5.2. Investing in Peru

Political stability, stable growth rates for the past years and a friendly climate for foreign investments are good reasons for taking a closer look to evaluate possible investments in large petrochemical projects in Peru.

Peru is a developing country at the western shoulder of the South America sub continent, bordering the South Pacific Ocean. Peru’s economy ranks 43 of 185 (world ranking) in the World Banks Doing Business 2013 report⁹⁴ and ranks second behind Chile for the Latin America & Caribbean area. Particular strengths are seen in the topics investor’s protection, getting credit and registering property.

Though the focus of the Doing Business report is to measure and benchmark regulations applying to domestic small to medium-size businesses through their life cycle it can serve also as a first reference for judging about the investment climate for large size businesses.

Peru’s legislative frame work is supportive to foreign investment and guarantees by law equal treatment for foreign and local investors (Legislative Decree N° 662 and Decree Law N° 757). The State also guarantees the legal stability to foreign investors and to the enterprises where they invest⁹⁵.

The World Economic Forum ranks Peru’ financial development index 41, and especially emphasis Peru’s financial stability, which ranks 15, and access to finance which ranks 26⁹⁶.

Increase of gross domestic product (GDP) was steady for the past ten years, with the only exception being 2009, when most of the world’s economies had to cope with significant drops in growth because of the financial crisis. Past growth rates of the Peruvian economy were dominated by the industrial development⁹⁷.

change)" class="wp-image-11402 size-full" height="193" src="https://sgbs.ch/wp-content/uploads/Illustration-18-GDP-AND-DOMESTIC-DEMAND-Real-change.png" width="409"> Illustration 18: GDP AND DOMESTIC DEMAND (Real % change)⁹⁸

It is the government’s policy to tap its resources of oil and gas and to put these resources to value for continued industrial development⁹⁹. The project suits this policy and therefore governmental support can be expected.

The Peruvian Government’s economic policy for the near future promises continued political and economic stability as the Minister of Economy and Finance underlines his main principles¹⁰⁰:

• Greater social inclusion and poverty reduction.
• Growth with Stability.
• Improving productivity and competitiveness of our economy.
• ...

Consequently also Euler Hermes¹⁰¹ rates Peru’s Country Grade as BB “Moderate external transfer & convertibility risk and sound, above average business environment“ and Peru’s Country Risk as low risk (L1: low vulnerability and low cyclical risk).

Peru is associate member of the MERCOSUR (free trade agreement) and therefore enjoys simplified export regulations to the member states.

PTPA (Peru Trade Promotion Agreement) with the USA entered into force in 2009 and opened the way to greater trade investments between the two economies

It can be concluded that the environmental conditions for an investment in Peru are supportive.

⁹⁴ World Bank. 2013. Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises. Washington, DC: World Bank Group.
⁹⁵ Deloitte Doing Business Peru 2011 2011 Deloitte & Touche S.R.L., Peru’s Business & Investment Guide 2010/2011, Ernst & Young
⁹⁶ The Financial Development Report 2012 World Economic Forum USA Inc.2012
⁹⁷ World Bank
⁹⁸ ANNUAL REPORT 2011, Banco Central de Reserva del Perú
⁹⁹ Ministerio de Energia y Minas, Plan Estrategico Institutional 2012 - 2016
¹⁰⁰ Luis Miguel Castilla Minister of Economy and Finance, Multiannual Macroeconomic Framework Revised 2012-2014
¹⁰¹ Euler Hermes claims to be the world’s leading provider of trade related credit insurance solutions with more than 100 years of client support and responsiveness to changing business environments. Euler Hermes Deutschland AG and PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft manage the official export credit guarantee scheme on behalf and for account of the Federal Government