Peru is ranked by the World Bank as the 43rd easiest country to do business in, which makes it second in the region. Peru tops Grant Thornton’s list of the best prospects among emerging markets. Peru is ranked fourth by Bloomberg among ‘best emerging countries for investment’.
Contact a Department for International Trade (DIT) Peru export adviser for a free consultation if you’re interested in exporting to Peru.
Peru is the second safest country to do business with in Latin America, due to low country risk and a consistently improving credit score. Investment in Peru is the highest in the region with 28% of gross domestic product (GDP). There is a huge pipeline of over £30 billion in investment projects.
Strengths of the Peruvian market include:
- third largest country in South America and one of the richest in natural resources
- committed to free trade
- strategically positioned, a regional transport hub and Brazil’s gateway to Asia
- highest growth rate and the lowest inflation in Latin America over the last decade
- topped the Global Microscope ranking for the last 6 years
- 11th place on the 2013 Resource Governance Ranking of the Revenue Watch Institute
While Peru’s potential is huge, there are still several challenges for doing business. These include:
- corruption affects government activity
- bureaucracy in the public sector, especially at local levels
- tension over natural resource extraction with native population
- English not widely spoken in public sector or smaller private sector companies
- poor research and technical development
3. Current benefits and growth potential
3.1 Economic growth
Peru is one of the fastest growing economies in the world. It is already the 41st largest by GDP and has had the leading growth rates in Latin America (average 6.35%) for over a decade. Peru has gone without a single year of negative growth, which has led HSBC to predict it will be the 26th largest economy by 2050.
Peru has a young population with an average age of 25.5 years old, a growing middle class and numerous natural resources. Due to Peru’s strong management of the economy and a stable democratic political system, the growth experienced in the past decade should continue.
3.2 Free trade
Peru is committed to free trade. More than 80% of trade is covered by Free Trade Associations (FTAs), including one with the European Union. Peru had a founding role in the free trading Pacific Alliance bloc and has an active participation in the Trans-Pacific Partnership negotiations.
4. UK and Peru trade
Up to November 2013, UK exports to Peru reached £153.9 million. This resulted in a trade deficit of minus £41.4 million. The trade deficit for the UK has started to reduce in the last 3 years, with the largest drop happening between 2011 and 2012.
The main goods exported from the UK to Peru include:
- piston engines
- generator sets
- alcoholic beverages
5. Opportunities for UK businesses in Peru
The perception of the UK in Peru is positive and those tendering contracts want UK companies to be competing for work.
Department for International Trade (DIT) provides free international export sales leads from its worldwide network. Search for export opportunities.
The Peruvian government is taking steps to close the £53,619 million infrastructure gap. It has approximately £7,654 million in planned projects in 2014 and £30,466 million more planned for the future. Public Private Partnerships (PPPs) will be the main financing model.
Infrastructure opportunities exist in:
- design, build and operation
- project financing
- professional services
Some of the major infrastructure projects for the coming years will be:
- the development of the Lima Metro System (£12 billion)
- Lima’s 5 complimentary bus corridors (£518 million)
- the preparations for Lima 2019 Pan American Games (£431 million)
- the construction of a peripheral ring road connecting 12 of Lima’s districts (£731 million)
Contact the Deputy Director Department for International Trade (DIT) Lima Carlos.Chau@fco.gov.uk for more information on infrastructure opportunities in Peru.
5.2 Defence and security
Defence and security are important political and social issues in Peru. The industry is expected to continue growing. The government and private sector are looking for new ways to improve security and invest in protection.
The government is planning to invest approximately £1,401 million in large defence projects including:
- air defence systems
- an earth observation satellite
- upgrading and renewing air and ground equipment
- patrol vessels
Contact the Business Development Manager Maricarmen.Larrauri@fco.gov.uk for more information on defence and security opportunities in Peru.
The Export Control Organisation (ECO) issues licences for the export of strategic goods. You must check your goods are meeting legal requirements for export.
5.3 Oil and gas
Peru’s oil and gas industry is growing. There are oil reserves in all the country’s territories. In 2012, the estimated production was 166,170 barrels per day, which is expected to double over the next 3 years.
Some of the opportunities in the sector include:
- construction of the 1,085 km South Andean Gas Pipeline (£9,749 million)
- £2,120 million upgrading project of the Talara oil refinery including a £548 million desulphurating plant to be tendered by Petroperu
Contact the Business Development Manager Michelle.DeRivero@fco.gov.uk for more information on oil and gas opportunities in Peru.
Mining is the foundation of the Peruvian economy. It influences other important sectors including power, construction, railways and financial services. Private companies operating under long-term government licences control all mining activity in Peru.
Mining has a planned investment of £36,094 million at different stages of development. These projects will involve around:
- 45% construction
- 40% capital goods
- 5% engineering
- 5% transport and services
- 5% management and supervision
Contact the Business Development Manager Michelle.DeRivero@fco.gov.uk for more information on mining opportunities in Peru.
Demand for health services has grown in recent years with private health services seeing an annual 12% growth. There’s a need for increased efficiency in the delivery of services through PPPs.
There are plans in the next 3 years to construct 10 new hospitals and more than 700 strategic facilities as part of a £1,645 million investment pipeline. The health ministry is still at the early stage of implementing the PPP program and wants to replicate the UK model. Medical services will remain public, but some other non-medical services will be through private sector contracts.
Contact the Deputy Director Department for International Trade (DIT) Lima Carlos.Chau@fco.gov.uk for more information on opportunities in the healthcare sector.
The emerging middle class and strong consumer confidence are fuelling growth in the retail sector. Peru currently has around 60 shopping centres and there are projects to develop 12 more by the end of 2014.
The retail sector is growing faster than GDP with increases in sales of 15% in 2012. This trend is expected to continue at an estimated average of 6% over the next 5 years. The subsectors most likely to experience growth according to top retail executives are:
- home and kitchen appliances
Contact the Business Development Manager Michelle.DeRivero@fco.gov.uk for more information on opportunities in Peru’s retail sector.
6. Start-up considerations
Foreign investors are treated as nationals in Peru. There are certain restrictions which apply for specific sectors, such as weaponry, security and air/maritime transport.
There are several options for doing business in Peru:
- foreign owned company eg corporation, closed corporation, public corporation or limited liability company
- branch office
- joint venture
- find an agent/distributor
Legal documents may be required and will need to be certified by the Peruvian Ministry of Foreign Affairs (MRE).
If you are planning on doing business in Peru, you’ll need to register with Proinversion, the authorised government agency.
You should seek legal advice as the tax and legal obligations of each business structure can differ.
7. Legal considerations
7.1 Rights for exporters
Peru has adopted a legal system that promotes and protects foreign investors´ interests.
The political constitution and the legal system guarantee:
- private property rights
- the fulfilment of contracts
- free capital transfer and remittance of earnings
- unrestricted access to internal and external credit
- unrestricted access to most economic sectors
7.2 Legal Stability Agreement
The Peruvian state offers a Legal Stability Agreement for businesses that invest in any of the following criteria:
- at least a 2 year term
- £6 million in the mining and hydrocarbon sector
- £3 million in any other economic activity
You must register with Proinversion to enjoy the benefits of the agreement, which include:
- tax stability - including income, export labour and certain tax exemptions
- accepts currencies other than Peruvian Nuevos Soles (eg Euro, US dollar)
- non-discrimination for exchange rate and capital transfer
- option of keeping accounting in a foreign currency
7.3 Property ownership
If you are a doing business in Peru, you are subject to the same rights as Peruvians except for some limitations within 50km from the national borders.
7.4 Choice of business entity
The main company types in Peru are:
- private corporations
- private close corporations
- public corporations
Representative offices are not considered a valid company legal form. There is no regulation on how to ‘incorporate or establish’ a representation office in Peru.
8. Tax and customs considerations
8.1 Tax considerations
The Peruvian fiscal year is the calendar year, running from January to December.
The Superintendent of Tax Administration (SUNAT) is the governmental office in charge of administrating taxes and customs.
Income Tax for companies located in Peru is 30% on net income. For non-domiciled companies, a 30% rate is placed on their Peruvian source income only.
If your company is in not yet operational in Peru, you have the right to recover the VAT (known as IGV in Peru). To qualify, you must meet these requirements:
- at least 2 years of pre-operative stage
- have an agreement with the government
- invested at least £3 million
Holders of mine concessions and oil and gas agreements must apply for special agreements regarding this benefit.
8.2 Customs considerations
Customs duties are imposed on the cost, insurance and freight (CIF) value of imported goods. Based on its value, rates of 0%, 9% and 17% are imposed. Many goods are exempted since Peru is executor of over 70 bilateral commercial agreements, including a free trade agreement with the European Union.
You can find more about import tariffs in the Market Access Database (MADB).
Financial regulation is under the control of 3 public institutions with functional autonomy:
- The Central Reserve Bank of Peru (BCRP) regulates the currency and the credit in the financial system
- The Superintendent of Banking, Insurance and Pension Funds (SBS) preserves the interests of the depositors while preventing and detecting the laundering and terrorism
- The Superintendent of Securities Market (SMV) ensures the protection of investors and the efficiency of markets
Some other sectors are also subject to regulation.
9. Business behaviour
Many business people speak excellent English. English is less widely spoken amongst government officials and private sector employees in smaller businesses. A good knowledge of Spanish is useful. It’s recommended to have full Spanish versions of brochures or presentations at meetings.
10. Entry requirements
All visitors must have a valid passport and visa. A visa is not required for tourism. Business visitors need to have a business visa. Business visa holders can usually remain in Peru for up to 183 days.
It is necessary to have a business visa to incorporate a company, establish a branch or sign contracts. A special permit may be available for those who only have a tourist visa.
If you’re travelling to South Africa for business, check the Foreign and Commonwealth Office (FCO) travel advice page beforehand.
Contact the Department for International Trade (DIT) team in Peru for more information and advice on opportunities for doing business in Peru.