Peru Country Facts.
Peru has a rich history of architecture and engineering, and its heritage is a great mix of Hispanic and native traditions. The former seat of the famed Incan Empire, Peru is host to the ruins of Machu Picchu, one of the world’s greatest archaeological treasures. Among it’s Latin America peers, Peru is famous for its high percentage of immigrants from East Asia, a fact that affects its culture and cuisine to this day.
Thanks to technological advancements, modernization, and development, Peru has become a lucrative country in which to do business. Not only is it a fast-growing economy in South America, but it has also created a favorable and friendly environment for foreign investments. This is reflected in the fact that Peru ranks 85th in the World Bank Ease of Doing Business Survey, giving investors the confidence to expand their business to Peru.
Facts to consider before expanding your business in Peru
To expand to a new business environment, you need both experience as well as a nuanced understanding of the culture. At SERVIAP we are leveraging our understanding of Peru to help our clients expand their business in the region. Here are some high-level facts to understand the risks and opportunities of doing business in Peru.
- According to the IMF, Peru is one of the fastest-growing economies of Latin America.
- Despite reduced growth in 2019, Peru has taken initiatives to invest in infrastructure, particularly in transportation, sanitation, health, telecommunications, and water.
- Peru experienced a sharp growth in employment and income in the 1980s-90s, bringing a steep decline in poverty.
- Peru is undergoing a high agriculture export boom, with an increasing demand for high-value seasonal fruits and vegetables in the northern hemisphere.
- With leading mineral industries, diverse resources, Peru has also successfully managed its skilled labor. In fact, Peru has absorbed its migrant populations to create a profitable workforce.
The main sectors to run a successful business
- The Service Sector in Peru is the highest contributor to GDP, at nearly 60%. Within the sector, some of the promising industries are:
- Retail and wholesale trade, accounting for 13.7% of GDP
- Financial and business services at 8.5% of GDP
- Peru’s telecom sector is also a promising arena for investors. Broadband penetration is still only 56%, which means the sector will see high growth in the coming years.
- The Industrial Sector is the second largest contributor to the GDP at 32.7%, with the main industries being:
- Manufacturing at 23% of the total GDP
- Mining, which constitutes 57% of Peru’s exports
Characteristics of the Peruvian population
- Peru is the fourth-most populous country in South America and the 43rd in the world.
- The population density in Peru is only 25 people per square kilometer, much below the world average of 50.
- The growth rate of the population is around 1.42% annually.
- Peru has a young population, with around 30% of people between the ages of 15 and 29. This is why the percentage of people entering the workforce increases by nearly 2% (or 300,000 people) every year.
- The median age in Peru is 28 years.
- Peru is the third-largest country in South America and the 20th largest in the world.
- Peru is bounded by the Pacific Ocean to the west and the Andes mountains to the east.
- It is bordered by some of the strongest economies of Latin America – Ecuadorand Colombia to the north, Brazil to the east, and Chile to the south.
Heritage & Culture of Peru
Peru is most popularly known for Machu Picchu, an architectural-engineering marvel and a Wonder of the World. But there’s more to Peru’s heritage:
- Peru became the World’s Leading Culinary Destination 2019. With mixed Spanish-Andean identity, Peru’s cuisine incorporates influences from various migrations and local produce to make innovative dishes. Peru’s national dish — Ceviche (citrus cured fish) — is simple, delectable, and popular worldwide.
- The monuments of Peru make it a hotspot for tourism. From ruins like Caral to an architectural beauty like Qorikancha to the unexplained designs of Nazca Lines in the desert, Peru has something for every explorer.
- Part of Peru is covered with the Amazonian Basin, which is a biodiversity and conservation hotspot. The rainforest is an important part of the ecology of Peru, providing a home to wildlife and the Amazon tribes.
- Peruvian consumers are more interested in foreign-branded products than ever before.
- The higher-income buyers in Peru also recognize the need to buy locally made products to sustain the local businesses.
- Peruvian consumers are aware of the environment and its sustainability.
- When buying, Peruvian consumers are rational and expect high-quality products.
- A great surge in e-commerce means Peruvian consumers are actively seeking discounts and promotions.
Workforce and laws
The rights of Peru’s workers are safeguarded by Peru’s labor laws. People who are looking to create business opportunities in Peru need to be aware of the regulations applicable to Peruvians, but also the ones applicable to foreign employees. These are better handled by experts. Some of the things to look out for:
- The minimum wage in Peru is PEN930 or 242.4 € per month
- A maximum work-week of 6 days and 48 hours is allowed.
- For overtime, the employer must pay a minimum surcharge of 25% over the regular rate for the first two hours, and a minimum surcharge of 35% thereafter.
- Employers can hire regular staff on a three-month trial, which can then be extended for another three months. This doesn’t entitle the employer to arbitrary dismissal of course.
- Peru’s labor laws have given a push to women’s employment in all sectors.
- Peru’s strong tourism sector means that a large percentage of the population speaks English.
- Peru is keenly interested in promoting start-ups and is trying to create a Silicon Valley in the capital city, Lima.
- 33% of Peruvian software developers are looking for work. Peru is one of those rare economies where the supply of tech talent outstrips demand, making it the perfect outsourcing destination.
- The quality of tech talent in Peru is quite exceptional as well. Peru ranks 26th on the TopCoder rankings.
The major areas where Peru is witnessing technological advancements are:
- The e-commerce industry is a relatively untapped market for Peru and the retail brands are speedily investing in it. Only 21% of the Peruvian population currently shops online so there’s a lot of scope for growth. Mercado Libre and Sagafallabella are popular home-grown e-commerce companies.
- Peru is interested in technological developments that will align with its mining industries and natural resources. Both national companies like ZINSA and MNCs like Rio Tinto dominate this space.
- Recognizing that Peru is lagging in innovative advancement, the government has also focused on bringing investments through StartupPeru and InnovatePeru.
Facilities for foreign investment
Peru has a relatively open and favorable environment for foreign investors, as compared to its neighbors. Key reasons:
- Freedom of Establishment- one of the basic principles in the Peruvian economy is the equal treatment of national and foreign capital, accorded by the law on the promotion of foreign investments and its decree: Law number 662 of 1991.
- Foreign investors can have a major stake in the capital of a local company.
- With a few exceptions, foreign capital can be invested in all economic sectors without prior authorization.
Peru Visa Requirements
If you’re looking to expand your business to Peru, you may require work visas for your expat employees. Visa waivers are provided for citizens of a select few countries – Brazil, Colombia, and the Schengen Area countries.
Since Peru is a member of the Asia-Pacific Economic Cooperation agreement, some nationals with APEC Business Travel Cards can avail of visa waivers.
Peru has struggled to keep its socio-economic status high in the last few decades. But key macroeconomic policies, an open environment for businesses, and a booming agricultural sector are helping it drive towards a sustainable future. With a stellar young and skilled workforce, and varied geographic/industrial resources, Peru is one of the promising countries with the potential of making your next investment or hiring cutting-edge talent.