiar with the local authorities, including Notary offices, Interpol, the Labour Ministry (where applicable) and of course the immigration office based in central Lima. Whilst there are many components that make up a visa application process, the headache to understand and also battle with the language barrier can be overcome by having this procedure managed by the right people. If efficiently managed, a typical visa procedure should take (2)-(3) months from start to finish.
2017 is set to be an exciting year for both the local and international business environments of Peru! As detailed in this article, there are many opportunities for doing business and living a quality life in Peru. Foreign investment is greatly welcomed by the country and as such, the constitution of a company in Peru is widely available to foreign investors and with modest requirements for compliance. Once a foreign individual has formed a Peruvian registered company, this opens many doors in terms of obtaining longer term stay in the country and, within time, permanent residence.
The team at Biz Latin Hub are excited to see what this coming year will bring in terms of further investment into the emerging economy of Peru. The Biz Latin Hub group is a market leader in supporting both local and foreign individuals and companies to successfully do business in Latin America, by providing a full suite of multi-lingual back-office services, including:
- Market Entry Support
- Local & Offshore Company Formations
- Legal & Immigration Services
- Accounting, Financial & Taxation Services
- Recruitment Services
- Security & Investigations Services
- Technology Services
- Administrative Support
The company is owned and managed by an experienced team of local and expatriate professionals, with offices in Colombia, Peru, Mexico, Chile, Argentina and Panama. The Biz Latin Hub offers services that are reliable, economic and tailored to meet client needs. For more information, please contact Craig Dempsey here.