Peru: Opportunities
for U.S. Exporters
May 2009
Peru at a Glance
 496,226 square miles
(three times larger than California)
 Geography: desert coast, central
mountains and eastern Amazon
rainforest
Rainforest “selva” 1/3 of the
country, or the size of California
 25 regions & 1 province
 27 million people
 Spanish language, with Quechua
& Aymara spoken in the highlands
 90% literacy rate
 Life expectancy: 70 yrs.
Map courtesy of www.theodora.com/maps,
used with permission.
Peru: One of Fastest Growing
U.S. Export Markets
• U.S. Exports have more than doubled in
the past 2 years:
--$2.9 Billion in 2006
--$6.2 Billion in 2008
Exports increased by:
--25% in 2006
--41% in 2007
--50% in 2008.
Bilateral Trade: 2004-2008
7
6
5
4
U.S. Exports
U.S. Imports
3
2
1
0
2004
2005
2006
2007
2008
Factors Driving Demand
for U.S. Products:
1.
Strong Economic Growth: 9% last 2 years. Over 90
consecutive months of economic growth. The size
of the Peruvian Economy will more than double this
decade.
2.
Market Reforms and Tariff Reductions
3.
Exchange Rate: Dollar had depreciated by about
20%, but is now appreciating.
Peruvian Economic Trends 1985-2007
GDP Growth (%)
Per Capita GDP
10
3,800
Asian Crisis
& El Niño
3,300
5
2,800
0
2,300
-5
ATPDEA
Hyperinflation
-10
-15
Garcia
Fujimori
1,800
1,300
Toledo
Per Capita GDP (current US$)
Market
Reforms&
ATPA
Garcia 800
19
8
19 5
8
19 6
8
19 7
8
19 8
8
19 9
9
19 0
9
19 1
9
19 2
9
19 3
9
19 4
9
19 5
9
19 6
9
19 7
9
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
0
20 5
0
20 6
07
Percent Annual GDP Growth
15
Sources: BCRP, IMF
4
Peruvian Market:
Heavy Concentration
Geographically:
Sectorally:
Lima
Mining
Market is Heavily Concentrated in Lima
• Almost one-third of population (9 million)
-- second largest city has pop. of only 800,000.
• Produces 50% of GDP
• 55% of cell phone users
• Home to 2/3 of Peru’s manufacturing
• Over 80% of new car sales
Mining Sector
• Accounted for 59% of Peru’s Exports in 2008,
totaling $18 billion
• Major Purchaser of U.S. exports, probably
above 50%
• $20 Billion in additional Mining Investments
have been proposed – although many are
being delayed due to global financial crisis.
Signs of Diversification are Appearing
• Consumer goods sales are now split evenly between
Lima and the rest of the country.
--Five years ago closer to 70% of such sales
occurred in Lima.
• New industries are showing strong growth and
attracting foreign investment.
--Oil and Gas (Hunt Oil: $3.5 billion LNG facility
and large number of new oil and gas leases)
--Telecommunications (Telefonica, America
Mobil, Nextel)
--Retail (major Chilean presence)
--Strong agricultural export sector
Sectors Leading Economic Growth
in Peru (2008)
• Overall Economy
9.8%
• Construction
16.5%
• Mining and Energy
7.6
• Manufacturing
8.5%
• Electricity and Water
7.7%
Leading U.S. Exports to Peru: 2008
• Industrial/Power Generating Equip.
26%
• Refined Petroleum Products
19%
• Electrical Machinery
9%
• Plastics
8%
• Transportation Equipment
4%
Leading Peruvian Exports to U.S.: 2008
• Petroleum Products
21%
• Precious Metals (Gold, Silver)
18%
• Copper
16%
• Knit Apparel
13%
• Tin
6%
Foreign Competition:
Sources of Peruvian Imports 2008
• United States
18%
• China
14%
• Brazil
8%
• Ecuador
6%
• Argentina
5%
Impact of Global Economic Crisis:
• Decelerating growth: Down from 9% in 2008 to 2.3%
in March 2009
• Sharp decline in Trade Flows in Q1 2009:
--Exports down 33% (to U.S. -40%)
--Imports down 23% (from U.S. 21%)
• Still, Peru’s economy performing better than most.
• Business and consumer confidence is still strong.
--
Foreign Competition:
Pending Peruvian Trade Agreements
Peru is reaching out to many of its key trade partners, having
recently concluded or negotiating FTAs or other trade accords
• Canada:
Concluded agreement in May 2008
• China:
Concluded April 2009
• Singapore: Signed agreement in May 2008
• EU:
Trade agreement under negotiation
• Korea
Seeking to conclude an agreement in 2009
• Japan:
Seeking to conclude an agreement in 2010
Best Prospects for U.S. Firms
• Mining Equipment: Over $20 billion in proposals for
new or expanded mining projects.
• Construction and Transport Equipment: Continued
strong housing construction sector and infrastructure
projects (roads, ports, water projects).
• Power Generation Equipment: Shortfall of generating
capacity. Major gas fired, hydro and wind projects
proposed.
• Oil and Gas Equipment: New exploration leases,
major pipelines and down-stream projects under
development.
U.S. Peru Trade Promotion
Agreement (FTA)
•Approved by U.S. Congress in December 2007
•Entry into Force February 1, 2009
•FTA will make it easier to sell to and do business in
Peru.
FTA: Key Provisions
•80% of U.S. exports of consumer and industrial
products become duty-free immediately.
--Remaining tariffs phased-out over 10 years
•Two-thirds of U.S. farm exports become duty-free
immediately.
--All tariffs eliminated in 17 years.
•Facilitates Trade by improving transparency and
efficiency in customs procedures.
FTA: Key Provisions (cont.)
•Improved labor rights commitments
•Obligations regarding environmental protections.
•Expanded Access to services markets
Market Challenges
•Peru’s Infrastructure deficit is estimated at $20
billion. Roads and ports are in particular need of
upgrading.
•Government capacity to implement infrastructure
projects or social welfare programs is constrained
and marked by frequent delays.
•Judicial system does not offer an effective
remedy for commercial disputes.
--Commercial contracts should include strong
arbitration provisions.
•Peruvian public identifies corruption as a leading
concern in recent polls.
Public Perception of Main Problems
“Currently the main problems of the country?”
(Asked to pick top three from a list; most often mentioned)
–
–
–
–
–
–
–
Corruption
Unemployment
Poverty
Lack of security
Cost of Living Increases
Abuse of authority
Inadequate education
43%
38%
36%
28%
24%
23%
23%
APOYO national poll taken April 15-17, 2008
8
Marketing Products in Peru
•Pricing is critical.
-- Despite reductions in import duties,
goods in Peru are expensive owing to a
19% VAT.
•Most goods are costlier than in the United
States, in a country with a per capita GDP
of only about $3,700.
•40% of the population lives below the
poverty line
Market Issues
•Local representative is often important
•Most firms with ongoing commercial
activities in Peru engage a local attorney.
•Customs valuation of imports is
sometimes an issue, becoming less so as
import duties are reduced.
• Certificate of Origin documentation can
be a source of customs clearance delays.
Useful Web Sites
• www.buyUSA.gov/peru/en
• ustr.gov/Trade_Agreements/Bilateral/Peru_TPA/Secti
on_Index.html
• www.proinversion.gov.pe
• www.doingbusiness.org/ExploreEconomies/?econom
yid=152
• www.aduanet.gob.pe/aduanas/informai/tra_ar.htm