The Peruvian economy continues to out-perform its regional neighbors and most other global economies. In 2008, for the second straight year, Peru achieved economic growth rates exceeding 9%. This growth has helped fuel strong demand in Peru for U.S. products. In 2008, American exports to Peru increased by 50%, exceeding the 2007 growth rate of 41%. In just the past two years, annual U.S. exports have risen by over 100%, from $2.9 billion to $6.2 billion, making Peru the 35th largest market for U.S. exports worldwide.
In addition to a robust macro-economic environment, sales of U.S. products in Peru are also being aided by improve market access condition. On February 1, 2009, the U.S. Peru Trade Promotion Agreement (commonly referred to as the U.S.-Peru Free Trade Agreement, or FTA) entered into force. The agreement enhances the overall commercial and investment climate by, inter alia, eliminating tariffs on many goods, accelerating the customs clearance process for U.S. imports, and strengthening the protection on intellectual property rights.
The FTA builds upon the provisions of the previously existing Andean Trade Preferences and Drug Eradication Act (1991), which has allowed Peruvian firms to export most goods to the United States duty-free. The FTA will afford similar treatment to a majority of U.S. goods entering Peru, making 80% of U.S. consumer and industrial products eligible for duty-free access into Peru immediately upon entry into force; with the remaining tariffs phased-out over ten years. More than two-thirds of current U.S. farm exports to Peru will also become duty free immediately. Although the 19% VAT still applies to almost all commercial transactions. The FTA is also the first U.S. trade agreement in force that reflects the enhanced labor and environmental standards set out in the May 2007 agreement between the two governments.
Peru’s efforts to broaden its trade relationships are not limited to enhancing its commercial ties with the United States. The Peruvian Government has also concluded or is in the process of negotiating trade agreements with Canada, China, the European Union, Singapore and Australia.
Extractive industries, mining and petroleum, represent the largest customers for U.S. goods and services. These sectors have also attracted the majority of U.S. investment into Peru. In 2008, the mining industry accounted for 59% of Peru’s $31 billion in exports (and a similar volume of American exports to Peru). Although in 2009, the mining sector is expected to continue to feel the effects of the international financial crisis as commodities prices have dropped and demand slackened; resulting in a decline in Peruvian exports of minerals and impacting demand for products and services by mining operations.
Leading American exports to Peru include mining equipment, industrial and electrical machinery, refined petroleum products, plastics, computers and telecommunications equipment. In 2008, the United States imported $5.7 billion in goods from Peru, including minerals (copper, gold, silver, zinc, tin and lead), petroleum, apparel and increasing quantities of agricultural products. The United States is Peru’s leading source of imports. In 2008, 18% of all Peruvian imports originated in the United States; followed by China (14%); Brazil (8%); Ecuador (6%) and Argentina (5%). Major foreign investors in Peru include the United States (mining, oil & gas, telecommunications, consumer goods); United Kingdom (mining) Spain (oil & gas, telecommunications), Chile (retail), Mexico (telecommunications, mining) and increasingly China (mining).
Peru’s strong economic performance in recent years has been aided by market-oriented economic reforms and privatizations in the 1990s, and measures taken since 2001 to promote trade and attract investment. High global prices for minerals (until late 2008), Peru’s principal export, has also contributed to the country’s recent economic vitality. In 2008, Peru’s GDP was estimated to be $125 billion, or approximately $4,500 per capita.
In its Doing Business 2008 publication, the World Bank ranked Peru 58 among 178 countries surveyed in terms of ease of doing business. Difficulties cited by the report, and often mentioned by U.S. companies active in Peru, include excessive bureaucracy, especially in establishing a business, and obtaining the requisite licenses. Labor issues also pose challenges for companies operating in Peru. Peru’s investor protection and access to credit were ranked high by the report. A copy of the Peru portion of the 2008 Doing Business report can be accessed at the following site:
http://www.doingbusiness.org/ExploreEconomies/?economyid=152
