Peru flag Peru: Investing in Peru

Foreign direct investment (FDI) in Peru

FDI in Figures

Peru is very much open to trade with its neighbours and the rest of the world, and has a favourable business environment for foreign investors. According to UNCTAD 2021 World Investment Report, FDI inflows fell sharply from USD 8 billion to USD 982 million between 2019 and 2020, following the economic crisis triggered by the Covid-19 pandemic. The total stock of FDI stood at USD 116 billion at the end of 2020. Thanks to its attractive legislative and fiscal framework and a dynamic mining sector, Peru was able to attract new investment in recent years. It is the fourth recipient of FDI in Latin America after Brazil, Colombia and Chile. FDI comes primarily from Spain (the largest investor), the rest of the European Union, the United States and the UK. Chile, Brazil and the Netherlands are also among the major investors. The sectors that attracted most of the FDI are mining, communications, industry, finances and energy.

Peru ranked 76th out of 190 in the World Bank's last Doing Business Report, published in 2020, a considerable decline when compared to the previous year, when it ranked 68th. Peru's attractiveness for FDI comes from its low cost of wages compared to developed countries and its non-restrictive policy on dividends. Other positive points in investing in Peru are its abundant natural resources, developed domestic market, and its closeness to the Chilean, Colombian and Mexican markets as together they form the Pacific Alliance. The country has an investment promotion agency, ProInversion, which seeks to attract foreign investment particularly in free trade zones and the country's infrastructure sector. However, even though the Peruvian government is open to attracting FDI in the country, the authorities need to reduce customs barriers, make the tax legislation more flexible, improve the efficiency of public institutions and strengthen the rule of law in order to keep the country attractive to investors. In recent years, Peru has been enhancing its strategy to improve the business climate and the country has implemented policies that made it easier to invest in the country, mainly by simplifying post-registration procedures. Some potential barriers to investing in Peru include a high vulnerability to commodity prices, lack of infrastructure, a slow and bureaucratic legal framework, and corruption. Among the most notable investments to happen in the country in recent years are the construction of the mega-port of Chancay by the Chinese state-owned Cosco Shipping Ports for about USD 3 billion, and the Amazon Waterway, a USS 95-million initiative involving China’s Sinohydro.

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 6,179-8715,908
FDI Stock (million USD) 112,778111,908117,816
Number of Greenfield Investments* 894260
Value of Greenfield Investments (million USD) 13,0951,7222,344

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 
Country Comparison For the Protection of Investors Peru Latin America & Caribbean United States Germany
Index of Transaction Transparency* 9.0 4.1 7.0 5.0
Index of Manager’s Responsibility** 6.0 5.2 9.0 5.0
Index of Shareholders’ Power*** 6.0 6.7 9.0 5.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in Peru

Strong Points

The main strengths of Peru's economy are:

  • Economic dynamism with a sustained growth rate for five years: forecasts up to 7.3% in 2021 (IMF)
  • An abundance of natural resources (mining, energy and agriculture), generating a general trade balance surplus thanks to its numerous exports
  • Prudent macroeconomic policies that have been carried out by an independent central bank, which has enabled the country to have optimal management of the public debt and to reduce the external debt
  • A large workforce because of the youth of the population
  • Favourable development of the domestic market, encouraged by ever stronger domestic demand
  • Membership in the Pacific Alliance, which opens access to the markets of Chile, Colombia and Mexico 
  • A continued open trade policy over the years
Weak Points

The Peruvian economy, however, presents certain obstacles to FDI:

  • High vulnerability to commodity prices and the Chinese economy (China being the largest receiver of Peruvian exports)
  • High dependence on exports on the primary sector
  • Legal framework with deficiencies that do not help to eradicate corruption
  • A social situation that is sometimes difficult depending on the region, caused by a structuring of the redistribution of unstable and unequal wealth
  • A large lack of infrastructure
  • Vulnerability to natural disasters
  • A large informal sector (70% of employment in 2021 according to COFACE)
  • A dollarised financial sector
Government Measures to Motivate or Restrict FDI
The Peruvian government is trying to attract foreign investors in all sectors of the economy. During the 1990s, the Peruvian government encouraged the stabilisation of the economy and promoted liberalisation policies by dropping customs barriers and opening the economy to foreign investors. In April 2002, the government established PROinversion, an agency that promotes and administers private investment in Peru. PROinversion participates in the privatisation of public companies and industries based on natural resources. Peru's foreign investment laws, including the Foreign Investment Promotion Law and the Private Investment Growth Framework Law, were passed in 1991, reinforced by the 1993 Constitution.

Since 2011, the Peruvian presidents focused on a model of liberal development, largely favourable to foreign investors. The latest political changes, with the election of President Francisco Sagasti in 2020, have stimulated Peruvian sovereign bond issuance and inspired international markets. Legislative reforms and privatisations are supported by the World Bank and the International Monetary Fund (IMF), whose loans in Peru between the 1990s and 2010 are valued at around USD 7 billion. The country is considered to be reliable by the World Bank, which ranks it 76th in the world and sixth in Latin America, in its 2020 Doing Business report, indicating that the government has created a favourable environment for business.

Peru hosts a total of seven Special Economic Zones (SEZs) overseen by MINCETUR's Foreign Trade Facilitation Office: a Free Trade Zone in Tacna and Special Development Zones (SDZs) in Ilo, Matarani, Paita, Tumbes, Loreto and Puno (the last three are not active). Companies can join SEZs through public tenders. These SEZs allow companies to access various incentives (such as tax benefits, exit facilitation procedures or tax exemptions).

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Latest Update: July 2022

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