Overlooked by many, Peru has become one of the world’s leading emerging markets with impressive growth, underpinned by improved corporate governance.

Two decades after the end of a period of terrorist activity and hyperinflation, Peru has managed to stabilize and consolidate its economy. Today, Peruvian economy positions itself as one of the most attractive investment destinations in Latin America.

Now the sixth-largest economy in Latin America, Peru has continued to grow while larger nations such as Brazil and Argentina have faltered. Peru has succeeded in reducing unemployment and poverty and has even started to be seen as a possible middle-income country, which is one of the categories the World Bank uses to classify economies of the likes of Brazil, India, and China.

Like many other developing countries, Peru plays an increasingly important role in the global economic system. Due to possessing a solid base for economic stability and low inflation combined with steady GDP growth, the International Monetary Fund has stated that Peru has become a “rising star.”

Before, emerging markets used to be a slightly challenging niche in the international investing world. As developing markets drive more than half of global economic growth, quickly developing countries like Peru play an increasingly important role in the global economic system.

The Government of President of Peru, Pedro Pablo Kuczynski, is currently seeking to consolidate the economic progress further by prioritizing investments in technology and infrastructure projects, all while he is looking to position the country as a hub for international trade in South America. Structural and regulatory improvements are supporting these initiatives, with the aim of making it easier to do business in Peru.

International investors traditionally overlooked Peru in favor of its bigger neighbors, Brazil and Mexico. However, it is a country that has delivered some reasonably impressive growth statistics. Annual growth has regularly kept above 6% not just over the last 2 or 3 years, but over the past fifteen years.

Attracting Area for Investments

According to Roque Benavides, Chairman of Peru’s largest publicly traded precious metals mining company Buenaventura, Peru’s traditional strength in the mining and minerals industry remains attractive for foreign investors.

Peru’s mining, transport, energy, and tourism industries, among others, offer attractive investment opportunities despite weakened positive growth prospects due to recent “Coastal El Niño” and Lava Jato scandal shocks. Peru is also one of the world’s biggest producers of base and precious metals, and among the top four global producers of silver, lead, zinc, tin, and molybdenum.

Economic Challenges Lay Ahead

The economic growth has averaged more than six percent per annum since nearly two decades ago. However, according to Julio Velarde, Governor of the Central Reserve Bank of Peru, there to still be room for improvement. As stated Velarde, President Kuczynski is planning a new phase of growth based on pushing investment in infrastructure and increasing domestic demand.

Peru is part of the seventh largest economies in Latin America, yet it still has a long road ahead towards modernization and competitiveness of its industries and services. This strength is proving to the investors, that the country can be a compelling proposition.

An estimated 70% of current exports are raw material, mainly minerals. Some social issues have affected mining projects, although in general terms the investment environment for mining is quite marked, particularly regarding taxation. Peru is rich in natural resources, but challenges lay in issues such as building a secure infrastructure worthy of an advanced economy, and increasing domestic demand.

The country will face three principal economic challenges. First, the former Government had a higher debt than the new Government was expecting, which means reductions in public expenditure. Second, Peru—like many countries in Latin America—has been affected by the corruption scandals related to Brazilian companies, such as Odebrecht. Third, Peru has recently suffered the worst flooding in the north of the country since nearly a centennial ago.

While local entrepreneurs throughout the region have seen an improvement in the business environment in the past years, Peru continues to rank as one of the top economies where it is easier to do business in Latin America.

Cornfield & Partners can help you with market or investment opportunities related to Peru or other Latin American countries. To find out more about potential business opportunities, contact info@cornfieldpartners.com or you can call us on +44 (0) 20 7692 0873

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