1. A country which generates trust
Peru is a country that generates trust for foreign investors, as it continues to have one of the lowest country risks in the Latin American region despite political uncertainty during the recent change of government. To this extent, Peru’s EMBIG (Emerging Market Bond Index Global) country risks yield stood at 1.83%, or 183 bps, on average in August 2021 – considerably lower than the regional average of 3.92%, or 392 bps. Moreover, during the first half of September said yield hovered below 180 bps on average. It is noteworthy to mention that during 2020 Peru registered the lowest country risk in the region, according to Peru’s Central Bank.
Despite recent upheavals in July 2021, Peru continues to register among the lowest inflation rates in the region, reducing macroeconomic uncertainty. During August and September, Peru’s central bank raised the interest rate by 0.75% after keeping it without changes for a year at 0.25%. Inflation has increased in Latin America’s biggest economies in recent months, but still Peru maintains one of the lowest annual inflation rates in the region, at 5.0% as of August 2021.
Peru has a two-decade record of high growth, low inflation and economic stability, which has enabled it to tap international credit markets at very low interest rates. In November 2020, the Peruvian government issued $4 billion worth of international bonds, including some with securities coming due in 100 years, for the first time in the country’s history.
2. Peru is committed to continue developing human capital
In a continent where human capital is often undervalued, Peru is working to boost it. It was ranked as one of the most improved nations by the World Economic Forum’s Global Talent Competitive Index (GTCI) in 2019, boosting its ranking to 65th place out of 141 countries. Its improvements in investment and developing local talent helped it move up the ladder.
3. A country opened to international markets
The Pacific-facing nation was ranked 76 out of 190 economies in 2020 in a Doing Business profile by the World Bank Group. Peru has 21 active Free Trade Agreements which link it to 58 countries that concentrate 80% of the world’s GDP and 40% of the global population. Peru also has 28 bilateral investment treaties and nine double tax conventions. It belongs to the World Trade Organization, the Asia Pacific Economic Convention (APEC) and the Pacific Alliance, a regional trading bloc that includes Chile, Colombia and Mexico.
Peru has four special economic zones enabling customs-free and tax-free treatment for companies or services working in foreign trade until 2042. These zones are located in the Pacific-facing ports of Tacna, Paita (in the Piura region), Ilo (in the Moquegua region) and Matarani (in the Arequipa region).
4. An excellent environment to invest and enjoy life
Before the pandemic, Peru was in first place in Latin America in a 2019 Reputation Institute’s ranking of countries with the best reputation in the world. Peru was in 25th place in the world, above Chile (28th place), Colombia (48th place) and Mexico (40th place), the nation’s partners in the Pacific Alliance trading bloc.
The country is also an attractive destination for high-end travelers who can enjoy unique experiences such as a picnic in the desert, a cruise on the Amazon River or the Inca trail. Luxury train travel with incredible views on the Belmond Andean Explorer routes is a first-class way for investors and their representatives to see the country.
High-end tourists - classed as those who enter Lima’s Jorge Chavez airport with a tour agency and spend more than $4,000 during their stay – made up 1.9% of visitors to Peru in 2019, some 50,909 people. Peru’s flourishing reputation for its gastronomy and as a haven for foodies led to it being selected as the best culinary destination in the world for the 8th time in the World Travel Awards in 2019. In the capital city Lima, you can find some of the world’s top eateries, such as Astrid y Gastón, the iconic restaurant from Gastón Acurio — the renowned chef who established Peru as a gastronomic powerhouse – and Maido – a Japanese-Peruvian fusion restaurant under chef Mitsuharu Tsumura, which was voted Latin America’s Best Restaurant in 2019, 2018 and 2017.
5. Peru is a country with a favorable business climate
As a foreign investor or entrepreneur, it is relatively easy to set up a business in Peru and for that enterprise to enjoy legal protection. Peru’s Constitution guarantees the right to freedom of enterprise. As a result, any licit activity can be developed by Peruvians or foreigners provided it does not affect public health, national security or environmental conservation. This right is protected by Legislative Decree 662, the Regime of Legal Stability of Foreign Investment, which establishes that foreign investors have legal protection to operate in the country and enjoy the same rights as nationals.
By the same token, Legislative Decree 757 sets out the Legal Framework for the Growth of Private Investment, which establishes special requirements for juridical security. It states that free initiative and investments are guaranteed in all areas of economic activity and in any of the corporate or contractual forms.
Providing tax incentives has also been embedded in Peruvian laws, including a 2019 (103309) law which reduces income tax by up to 215% for investments in research, development and innovation projects.
Peru is the regional leader in terms of efficiency to register business ownership, taking an average of 7.5 days compared to the Latin American average of 41.5 days, according to the FDI benchmark in March 2021. It was also ranked as the third cheapest country to set up a company, costing just $591 compared to an average of $1,166 in the region, among countries including Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay and Uruguay.
The same ranking found Peru was in fourth place, below average, for the number of procedures to form a company, with a total of eight compared to a regional average of 9.1.
6. A country with an entrepreneurial attitude towards business
With an average age of 24, the Peruvian entrepreneur is one of the world’s youngest. It was ranked 67 out of 137 countries in the 2018 Global Entrepreneurship Index rankings. Peru was shown to be making efforts in technology absorption, and based on economic activity data it was close to The Netherlands in terms of human capital and to Norway in terms of networking, according to the index.
7. A country with an economy connected to global digital trends
Peru is ahead of other countries in the region in terms of internet connectivity and commerce. It is one of the countries with the highest number of internet users in the region, in 5th place with 24 million, above Chile, Ecuador and Guatemala. It also ranks 5th for internet penetration, above Brazil, Colombia, Bolivia and Panama, according to the market data portal Statista 2020.
Peru ranked in 56th place in the 2019 Global Connectivity ranking, above Ecuador, Venezuela, Paraguay and Bolivia. It rose to 69th place in the 2019 Global Innovation Index, surpassing other countries in the region like Argentina, Panama, Paraguay and Ecuador. Peru is also one of the two countries which are above the regional average in terms of innovation inputs.
In 2019, Peru was in 55th place in the E-Participation Index and rose 46 positions in the United Nations’ digital participation indicator. In 2020, Peru was in 71st place out of 193 countries in the UN’s E-Government Development Index.
More than three quarters (76.2 %) of homes in Peru have internet, while 36.1% of Peruvians are online buyers and 78% have smartphones, according to CAPECE, the Peruvian chamber of electronic commerce. In 2020, online retail consumption grew by more than 250% compared to 2019, CAPECE said. A 2021 survey of E-commerce by Neo Consulting showed that between 2020 and 2021 electronic sales in Peru grew by 86.7%, much more than in the other markets in South America (E-commerce in Brazil grew by 60.9%, in Colombia by 53.1%, in Chile by 45.6%, and in Argentina by 39%). Peru has led e-commerce in the region, registering the highest average annual growth rate in e-commerce, 35%, in the ten years before the Covid-19 pandemic. At the end of 2020, E-commerce was worth $6 billion.
8. As a result, Peru has been a preferred destination for Foreign Direct Investment
Peru is the fourth recipient of FDI in Latin America after Brazil, Colombia and Chile, thanks to its attractive legislative and fiscal framework and dynamic industries. It has been able to attract new investment in recent years. FDI comes primarily from its largest investor Spain, 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, finance and energy.
At the time when the COVID-19 fallout sunk global foreign direct investment (FDI) flows by 38% in 2020, Peru was also impacted. Previously, FDI flows into the country had increased from USD 6.5 billion to USD 8.9 billion between 2018 and 2019 (+37.1%), according to the UNCTAD 2020 World Investment report. However, Peru’s Central Bank has estimated FDI flows of USD 1.5 billion in 2020 and USD 2.4 billion in 2021. The total stock of FDI stood at USD 115 billion at the end of 2019.
Peru has registered sustained GDP growth in the last 20 years, surpassing the global and regional averages on many occasions. Following the impact of COVID-19, top multilateral institutions estimate that in 2021 and 2022 Peru will register the highest growth rate in South America and that in 2023 it will register the second highest growth rate.
9. What makes Peru so attractive for Foreign Direct Investment
Foreign Direct Investment in Peru grew to $80.8 billion between 2010 and 2019, according to the country’s Central Bank. Just in 2019, Peru registered $8.89 billion in FDI, positioning it as the economy with the second-highest growth in the region. During the same nine-year period Peru registered 410 FDI projects in manufacturing, tourism and textiles. The latter is the sector which has generated the most jobs, after manufacturing. In terms of potential sectors for future investment, renewable energy emerged in first place, followed by retail, which also generates a high number of jobs. Together these projects represented a total investment of $15.34 billion and 86,329 jobs. Between January 2019 and September 2020, the countries with the most capital invested in Peru were Spain with $1.2 billion (39%), China with $726 million (23%), Panamá with $504 million (16%), Chile with $263 million (8%) and in fifth place Thailand with $125million (4%), according to fDi Markets data in 2021.
The principal drivers for foreign investment interest in Peru between 2010 and 2019 were natural resources potential (27%), favorable internal demand (27%) and a macroeconomic climate conducive to growth (22%), the same 2021 survey by fDi Markets found.
