International Trade in Peru

News Related to International Trade in Peru

Business outline for Peru

Main Industry Sectors

Agriculture contributes more than 7% to the country's GDP and employs nearly 10% of the population. The main agricultural products are cotton, sugarcane, coffee, wheat, rice, corn and barley.

The industry sector employs almost 42% of the population and generates more than one third of the GDP. Peru has a large mining industry, which was privatized in the1990s and attracts significant investments. Peru is the world's first producer of silver, the fifth largest producer of gold, the third producer of copper, and an important supplier of zinc and lead. The country also has large reserves of natural gas and oil, even though, Peru is a net energy importer.

The main manufacturing activities are textiles, consumer goods, food processing and fish products. Peru is the world's first exporter of fish meal and asparagus. 

The tertiary sector contributes about 56% to the GDP and employs a little less than half of the population. The tourism sector is very well developed.

Economic Overview

Peru's economy is one of the most dynamic in Latin America, but it has experienced a significant slowdown in 2009 (0.9% of growth against 9.8% in 2008), due to the effect of the drop in global trade, the price fall in raw materials and the reduction of domestic demand.  Thanks to its solid base, the country gave proof of a strong endurance in face of the crisis, the government had set up counter-cyclical measures and controlled the adapted monetary means.  The revival was quick and vigorous in 2010, with an estimated growth or 8.3%, supported by the revival of global trade, the dynamism of domestic demand and the performance of investments.

Once the revival was well-started, the government began to withdraw gradually the exceptional re-launch measures and it is trying to contain the risks of inflation.  The president Garcia has established five priorities:  to stimulate growth with the support of investments, to maintain an austerity policy, to redistribute wealth, decentralization, education and health.  In the context of the next elections, he reaffirms his objective of reducing poverty and extreme poverty and wishes to speed up the integration of Peru into the global economy through the multiplication of trade agreements. 

In spite of the net progress achieved, 50% of the population lives beyond the poverty line, under-employment affects 60% of the population, unemployment is 8% and the informal economy represents 70% of the employment.  There is a strong concentration of wealth and significant inequalities.

FDI in Figures

After having attained a record level in 2007-2008, the FDI flows into Peru fell in 2009, under the effect of the global recession.  Nevertheless, they rebounded in 2010, stimulated by the region's growth, and they should continue this progress.  FDI in Peru comes mainly from Spain (the main investor), the United States and the United Kingdom. The sectors that attract most of  FDI are communications (about one third of the total), industry, finances and the mining industry. Peru's most appealing points in terms of FDI are the low cost of wages compared to the developed countries and the non-restrictive policy concerning dividends. However, the Peruvian authorities must look into reducing customs barriers, making their tax legislation more flexible,  improving the efficiency of public institutions as well as strengthening the rule of law, in order to keep the country attractive to investors.

FDI Government Measures

The Peruvian government is trying to attract foreign investors in all sectors of the economy. During the 1990s, the Peruvian government encouraged the stabilization of the economy and promoted liberalization policies by dropping customs barriers and opening the economy to foreign investors. In April 2002, the government established PROinversion, the sole representative of current and future investors, which took part in the privatization of public companies and industries based on natural resources. In addition to the 1993 Constitution, there are laws in Peru concerning foreign investment, including the 1991 Promotion of Foreign Investment Law and the Framework Law on the Growth of Private Investment 1991.

Country Strong Points

For five years Peru has experienced sustained growth, which rests on an external growth environment, on exports and domestic demand, which has benefitted from the combined rise in household consumption and public investment. Dynamic activity, sound economic policy, and the successful management of debt, have allowed Peru to show very good results in terms of a strong macro-economic balance, and to regain investor and market confidence. Peru enjoys well directed external demand and the good performance of the raw material prices, of which it is a substantial producer.

Country Weak Points

If the Peruvian economy's prospects are favorable in the short term, the sustainability of the present growth is conditioned by Peru's capacity to define a medium term development strategy. With growth highly concentrated on the primary sector and in the agricultural exporting regions, it has only marginally contributed to redressing a difficult social situation. The main source of vulnerability is a permanently high level of poverty and under-employment, caused by a growth that is too dependent on a strongly capitalist mining sector. 

Growth is dependent on an external environment which up to now has been favorable, as domestic demand is not yet able to take over from a possible reduction of external demand or from the prices of raw materials. Peru also suffers from a great lack of infrastructures, and the institutional capacity of the country has not improved significantly over the last few years. Moreover, the progress of employment is too concentrated in the most dynamic areas and in the informal sector. The lack of efficiency and means of public policies is manifest in the permanently high poverty rate.

Foreign Trade Overview

Peru is a member of the WTO and it is very open to international trade which represents more than 45% of the GDP. Its economy benefits substantially from the Trade Promotion Agreement (TPA) with the United States.  Peru's three main export partners are the United States, China and Switzerland. The main export commodities are ores, precious stones, copper and oil. Its three main suppliers are the United States, China and Brazil. Peru mainly imports fuels, machinery, electronic equipment, plastic products and vehicles.  Structurally positive, Peru's trade balance should continue to strengthen with the rise in exports.