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Peru - Overview

Contents extracted from the comprehensive atlas of international trade by Export Entreprises

Introduction

Capital:: Lima
Area:: 1.285 km2
Total Population:: 29.988
Annual growth rate:: 1.00%
Density:: 23.00/km2
Urban population:: 78%
Population of Lima (8.473), Arequipa (905), Trujillo (680), Chiclayo (520), Piura (380)
Official language: Spanish and Quechua
Other languages spoken: This country is home to more than one hundred different languages. However, Quechua is the largest linguistic native group, followed by Aymara.
Business language: Spanish and English, of which, as a general rule, people do not have a sufficient grasp.
Ethnic Origins:: 45% native peoples (Quechuas and Aymaras); 37% mixed ethnic origins (between white and native); 15% white; Black and Asian minorities.
Beliefs: Catholics 93%, Protestants 5%, Others 2%.
Telephone codes:
To make a call from: 0
To make a call to: +51
Internet suffix:: .pe
Type of State::
Republic based on parliamentary democracy.
Type of economy::
Lower-middle-income economy, Emerging Financial Market
Agricultural, mining and tourism activities are the dominant sectors.

Economic overview

Between 2004-2007 Peru enjoyed a cycle of sustained growth of nearly 7% annually, thanks to continuous decade-long liberal economic policy. These focused mainly on maintaining monetary stability and fiscal balance, as well as a very open trade policy, aiming to sign the maximum number of free trade agreements (including with the EU, signed in April 2011) and position Peru as a regional hub for trade between Latin America and the APEC countries.

After experiencing a significant slowdown in 2009, due to the effect of the drop in global trade, the price fall in raw materials and the reduction of domestic demand, the economy of Perou has recovered to become one of the strongest in Latin America in 2014. 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 a growth of over 8.8%. It continued the following year with a 14th consecutive year of growth at 5.4% in 2013 (after 5.5% in 2012) supported by the revival of global trade, the dynamism of domestic demand and the performance of investments.

Despite the fears of the effects of a new international crisis on external demand, the outlook of the Peruvian economy is now very good. The IMF - who characterized Peru as "the new star of Latin America" - maintains its forecast of a 2014 growth rate (5.4%) which should make Peru a leader among the regional economies.

In spite of the progress achieved by Peru, 34% of the population still lives below the poverty line in 2014, under-employment affects around 60% of the population, unemployment has reached 6% in 2013 and the informal economy still represented 70% of employment. There is a strong concentration of wealth and significant inequalities in this country.

Main industries

Agriculture contributes more than 6.2% to the country’s GDP and employs less than 1% of the active population. The main agricultural products are cotton, sugarcane, coffee, wheat, rice, corn and barley.

The industry sector has generated 37.5% of the GDP in 2013, employing 25% of the active population. 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 to 56.3% of the GDP and employs around 75% of the population. The tourism sector is very well developed.

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 China (around 17% of total export in 2013), the United States and Switzerland. The main export commodities are ores, precious stones, copper and oil. The country is exposed to the fluctations of primary ressources prices. Export decreased by 9% in 2013, due to collapse of prices.

In 2013, its three main suppliers were the United States (over 19% of the country imports), 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 in 2014.

The United States remains Peru's largest trading partner in 2013. A free trade agreement between the two countries was signed in 2006 and came into force on February 1, 2009. Moreover, about one million Peruvians are registered in the Peruvian consulates in the United States, the primary destination of the Peruvian Diaspora.

China is Peru's largest trading partner since 2013, increasing year after year its trade with the country due to the effects of a free-trade agreement who came into force in 2010.

Although the EU is also a major trading, investment and developmental assistance partner, it only ranks third among Peru's trading partners.

FDI

In a context where global foreign investment increased by 10.9% in 2013, in particular in Europe (+25.2%) and in Latin America (+17.5%), FDI flows to developing economies reached a new high of US$759 billion. However macroeconomic fragility and policy uncertainties are driving investors to caution.

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 and the following years, stimulated by the region's growth. Thanks to its attractive legislative and fiscal framework and a dynamic mining sector, Peru continued to attract FDI in 2013. It is now a leader amongst the South-American receptors of FDI, behind Chili but ahead of Argentina with FDI influx reaching USD 12 billion in 2012. The strong appetite of foreign investors continues, with a $70 billion investment expected over the next five years, including $42 billion in the mining sector alone.

Peru's FDI come primarily from Spain (the largest investor), the United States and Great Britain. The sectors that attract most of  FDI in 2013 were 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.

Information on the 2013 FDI influx in this region can be accessed in the Global Investment Trade Monitor published in January 2014 by the United Nations Conference on Trade and Development (UNCTAD).

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