Official Name: Republic of Peru
Internet Domain: .pe
International Dialing Code: +51
Time Zone: UTC -5
Table of Contents
|Location and Size||Compariative Economic Indicators|
|Government||Credit and Collections|
|Legal System||Risk Assessment|
|Economic Indicators||Other Sources of Information|
Peru is the third-largest country in South America and is approximately three times the size of California. It borders on the South Pacific Ocean, between Chile and Ecuador.
Peru is a constitutional republic. Branches include: Executive – President Alan Garcia, two Vice Presidents, and a Council of Ministers led by a Prime Minister; Legislative -- Unicameral Congress; Judicial -- Four-tier court structure consisting of Supreme Court and lower courts.
The Peruvian judicial system is often very slow, and decisions are difficult to predict and enforce. The competence of individual judges is said to vary substantially, and allegations of corruption and outside interference in the courts are common.
In the 2007 Transparency International Global Corruption Barometer, the judiciary in Peru is perceived as the most corrupt sector in the country. User surveys indicate that unofficial payments affect both the speed and the final outcome of judicial processes.
Peru is the fifth most populous country in Latin America (after Brazil, Mexico, Colombia and Argentina).
- Population: 29,180,900
- Population growth rate: 1.264% (2008 est.)
- Languages: Spanish (official), Quechua (official), Aymara, and a large number of minor Amazonian languages
- Literacy: 82.1% (2004 est.)
- Ethnic Make-up: Indigenous (45%), mixed background ("mestizo") (37%), European (15%), African, Japanese, Chinese, and other (3%).
- Religions: Roman Catholic 81%, Seventh Day Adventist 1.4%, other Christian 0.7%, other 0.6%, unspecified or none 16.3% (2003 est.)
Peru's economy, one of the most dynamic in Latin America, has shown strong growth over the past five years.
Despite the strong macroeconomic performance, underemployment and poverty have stayed persistently high. The economy also continues to be excessively dependent on world commodities prices, which has impeded its diversification. The pace of development has also suffered from infrastructure shortcomings, extensive poverty and inequality, heightening social and political tensions, and from the difficult business environment.
Peru's economic growth should remain among Latin America's highest in 2008 and 2009. The international financial turmoil should have limited impact, as Peru’s economic growth rests on relatively solid foundations with domestic demand constituting the main economic driver. Investment will be boosted by the second phase of the Camisea natural-gas field, several major mining projects and the free trade agreement with the United States.
Currency: Nuevo Sol (PEN)
Leading Markets (2007): US 18.5%, China 12.1%, Switzerland 8.1%, Canada 7.2%, Japan 7.1%, Chile 5.6%
Leading Exports-commodities: copper, gold, zinc, crude petroleum and petroleum products, coffee, potatoes, asparagus, textiles, guinea pigs
Leading Suppliers (2007): US 20.1%, China 10.6%, Brazil 9.8%, Ecuador 6%, Colombia 5.9%, Argentina 5.2%, Chile 4.9%, Mexico 4.2%
Leading Imports-commodities: petroleum and petroleum products, plastics, machinery, vehicles, iron and steel, wheat, paper
Top Industries: mining and refining of minerals; steel, metal fabrication; petroleum extraction and refining, natural gas; fishing and fish processing, textiles, clothing, food processing
Top Agricultural Products: asparagus, coffee, cotton, sugarcane, rice, potatoes, corn, plantains, grapes, oranges, coca; poultry, beef, dairy products; fish, guinea pigs
|Economic growth (%)||5.2||6.7||7.6||9.0||8.5||6.0|
|GDP (USD billion)||69.7||79.5||93.0||101.5||108.6|
|Exports (USD billions)||12.8||17.3||23.8||28.0||43.6||36.1|
|Imports (USD billions)||9.8||12.1||14.9||19.6||27.5||33.2|
|Foreign debt (% of GDP)||33.8||36.0||30.5||29.8||23.4||24.0|
|Foreign currency reserves (in months of imports)||8.8||7.8||7.7||9.5||10.0||9.0|
|Exchange rates (PEN per USD) 2008-11-13||3.5||3.3||3.4||3.2||3.1|
|Exchange rates (PEN per EUR) 2008-11-13||4.4||4.1||4.2||4.4||3.9|
|Population growth* (%)||1.3||0.9||0.9||1.2||1.4||1.4|
|GDP** (USD billion)||219.6||232.8||98.7||1.8||327.7||39.8|
|GDP per capita**
|Economic growth (%)||9.0||5.1||2.0||5.4||7.5||4.6|
|Unemployment rate (%)||6.9||7.0||8.8||9.3||11.2||7.5|
|Exports (USD billions)||28.0||67.6||14.4||160.7||28.8||4.5|
|Imports (USD billions)||19.6||44.0||12.8||120.6||30.0||3.2|
|Exchange rates on Nov. 13, 08 (per USD)||3.1||629.7||25,000.0||2.3||2,339.0||7.2|
|Exchange rates on Nov. 13, 08 (per EUR)||3.9||790.1||31,366.0||2.8||2,934.6||9.1|
* 2008 estimates
** PPP – Purchasing Power Parity
Overseas Press & Consultants (OP&C) Evaluation
- Collection Experience: Fair-Good
- Exchange Delays: 3 months
- Preferred Credit Terms: Unconfirmed letter of credit
- Minimum Credit Terms: sight draft
ABC-Amega’s collection experience in Peru
Typical of South America, collections in Peru are difficult, at best. Recovering via lawsuit is almost impossible without a solid document trail starting with an appropriately structured contract and ending with proof of delivery – including purchase orders and every other imaginable piece of documentation in between.
Unless the Peruvian debtor has a genuine interest in building or maintaining a relationship with the seller/creditor, he will often "hide" behind the slow, cumbersome legal system frequently unfriendly to foreign creditors. This often happens on claims under $20K where the amount involved is too small to warrant the cost of proceeding with a lawsuit. Such cost includes suit fees, court costs, and potentially depositions or a court appearance in Peru as a witness.
Twenty-four commercial courts were established between 2004 and 2007. These courts have substantially improved the process of resolving commercial disputes. Previously, it took an average of two years to resolve a commercial dispute through the civil court system. The amount of time required to resolve a case has now been reduced to two months, and enforcement of a court decision has been reduced from 36 months to 3-6 months.
Despite these efforts, foreign investors still prefer to use arbitration to resolve business disputes, avoiding the time-consuming judicial procedures and corruption within the courts altogether.
Coface Country Risk Rating: B -- Political and economic uncertainties and an occasionally difficult business environment can affect corporate payment behavior. Corporate default probability is appreciable.
Ducroire Delcredere Political Risk Rating: 1 – lowest risk
Ducroire Delcredere Commercial Risk Rating: B – average risk
The business climate in Peru is generally attractive. Foreign trade has been extensively deregulated in recent years, state interference in free trade is minimal and the present government is continuing many of the business-friendly policies of previous governments. President Garcia has advocated for ratification of the U.S.–Peru Trade Promotion Agreement and has painted himself as the market-friendly alternative in the Andes to Venezuela's Hugo Chávez.
Private investment into Peru is also rising and becoming more broad-based now that Peru has obtained investment grade status (in 2008). However, the poverty afflicting more than half the population has been a source of political and social instability. The number of strikes and violent protests continues to rise. A 24-hour national strike was held in July 2008 to protest President Garcia's economic policies. There were also demonstrations against the free-trade agreement with the US.
Economic Freedom: According to the 2008 Index of Economic Freedom, Peru's economy is 63.5% free, making it the world's 55th freest economy. Peru faces significant challenges, particularly in labor freedom, property rights, and freedom from corruption. The slowness and unpredictability of the courts have led to allegations of corruption, but corruption is not as serious as it is in other countries in the region.
Infrastructure: Infrastructure in Peru is poor both by regional and international standards.
Tariffs and Customs: Tariffs are levied on certain imports. However, 48.5% of all imports enter the country duty-free and most non-tariff barriers to trade have been eliminated.
Companies planning to do business in Peru should note that corruption in Peruvian customs is not a major issue compared to many other countries in the region. Making the customs administration more efficient and fair continues to be a priority, as the present administration seeks to improve the business environment.
Regulatory Environment: Although reducing barriers to trade, establishing faster customer procedures and improving dispute settlement processes has improved the regulatory environment, many foreign companies still cite regulatory issues as constraints for their business operations in Peru. According to the World Economic Forum's 2007-2008 Global Competitiveness Report, the surveyed companies identified inefficient government bureaucracy, tax and labor regulations, and corruption as among the most problematic factors. Companies continue to complain about excessive red tape and confusion as to which licenses they need and where to get them.
Property Rights: Secured interests in property are recognized, in principle. However, the Peruvian judicial system is often very slow to hear cases and to issue decisions.
Conversion and Transfer Policies: According to the 2008 Investment Climate Statement of the U.S. Department of Commerce, there are no restrictions or controls on payments, transactions and repatriation of profits. The Peruvian government guarantees the freedom to hold and dispose of foreign currency. All restrictions on remittances of profits, dividends, royalties, and capital have been eliminated. Exporters and importers are not required to channel foreign exchange transactions through the Central Reserve Bank of Peru, and can conduct transactions freely on the open market. Anyone may open and maintain foreign currency accounts in Peruvian commercial banks. U.S. firms have reported no problems or delays in transferring funds or remitting capital, earnings, loan repayments or lease payments since Peru's economic reforms of the early 1990s.
Corruption: In several surveys, corruptionhas been reported to be a major obstacle for business operations in Peru. The difficulties experienced when trying to deal with Peru's extensive bureaucracy has led some companies to make use of facilitation payments or to contract local agents whom they hope can expedite business transactions. However, since companies can be held accountable for corrupt behavior performed by agents on their behalf, they are advised to conduct extensive due diligence when investing in or doing business in Peru.
For more detailed information on these topics, visit the 2008 Investment Climate Statement – Peru, of the U.S. Department of State.
Business Cards: Ensure that you have your business card printed in Spanish. If you hold a title such as Doctor, Engineer or Professor, it should also be displayed on your business card.
Business Attire: Formal, well-tailored suits are standard attire for business meetings. Casual clothes, especially “business casual” styles, are not considered appropriate attire in Peru. Women should wear suits or dresses in a tailored style complemented by jewelry and make-up.
Names and Titles: First names are used only by people on familiar terms. Titles are very important in Peru. Address a person directly by using his or her title such as Professor or Doctor and last name. People who do not have professional titles should be addressed using courtesy titles such as Señor, Señora, or Señorita plus the surname. Most Hispanics have two surnames: one from their father, which is listed first, followed by one from their mother. Only the father's surname is commonly used when addressing someone.
Conversation: Be tactful and diplomatic. If you are too direct, Peruvians will not value what you have to say.
Appointments: Peruvian contacts are generally more relaxed about time than people in many other parts of the world. Although you will be expected to arrive punctually for business meetings, you may be kept waiting for 15 to 30 minutes or longer.
Meetings and Negotiations: Since Peruvians value personal relationships, and relate more to an individual business associate than a corporation, a third party contact is necessary to do business in Peru.
Peru Country Profile, The World Bank
This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Peru. For further information, contact [email protected].
This report represents a compilation of information from a wide variety of reputable sources.
Economic Indicators: Variety of sources including the CIA World Factbook, Coface Country Rating, Economist Country Briefings, Federation of International Trade Associations (FITA) Country Profiles.
Historical Exchange Rates: OANDA.com The Currency Site.