Peru

GDP (US$ Billion)

214.25 (2017)

World Ranking 49/193

GDP Per Capita (US$)

6,732 (2017)

World Ranking 86/192

Economic Structure

(in terms of GDP composition, 2016)

Services
(55.2%)
Industry
(30%)
Agriculture
(7%)

External Trade (% of GDP)

46.9 (2017)

Currency (Period Average)

Peruvian Sol

3.26 per US$ (2017)

Political System

Unitary multiparty republic

Overview

Between 2002 and 2013, Peru was one of the fastest-growing countries in Latin America, with an average GDP growth rate of 6.1% annually. A favourable external environment, prudent macroeconomic policies and structural reforms in different areas created a scenario of high growth and low inflation. Between 2014 and 2017, however, GDP growth slowed to an average rate of 3%, mainly owing to the decline in international commodity prices, including copper, the leading Peruvian export commodity (with mineral products representing an estimated 46% of all Peruvian exports).

Sources: World Bank, Fitch Solutions

Major Economic/Political Events and Upcoming Elections

April 2016

Pedro Kuczynski was elected as president, beating Keiko Fujimori, the daughter of former president Alberto Fujimori.

July 2016

The government declared an emergency in approximately half of the country in the face of concerns surrounding the spread of the Zika virus.

December 2017

Former president Alberto Fujimori was pardoned from prison on grounds of ill health.

March 2018

President Pablo Kuczynski resigned from office. Martín Vizcarra, the acting vice president, succeeded Kuczynski as president of Peru.

April-June 2021

Presidential, congressional and gubernatorial elections to take place.

Sources: BBC Country Profile – Timeline, Fitch Solutions

Major Economic Indicators
Graph: Peru real GDP and inflation
Graph: Peru real GDP and inflation
Graph: Peru GDP by sector (2017)
Graph: Peru GDP by sector (2017)
Graph: Peru unemployment rate
Graph: Peru unemployment rate
Graph: Peru current account balance
Graph: Peru current account balance

e = estimate, f = forecast

Sources: IMF, World Bank, Fitch solutions

Date last reviewed: May 31, 2019

External Trade

4.1 Merchandise Trade

Graph: Peru merchandise trade
Graph: Peru merchandise trade


Source: WTO

Date last reviewed: May 31, 2019

Graph: Peru major export commodities (2018)
Graph: Peru major export commodities (2018)
Graph: Peru major export markets (2018)
Graph: Peru major export markets (2018)
Graph: Peru major import commodities (2018)
Graph: Peru major import commodities (2018)
Graph: Peru major import markets (2018)
Graph: Peru major import markets (2018)

Sources: Trade Map, Fitch Solutions

Date last reviewed: May 31, 2019

4.2 Trade in Services

Graph: Peru trade in services
Graph: Peru trade in services


e = estimate

Source: WTO

Date last reviewed: May 31, 2019

Trade Policies
  • Peru has been a World Trade Organization (WTO) member since January 1, 1995. Prior to its membership to the WTO, Peru has been a member of the General Agreement on Tariffs and Trade since October 7, 1951.


  • Peru has adopted an export-oriented trade policy. Peru is highly reliant on the export of mineral products, with an estimated 49% of all exports falling into the category of chemical, industrial and fuel products. Metals and articles thereof account for the second-most exported goods (in terms of value); within this category, copper ore comprises the largest share and represents the biggest export commodity in Peru. This exposes Peru to volatility in the demand of copper and any resulting price fluctuations.


  • Despite the country’s status as an oil-producing state, it still lacks the refining capacity to meet domestic demand. Its biggest import category is refined oil products which comprises 7.4% of all imports entering Peru. Machinery and complex manufactured goods is the largest import category in Peru, representing 33% of all imports.


  • The Peruvian currency, the sol, is one of the least volatile in the region and supports the economy's trade ambitions by incentivising exports. Monetary policy is partially aligned to promoting Peru's competitiveness in terms of international trade.


  • Peru is a member of the Community (CAN) and the Latin American Integration Association.


  • Peru has implemented anti-dumping measures on the following products:



    • Biodiesel from the United States
    • Biodiesel B100 from Argentina
    • Certain types of poplin fabrics of polyester-cotton blend from Pakistan and India
    • Stainless steel cutlery from Mainland China
    • Certain footwear from Mainland China
    • Zip fasteners and parts thereof from Mainland China
  • Fundamental to Peru's international trade success are its strategic free trade agreements (FTA) with several key Latin America economies including Mexico and Chile.


  • Imports are subject to the general sales tax of 16%, the municipal promotion tax of 2% and a tariff of either 0%, 6% or 11% (according to the tariff subheading of the merchandise imported). Traders are advised to seek additional information from the Superintendencia Nacional de Aduanas y de Administración Tributaria (SUNAT), the Peruvian tax authority, for specifics concerning the exact nature of tariffs on products. That said, import tariffs are the lowest in the region, at 1.4% on average, largely due to the wide range of FTAs in force which cover the vast majority of international trade. Consequently, most imported goods are subject to 0% tariffs rather than most favoured nation (MFN) bound tariffs.


  • The average MFN applied rate is low, at 2.4%, indicating that even goods not covered by FTAs are not generally subject to significant tariffs. The highest duties are imposed on clothing and textiles.


  • Peru will impose surcharges on certain agricultural products from time to time in order to protect local Peruvian farmers. These surcharges do not apply in most cases where a country has an FTA with Peru.


  • Most exporting companies in Peru are small- or medium-sized entities, accounting for around 82% of all exporting companies.

Sources: WTO – Trade Policy Review, Fitch Solutions

Trade Agreements

6.1 Major Multinational Trade Agreements



Active

  1. CAN Customs Union and Free Trade Area (Bolivia, Ecuador, Peru and Colombia): Trade between the Andean nations is substantial and has been increasing under the customs union, which allows businesses access to a larger market in the region and lowers tariff and non-tariff barriers to trade.


  2. Pacific Alliance (PA) FTA: The PA trade bloc, consisting of Chile, Colombia, Mexico and Peru, further assists with promoting regional growth. The PA focuses on boosting external trade with strategic partners, including those in Asia as well as adopting a business-friendly agenda aimed at incentivising investment into the region to enable companies to better access Latin American markets and create intra-regional supply chains. PA members represent nearly 36% of Latin American GDP and exported approximately USD1 trillion in 2015.


  3. Peru-United States: The United States is an important trade partner for Peru. This agreement lowers costs for importers sourcing goods from the United States and opens up a large market for Peruvian exporters. This agreement is particularly important since the United States pulled out of the Trans-Pacific Partnership (TPP), giving Peru an advantage over other Pacific Rim countries which do not have a prior agreement with the United States.


  4. Peru-Mainland China: Mainland China is Peru's largest trade partner, making this agreement extremely important for Peru. The agreement allows access for Peruvian goods, primarily metals such as copper, to the largest market in the world. This considerably boosts the country's appeal to mining and metalworking companies, while also reducing the costs of imported machinery, textiles, and consumer goods for Peruvian companies and consumers.


  5. European Union (EU) CAN: In January 2017, the CAN ratified an FTA and economic integration agreement with the EU. The agreement eliminates tariffs for all industrial and fisheries products, increases market access for agricultural products, improves access to public procurement and services, and further reduces technical barriers to trade. The FTA also includes commitments to effectively implement international conventions on labour rights and environmental protection, which are monitored with the systematic involvement of civil society.


  6. Common Market (Mercosur)-CAN (MERCOSUR-CAN): As a member of the CAN, Peru is party to commercial agreements with Mercosur (Brazil, Argentina, Paraguay and Uruguay). Mercosur member states present greater economic opportunities for firms in Peru, and the agreement brings about greater economic integration. This supports the Free Trade Area of the Americas – an agreement that reduces the trade barriers among all countries in Latin America.


  7. Peru-South Korea: South Korea is a key trade partner and is not yet included in the TPP, meaning Peru will stand to benefit from this bilateral FTA.


  8. The Comprehensive and Progressive Agreement for TPP (CPTPP): The agreement – comprising Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam – is in effect. The agreement was ratified in Q418, with the deal representing 13.4% of global GDP, making it the third-largest trade agreement after the United States-Mexico-Canada Agreement and the EU. The agreement aims to cut tariffs, improve access to markets and set common ground on labour and environmental standards and intellectual property protections.


  9. Peru also has active FTAs with Honduras, Japan, Costa Rica, Panama, Mexico, Canada, Singapore, Chile and Thailand.

Sources: WTO Regional Trade Agreements Database, Fitch Solutions

Investment Policy7.1 Foreign Direct Investment
Graph: Peru FDI stock
Graph: Peru FDI stock
Graph: Peru FDI flow
Graph: Peru FDI flow

Source: UNCTAD

Date last reviewed: May 31, 2019

7.2 Foreign Direct Investment Policy

  1. ProInversión is a public entity attached to the Ministry of Economy and Finances and is responsible for the execution of the national private investment promotion polices. ProInversión aims to promote investment in public services and infrastructure through the use of public-private partnerships. Additionally, ProInversión offers assistance and information to investors.


  2. ProInversión also participates in the privatisation of public sector companies and industries based on natural resources.


  3. Peru's investment policies and profile are based on legal frameworks set out under the Foreign Investment Promotion Law, the Private Investment Growth Framework Law and the Legal Stability Scheme for Foreign Investments, and are protected by the Peruvian Constitution (1993).


  4. Foreign investment in Peru does not require prior authorisation and is allowed without restriction in the large majority of economic activities. A number of industries, however, are restricted from foreign investment, including:



    • Air transport
    • Sea transport
    • Private security and surveillance
    • Investments in protected natural areas
    • The manufacture of weapons of war


  5. Basic rights for foreign investors include:



    • Freedom of trade and industry
    • Export and import freedom
    • The ability to send remittances abroad for profit or gains, after having paid any applicable taxes
    • A guarantee to freely possess and use foreign currency
    • The ability to use the most favourable exchange rate in the market
    • The ability to freely re-export any capital investments
    • Unlimited access to domestic credit
    • The ability to purchase shares owned by national investors
    • Free hiring of technology and remittance of royalties
    • The ability to take investment insurances abroad
    • The ability to enter into legal stability agreements with the Peruvian government, for their investments in Peru


  6. Foreign investors cannot purchase or own mines, land, forests, water, fuel or energy sources within 50 kilometres from international borders. Exceptions to these restrictions may be allowed in cases of public necessity as approved by the government (via the Council of Ministers).


  7. Property, if expropriated by the government, is only allowed after payment of a fair sum which includes compensation for eventual damages.

Sources: WTO – Trade Policy Review, ITA, US Department of Commerce, ProInversión

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
There are a number of free trade zones (FTZs), named CETICOS, which are based at Matarani and Ilo in the south, and Paita and Tumbes in the northThese zones allow various activities including manufacturing, packaging, storage and repair of vehicles and machinery to take place, with exemption from income tax, sales tax and import duties until 2022.
FTZs located at Tacna and Puno- These offer similar tax exemptions as the FTZs based at Matarani and Ilo in the south, and Paita and Tumbes in the north



- Designated for agribusiness, manufacturing and services activities, until 2032 and 2027 respectively
Deductions for technological and scientific endeavoursProjects related to scientific research, technological development and technological innovation have provisions for special tax deductions.



Those investing in such projects are entitled to a deduction of 175% or 150% of the amount spent:



- 175% if the project is conducted through centres of scientific research, technological development and technological innovation located within the country



- 150% if the project is executed by non-local centres of scientific research, technological development and technological innovation
Stability agreementInvestors may enter into a stability agreement with the government, allowing for the guarantee of the following for 10 years:



- Stability of the income tax regime in force at the time the agreement is entered into, as it pertains to distribution of profit



- Stability of the Peruvian government monetary policy (a complete absence of exchange controls)



- Right of non-discrimination between foreign and local investors



Companies operating with oil and gas and mining have additional provisions which may apply for different periods of time
Investment promotion – the AmazonVAT and income tax benefits are available to investments benefitting the Amazon region. The industries affected are:



- Agriculture and livestock operations



- Aquaculture



- Fishing



- Tourism



- Manufacturing activities linked to the processing, transformation and commercialisation of primary goods produced in the activities listed above, provided the products have been produced in the area designated 'Amazon'



- Forest transformation

Source: Fitch Solutions

Taxation
  • Value Added Tax: 17%
  • Corporate Income Tax: 29.5%

Source: SUNAT

8.1 Business Taxes

Type of Tax

Tax Rate and Base

Corporate Income Tax

29.5%
Withholding Tax- 5% on dividends

- 30% on interest

- 30% on royalties

- 15% on technical assistance

- 30% on digital services
Sales Tax17% on the sale of goods, services and most product imports
Net Assets Tax0.4%
Social Security Contributions9% on employee's salaries, as paid by employers

Source: SUNAT

Date last reviewed: May 31, 2019

Foreign Worker Requirements

9.1 Localisation Requirements

The employment of foreign workers in Peru is regulated under the aegis of the Ministry of Labour. The 'Foreigners Contract Law' allows businesses to hire foreign workers, with certified work visas, up to a maximum of 20% of the company's total workforce, provided that the salaries of the foreigners do not exceed 30% of the entity's total payroll. Moreover, contracts must be completed (in writing) for a maximum three-year period. These can be extended for similar periods if approved by the Ministry of Labour.



9.2 Visa/Travel Restrictions



A working visa is normally very easy to obtain, but only allows the individual to stay in the country for the duration of his/her employment contract and only after it has been approved by the Peruvian General Directorate of Immigration and Naturalisation. The ability of companies operating in Peru to import foreign labour has also become easier as of November 2016. The process has been simplified and businesses are no longer required to submit educational diplomas and certificates when applying for work permits for foreign workers. All that is required for the visa application is that employers submit a sworn affidavit which states that all Peruvian labour laws have been complied with in the hiring process as well as a copy of the prospective foreign worker's employment contract.



For citizens of North and South America, Western Europe, Australia, New Zealand and South Africa, only a passport is required to stay for a period of up to three months, but the individual is not permitted to work during this period. Business visas allow individuals to stay for up to 90 days, which can be extended by another 30 days if required, to discuss contracts and investment opportunities, but they cannot receive any income from a Peruvian source. Foreign nationals can apply for citizenship after two consecutive years of legal residency in Peru, be it by marriage or work.



Sources: Peru Ministry of Labour, Fitch Solutions

Risks

10.1 Sovereign Credit Ratings



Rating (Outlook)

Rating Date

Moody's

A3 (stable)24/07/2017
Standard & Poor's

BBB+ (stable)19/08/2013
Fitch RatingsBBB+ (stable)28/03/2019

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators



World Ranking

 2017 2018 2019
Ease of Doing Business Index54/19058/19068/190
Ease of Paying Taxes Index105/190121/190 120/190
Logistics Performance IndexN/A83/160N/A
Corruption Perception Index96/180105/180N/A
IMD World Competitiveness55/6354/63 55/63

Sources: World Bank, IMD, Transparency International, Fitch Solutions

10.3 Fitch Solutions Risk Indices



  World Ranking

201720182019
Economic Risk Index Rank

N/A

43/20244/202
Short-Term Economic Risk Score

66.970.668.5
Long-Term Economic Risk Score66.866.767.6
Political Risk Index rankN/A98/20298/202
Short-Term Political Risk score59.658.860.2
Long-Term Political Risk Score62.562.562.5
Operational Risk Index RankN/A99/201102/201
Operational Risk Score49.9 49.148.3

Source: Fitch Solutions

Date last reviewed: May 31, 2019

10.4 Fitch Solutions Risk Summary

ECONOMIC RISK

In the coming years, the Peruvian economy is expected to expand at lower average rates than in the past decade, as weaker metals prices weigh on export growth. Nonetheless, an expected surge in infrastructure investment will support region-leading growth and aid the development of its manufacturing and agricultural sectors. While the mining sector will remain a key economic driver, the rise of non-traditional exports will offer additional opportunities for growth. Increasing extractive sector production will, nonetheless, help narrow the current account deficit.



OPERATIONAL RISK

Peru offers a wide range of opportunities and advantages to investors seeking to enter the Latin American market. An open economy, substantial natural resources and a welcoming climate for foreign direct investment serve to pique investor interest, while a large, urbanised and low-cost labour market, as well as efficient trade procedures supported by strong international connections further boost Peru's appeal relative to regional peers. These considerations are somewhat offset by the risks posed by the inherent weaknesses in the country's poor internal logistics network, the limited pool of skilled workers and the prevalence of organised crime, compounded by an erratically-enforced rule of law.

Source: Fitch Solutions

Data last reviewed: June 3, 2019

10.5 Fitch Solutions Political and Economic Risk Indices

Hong Kong Connection11.1 Hong Kong’s Trade with Peru
Graph: Major export commodities to Peru (2018)
Graph: Major export commodities to Peru (2018)
Graph: Major import commodities from Peru (2018)
Graph: Major import commodities from Peru (2018)

Note: Graph shows the main Hong Kong exports to/imports from Peru (by consignment)

Date last reviewed: May 31, 2019

Graph: Merchandise exports to Peru
Graph: Merchandise exports to Peru
Graph: Merchandise imports from Peru
Graph: Merchandise imports from Peru

Note: Graph shows Hong Kong exports to/imports from Peru (by consignment)

Date last reviewed: May 31, 2019

Exchange Rate HK$/US$, average

7.75  (2014)   

7.75  (2015)  

7.76  (2016)   

7.79  (2017)   

7.83  (2018)

Sources: Hong Kong Census and Statistics Department, Fitch Solutions

Date last reviewed: May 31, 2019



2017

Growth Rate (%)

Number of Peruvian residents visiting Hong Kong

8,320

1.2

Source: Hong Kong Tourism Board



2017

Growth Rate (%)

Number of Latin American residents visiting Hong Kong195,8541.8

Source: Hong Kong Tourism Board

Date last reviewed: May 31, 2019

11.2 Commercial Presence in Hong Kong



2016

Growth Rate (%)

Number of Peruvian companies in Hong KongN/A

 
N/A

 
- Regional headquarters
- Regional offices
- local offices



11.3 Treaties and Agreements between Hong Kong and Peru

Peru and Mainland China signed a bilateral investment treaty (BIT) in 1994. The BIT came into effect in 1995.

11.4 Chamber of Commerce or related Organisations

Trade Commission of Peru in Hong Kong

Address: Suite 3706, 37/F, Hopewell Centre, 183 Queens Road East, Wan Chai, Hong Kong

Tel: (852) 3705 5656



Source: HKTDC

Consulate General of Peru in Hong Kong and Macau

Address: Unit 1401, 14/F, China Merchants Tower, 168-200 Connaught Road Central, Hong Kong

Email: secretary@peruconsulate.org.hk

Tel: (852) 2868 2622

Fax: (852) 2840 0733



Source: Protocol Division Government Secretariat



11.5 Visa Requirments for Hong Kong Residents



Hong Kong residents may travel to Peru visa-free for up to 180 days. For stays longer than 180 days, Hong Kong residents require a visa prior to arrival.

Source: Visa on Demand

Date last reviewed: May 31, 2019

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