Doing Business in Peru

Peru is a representative democratic republic divided into 25 regions. Its geography varies from the arid plains of the Pacific coast to the peaks of the Andes Mountains and the tropical forests of the Amazon Basin. It is a developing country with a high Human Development Index score and a poverty level around 31%. How much does the poverty level take a toll on trade in Peru?

Its main economic activities include agriculture, fishing, mining, and manufacturing of products such as textiles. The Peruvian population, estimated at 29.5 million according to a 2011 government census, is multiethnic, including Amerindians, Europeans, Africans, and Asians. The main spoken language is Spanish, although a significant number of Peruvians speak Quechua or other native languages. This mixture of cultural traditions has resulted in a wide diversity of expressions in fields such as art, cuisine, literature, and music.

Peru is a developing country with a market-oriented economy; its 2010 per capita income is estimated by the IMF at US$5,195 and it has a high Human Development Index score of 0.723 based on 2010 data. Historically, the country’s economic performance has been tied to exports, which provide hard currency to finance imports and external debt payments. Although they have provided substantial revenue, self-sustained growth and a more egalitarian distribution of income have proven elusive. According to 2010 data, 31.3% of its total population is poor, including 9.8% that is extremely poor. Services account for 53% of Peruvian gross domestic product, followed by manufacturing (22.3%), extractive industries (15%), and taxes (9.7%), according to the Peruvian Central Bank. Recent economic growth has been fueled by macroeconomic stability, improved terms of trade, and rising investment and consumption. Trade is expected to increase further after the implementation of a free trade agreement with the United States signed on April 12, 2006, as reported by the Office of US Trade Representative. Peru’s main exports are copper, gold, zinc, textiles, and fish meal; its major trade partners are the United States, China, Brazil, and Chile, according to the Peruvian government.

The economy of Peru is classified as upper middle income by the World Bank, and is the 42nd largest in the world, with a nominal GDP of $153.549 billion as reported by the IMF in 2011. Peru is, as of 2011, also one of the world’s fastest-growing economies owing to the economic boom experienced during the 2000s, with an estimated growth rate of 7% in 2011. Its economy is diversified although the commodity exports is important, the trade and industry are centralized in Lima but the agricultural exports have created development in all the regions. President Alejandro Toledo has made investment promotion a priority of his government. While Peru was previously marked by terrorism, hyperinflation, and government intervention in the economy, the Government of Peru under former President Alberto Fujimori took the steps necessary to bring those problems under control. Democratic institutions, however, and especially the judiciary, remain weak. The Government of Peru’s economic stabilization and liberalization program lowered trade barriers, eliminated restrictions on capital flows, and opened the economy to foreign investment, with the result that Peru now has one of the most open investment regimes in the world.

Overall, Peru would be considered an emerging market for businesses and investors. It has received a relatively decent rank of 41st in terms of ease of doing business for 2012, in the World Bank’s annual survey. The Peruvian government is clearly were conducive to businesses and is always looking for more investment. The Peruvian economy is also relatively diversified and is growing at a very high rate, making it a promising market for businesses and foreign investors.