Policies Toward Foreign Direct Investment

Direct inward investment into Japan by foreign investors has been open and free since the Foreign Exchange and Foreign Trade Act (the Forex Act) was amended in 1998.  In general, the only requirement for foreign investors making investments in Japan is to submit an ex post facto report to the relevant ministries.

The Japanese Government explicitly promotes inward FDI and has established formal programs to attract it.  In 2013, the government of Prime Minister Shinzo Abe announced its intention to double Japan’s inward FDI stock to JPY 35 trillion (USD 318 billion) by 2020 and reiterated that commitment in its revised Japan Revitalization Strategy issued in August 2016.  At the end of June 2018, Japan’s inward FDI stock was JPY 29.9 trillion (USD 270 billion), a small increase over the previous year. The Abe Administration’s interest in attracting FDI is one component of the government’s strategy to reform and revitalize the Japanese economy, which continues to face the long-term challenges of low growth, an aging population, and a shrinking workforce.

In April 2014, the government established an “FDI Promotion Council” comprised of government ministers and private sector advisors.  The Council remains active and continues to release recommendations on improving Japan’s FDI environment. The Ministry of Economy, Trade and Industry (METI) and the Japan External Trade Organization (JETRO) are the lead agencies responsible for assisting foreign firms wishing to invest in Japan.  METI and JETRO have together created a “one-stop shop” for foreign investors, providing a single Tokyo location—with language assistance—where those seeking to establish a company in Japan can process the necessary paperwork (details are available at http://www.jetro.go.jp/en/invest/ibsc/  ).  Prefectural and city governments also have active programs to attract foreign investors, but they lack many of the financial tools U.S. states and municipalities use to attract investment.

Foreign investors seeking a presence in the Japanese market or seeking to acquire a Japanese firm through corporate takeovers may face additional challenges, many of which relate more to prevailing business practices rather than to government regulations, though it depends on the sector.  These include an insular and consensual business culture that has traditionally been resistant to unsolicited mergers and acquisitions (M&A), especially when initiated by non-Japanese entities; exclusive supplier networks and alliances between business groups that can restrict competition from foreign firms and domestic newcomers; cultural and linguistic challenges; and labor practices that tend to inhibit labor mobility.  Business leaders have communicated to the Embassy that regulatory and governmental barriers are more likely to exist in mature, heavily regulated sectors than in new industries.

The Japanese Government established an “Investment Advisor Assignment System” in April 2016 in which a State Minister acts as an advisor to select foreign companies with “important” investments in Japan.  The system aims to facilitate consultation between the Japanese Government and foreign firms. Of the nine companies selected to participate in this initiative to date, seven are from the United States.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private enterprises have the right to establish and own business enterprises and engage in all forms of remunerative activity.  Japan has gradually eliminated most formal restrictions governing FDI. One remaining restriction limits foreign ownership in Japan’s former land-line monopoly telephone operator, Nippon Telegraph and Telephone (NTT), to 33 percent.  Japan’s Radio Law and separate Broadcasting Law also limit foreign investment in broadcasters to 20 percent, or 33 percent for broadcasters categorized as “facility-supplying.” Foreign ownership of Japanese companies invested in terrestrial broadcasters will be counted against these limits.  These limits do not apply to communication satellite facility owners, program suppliers or cable television operators.

The Foreign Exchange and Foreign Trade Act governs investment in sectors deemed to have national security or economic stability implications.  If a foreign investor wants to acquire over 10 percent of the shares of a listed company in certain designated sectors, it must provide prior notification and obtain approval from the Ministry of Finance and the ministry that regulates the specific industry.  Designated sectors include agriculture, aerospace, forestry, petroleum, electric/gas/water utilities, telecommunications, and leather manufacturing.

U.S. investors, relative to other foreign investors, are not disadvantaged or singled out by any ownership or control mechanisms, sector restrictions, or investment screening mechanisms.

Other Investment Policy Reviews

The World Trade Organization (WTO) conducted its most recent review of Japan’s trade policies in March 2017 (available at https://www.wto.org/english/tratop_e/tpr_e/tp451_e.htm  ).

The OECD released its biennial Japan economic survey results on April 15, 2019 (available at http://www.oecd.org/economy/surveys/japan-economic-snapshot/  ).

Business Facilitation

The Japan External Trade Organization (JETRO) is Japan’s investment promotion and facilitation agency.  JETRO operates six Invest Japan Business Support Centers (IBSCs) across Japan that provide consultation services on Japanese incorporation types, business registration, human resources, office establishment, and visa/residency issues.  Through its website (https://www.jetro.go.jp/en/invest/setting_up  /), the organization provides English-language information on Japanese business registration, visas, taxes, recruiting, labor regulations, and trademark/design systems and procedures in Japan.  While registration of corporate names and addresses can be completed through the internet, most business registration procedures must be completed in person. In addition, corporate seals and articles of incorporation of newly established companies must be verified by a notary.

According to the 2018 World Bank “Doing Business” Report, it takes 12 days to establish a local limited liability company in Japan.  JETRO reports that establishing a branch office of a foreign company requires one month, while setting up a subsidiary company takes two months.  While requirements vary according to the type of incorporation, a typical business must register with the Legal Affairs Bureau (Ministry of Justice), the Labor Standards Inspection Office (Ministry of Health, Labor, and Welfare), the Japan Pension Service, the district Public Employment Security Office, and the district tax bureau.  In April 2015, JETRO opened a one-stop business support center in Tokyo so that foreign companies can complete all necessary legal and administrative procedures in one location; however, this arrangement is not common throughout Japan. JETRO has announced its intent to develop a full online business registration system, but it was not operational as of March 2019.

No laws exist to explicitly prevent discrimination against women and minorities regarding registering and establishing a business. Neither special assistance nor mechanisms exist to aid women or underrepresented minorities.

Outward Investment

The Japan Bank for International Cooperation (JBIC) provides a variety of support to Japanese foreign direct investment.  Most support comes in the form of “overseas investment loans,” which can be provided to Japanese companies (investors), overseas Japanese affiliates (including joint ventures), and foreign governments in support of projects with Japanese content, typically infrastructure projects.  JBIC often seeks to support outward FDI projects that aim to develop or secure overseas resources that are of strategic importance to Japan, for example, construction of liquefied natural gas (LNG) export terminals to facilitate sales to Japan. More information is available at https://www.jbic.go.jp/en/index.html  .

There are no restrictions on outbound investment; however, not all countries have a treaty with Japan regarding foreign direct investment (e.g., Iran).

The 1953 U.S.-Japan Treaty of Friendship, Commerce, and Navigation gives national treatment and most favored nation treatment to U.S. investments in Japan.

As of March 2019, Japan had concluded 33 bilateral investment treaties (BITs):  Argentina, Armenia, Bangladesh, Cambodia, China, Colombia, Egypt, Hong Kong SAR, Iran, Iraq, Israel, Jordan, Kazakhstan, Kenya, South Korea, Kuwait, Laos,  Mongolia, Mozambique, Myanmar, Oman, Pakistan, Papua New Guinea, Peru, Russia, Saudi Arabia, Sri Lanka, Turkey, Ukraine, UAE, Uruguay, Uzbekistan, and Vietnam.  In addition, Japan has a trilateral investment agreement with China and South Korea. Japan also has 17 EPAs that include investment chapters (Association of Southeast Asian Nations, Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), European Union (EU), Singapore, Mexico, Malaysia, Philippines, Chile, Thailand, Brunei, Indonesia, Switzerland, Vietnam, India, Peru, Australia, and Mongolia)

On  December 30, 2018, Japan and ten other countries: Australia, Brunei, Canada, Chile, Malaysia, Mexico, Peru, New Zealand, Singapore, and Vietnam signed the CPTPP.  Australia, Canada, Japan, Mexico, New Zealand, Singapore, and Vietnam have already ratified the agreement. This agreement includes an investment chapter. The United States is not a signatory of this agreement.   The text of the agreement is available online (https://www.cas.go.jp/jp/tpp/naiyou/tpp_text_en.html#TPP11  

On February 1, 2019, the Japan – EU economic partnership agreement went into force.  This agreement includes a chapter on investment liberalization. The text of the agreement is available online (http://trade.ec.europa.eu/doclib/press/index.cfm?id=1684  ).

The United States and Japan have a double taxation treaty.  The current treaty allows Japan to tax the business profits of a U.S. resident only to the extent those profits are attributable to a permanent establishment in Japan.  It also provides measures to mitigate double taxation. This permanent establishment provision, combined with Japan’s high corporate tax rate that nears 30 percent, serves to encourage foreign and investment funds to keep their trading and investment operations off-shore.

In January 2013, the United States and Japan signed a revision to the bilateral income tax treaty, to bring it into closer conformity with the current tax treaty policies of the United States and Japan.  The revision is awaiting ratification by the U.S. Congress.

Japan has concluded 61 double taxation treaties that cover 71 countries and jurisdictions.  More information is available from the Ministry of Finance: http://www.mof.go.jp/english/tax_policy/tax_conventions/international_182.htm  

Transparency of the Regulatory System

Japan operates a highly centralized regulatory system in which national-level ministries and government organs play a dominant role.  Regulators are generally sophisticated and there is little evidence of explicit discrimination against foreign firms. Most draft regulations and impact assessments are released for public comment before implementation and are accessible through a unified portal (http://www.e-gov.go.jp/  ).  Law, regulations, and administrative procedures are generally available online in Japanese along with regular publication in an official gazette.  The Japanese government also actively maintains a body of unofficial English translations of some Japanese laws (http://www.japaneselawtranslation.go.jp/  ).

Some members of the foreign business community in Japan continue to express concern that Japanese regulators do not seek sufficient formal input from industry stakeholders, instead relying on informal connections between regulators and domestic firms to arrive at regulatory decisions.  This may have the effect of disadvantaging foreign firms which lack the benefit of deep relationships with local regulators. The United States has encouraged the Japanese government to improve public notice and comment procedures, to ensure consistency and transparency in rule-making, and to give fair consideration to comments received.  The National Trade Estimate Report on Foreign Trade Barriers, issued by the Office of the U.S. Trade Representative (USTR), contains a description of Japan’s regulatory regime as it affects foreign exporters and investors.

International Regulatory Considerations

The Japanese Industrial Standards Committee (JISC), administered by the Ministry of Economy, Trade, and Industry (METI), plays a central role in maintaining the Japan Industrial Standard (JIS), the country’s main body of standards.  JISC aims to align JIS with international standards: in 2016, the organization estimated that 58 percent of Japan’s standards were harmonized with their international counterparts. Nonetheless, Japan maintains a large number of Japan-specific standards that can complicate efforts to introduce new products to the country.  Japan is a member of the WTO and notifies the WTO Committee on Technical Barriers to Trade (TBT) of proposed regulations.

Legal System and Judicial Independence

Japan is primarily a civil law country based on codified law.  The Constitution and the five major legal codes (Civil, Civil Procedure, Commercial, Criminal, and Criminal Procedure) form the legal base of the system.  Japan has a fully independent judiciary and a consistently applied body of commercial law. However, if you are arrested in Japan, even for a minor offense, you may be held in detention without bail for several months or more during the investigation and legal proceedings.  An Intellectual Property High Court was established in 2005 to expedite trial proceedings in intellectual property (IP) cases.  Foreign judgments are recognized and enforced by Japanese courts under certain conditions.

Laws and Regulations on Foreign Direct Investment

Major laws affecting foreign direct investment (FDI) into Japan include the Foreign Exchange and Foreign Trade Act, the Companies Act, and the Financial Instruments and Exchange Act.  The Japanese government actively encourages FDI into Japan and has sought over the past decades to ease legal and administrative burdens on foreign investors, including with major reforms to the Companies Act in 2005 and the Financial Instruments and Exchange Act in 2008.  The Japanese government has not promulgated any significant new laws or regulations related to FDI in the past year.

Competition and Anti-Trust Laws

The Japan Fair Trade Commission (JFTC) holds sole responsibility for enforcing Japanese competition and anti-trust law, although public prosecutors may file criminal charges related to a JFTC accusation.  The JFTC also reviews proposed “business combinations” (i.e. mergers, acquisitions, increased shareholdings, etc.) to ensure that transactions do not “substantially […] restrain competition in any particular field of trade.”   On March 12, 2019, a bill to revise the Anti-Monopoly Law for the first time in six years was submitted to the Diet, after obtaining Cabinet approval. The revisions include: (i) more flexible implementation of the leniency program; (ii) extension of maximum calculation period for penalty charges, from three to ten years; and (iii) increasing the cap for penal charges for obstruction of investigations, etc. If approved by the Diet, the law will take effect no later than 18 months after its promulgation. JFTC also plans to change its Commission rulesto introduce the Attorney-Client privilege, only in the limited scope of “unreasonable restraint of trade,” such as cartels. This revision would not require Diet approval.  The Government of Japan expects both changes to take effect by the end of 2020.

Expropriation and Compensation

In the post-war period since 1945, the Japanese government has not expropriated any enterprises, and the expropriation or nationalization of foreign investments in Japan is highly unlikely.

Dispute Settlement

ICSID Convention and New York Convention

Japan has been a member of the International Centre for the Settlement of Investment Disputes (ICSID Convention) since 1967 and is also a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).

Enforcement of arbitral awards in Japan are provided for in Japan’s Arbitration Law.  Enforcement in other contracting states is also possible. The Supreme Court of Japan has denied the enforceability of awards for punitive damages, however.  The Arbitration Law provides that an arbitral award (irrespective of whether or not the seat of arbitration is in Japan) has the same effect as a final and binding judgment.  The Arbitration Law does not distinguish awards rendered in contracting states of the New York Convention and in non-contracting states.

Investor-State Dispute Settlement

There have been no major bilateral investment disputes in the past ten years.

International Commercial Arbitration and Foreign Courts

The Japan Commercial Arbitration Association (JCAA) is the sole permanent commercial arbitral institution in Japan.  Japan’s Arbitration Law is based on the United Nations Commission on International Trade Law “Model Law on International Commercial Arbitration” (UNCITRAL Model Law).  Local courts recognize and enforce foreign arbitral awards.

A wide range of Alternate Dispute Resolution (ADR) organizations also exist in Japan.  The Ministry of Justice (MOJ) has responsibility for regulating and accrediting ADR groups.  A Japanese-language list of accredited organizations is available on the MOJ website: http://www.moj.go.jp/KANBOU/ADR/index.html  .

Bankruptcy Regulations

The World Bank 2018 “Doing Business” Report ranked Japan first worldwide for resolving insolvency.  An insolvent company in Japan can face liquidation under the Bankruptcy Act or take one of four roads to reorganization: the Civil Rehabilitation Law; the Corporate Reorganization Law; corporate reorganization under the Commercial Code; or an out-of-court creditor agreement.  The Civil Rehabilitation Law focuses on corporate restructuring in contrast to liquidation, provides stronger protection of debtor assets prior to the start of restructuring procedures, eases requirements for initiating restructuring procedures, simplifies and rationalizes procedures for the examination and determination of liabilities, and improves procedures for approval of rehabilitation plans.

Out-of-court settlements in Japan tend to save time and expense but can lack transparency.  In practice, because 100 percent creditor consensus is required for out-of-court settlements and courts can sanction a reorganization plan with only a majority of creditors’ approval, the last stage of an out-of-court settlement is often a request for a judicial seal of approval.

There are three domestic credit reporting/credit monitoring agencies in Japan. They are not government-run.  They are: Japan Credit Information Reference Center Corp. (JICC; https://www.jicc.co.jp/english/index.html  ; member companies deal in consumer loans, finance, and credit); Credit Information Center (CIC; https://www.cic.co.jp/en/index.html  ; member companies deal in credit cards and credit); and Japan Bankers Association (JBA; https://www.zenginkyo.or.jp/pcic/  ; member companies deal in banking and bank-issued credit cards).  Credit card companies, such as Japan Credit Bureau (JCB), and large banks, such as Mitsubishi UFJ Financial Group (MUFG), also maintain independent databases to monitor and assess credit.

Per Japan’s Banking Act, data and scores from credit reports and credit monitoring databases must be used solely by financial institutions for financial lending purposes.  They are not provided to consumers themselves or to those performing background checks, such as landlords.  Increasingly, however, to get around the law real estate companies partner with a “credit guarantee association” and encourage or effectively require tenants to use its services.  According to a 2017 report from the Japan Property Management Association (JPMA), roughly 80 percent of renters in Japan used such a service. While financial institutions can share data to the databases and receive credit reports by joining the membership of a credit monitoring agency, the agencies themselves, as well as credit card companies and large banks, generally do not necessarily share data between each other.  As such, consumer credit information is generally underutilized and vertically siloed.

A government-run database, the Juminhyo or the “citizen documentation database,” is used for voter registration; confirmation of eligibility for national health insurance, national social security, and child allowances; and checks and registrations related to scholarships, welfare protection, stamp seals (signatures), and immunizations.  The database is strictly confidential, government-controlled, and not shared with third parties or private companies.

For the credit rating of businesses, there are at least seven credit rating agencies (CRAs) in Japan that perform such services, including Moody’s Japan, Standard & Poor’s Ratings Japan, Tokyo Shoko Research, and Teikoku Databank.  See Section 9 for more information on business vetting in Japan.

Investment Incentives

The Japan External Trade Organization (JETRO) maintains an English-language list of national and local investment incentives available to foreign investors on their website: https://www.jetro.go.jp/en/invest/incentive_programs/  .

Foreign Trade Zones/Free Ports/Trade Facilitation

Japan no longer has free-trade zones or free ports.  Customs authorities allow the bonding of warehousing and processing facilities adjacent to ports on a case-by-case basis.

The National Strategic Special Zones Advisory Council chaired by the Prime Minister has established a total of twelve National Strategic Special Zones (NSSZ) to implement selected deregulation measures intended to attract new investment and boost regional growth.  Under the NSSZ framework, designated regions request regulatory exceptions from the central government in support of specific strategic goals defined in each zone’s “master plan,” which focuses on a potential growth area such as labor, education, technology, agriculture, or healthcare.  Any exceptions approved by the central government can be implemented by other NSSZs in addition to the requesting zone. Foreign-owned businesses receive equal treatment in the NSSZs; some measures aim specifically to ease customs and immigration restrictions for foreign investors, such as the “Startup Visa” adopted by the Fukuoka NSSZ.

The Japanese government has also sought to encourage investment in the Tohoku (northeast) region which was devastated by the earthquake, tsunami, and nuclear “triple disaster” of March 11, 2011.  Areas affected by the disaster have been included in a “Special Zone for Reconstruction” that features eased regulatory burdens, tax incentives, and financial support to encourage heightened participation in the region’s economic recovery.

Performance and Data Localization Requirements

Japan does not maintain performance requirements or requirements for local management participation or local control in joint ventures.

Japan has no general restrictions on data storage.  Previously, separate and inconsistent privacy guidelines among Japanese ministries created a burdensome regulatory environment with regard to the storage and general treatment of personally identifiable information.  However, amendments to Japan’s Personal Information Protection Act, which came into full effect on May 30, 2017, transferred all enforcement powers from the individual ministries to an independent third party authority.  This Personal Information Protection Commission (PPC) issued guidelines for businesses on the protection of personal data and oversees implementation of the Personal Information Protection Act amendments, including new rules for the protection and electronic transmission of personal data.

Real Property

Secured interests in real property are recognized and enforced.  Mortgages are a standard lien on real property and must be recorded to be enforceable.  Japan has a reliable recording system. Property can be rented or leased but no sub-lease is legal without the owner’s consent.  In the World Bank’s 2018 “Doing Business” Report, Japan ranks 52 out of 190 economies in the category of Ease of Registering Property.  This is a result of the bureaucratic steps and fees associated with purchasing improved real property in Japan, even when it is already registered and has a clear title.  The required documentation for property purchases can be burdensome. Additionally, it is common practice in Japan for property appraisal values to be lower than the actual sale value, increasing the deposit required of the purchaser as the bank will provide financing only up to the appraisal value.

The Japanese Government is unsure of the titleholders to 4.1 million hectares of land in Japan, roughly 20 percent of all land and an area equivalent in size to the island of Kyushu, a government-sponsored study group noted in 2017.  According to a think tank expert on land use, 25 percent of all the land in Japan is registered to people who are no longer alive or otherwise unreachable. In 2015, the Ministry of Land, Infrastructure, Transportation and Tourism (MLIT) found that, of 400 randomly selected tracts of land, 46 percent was registered more than 30 years ago and 20 percent was registered more than 50 years ago.  A similar survey by the Ministry of Agriculture, Forestry and Fisheries (MAFF) found that 20 percent of farmland had a deceased owner and had not been re-registered. The government appointed a group of experts to study the matter, and the Unknown Land Owners Problem Study Group announced the results in a midterm report on June 26, 2017 and in a final report on December 13, 2017 (http://www.kok.or.jp/project/fumei.html  ).  It estimated that by 2040 the amount of land without titleholders will increase to 7.2 million hectares.  The primary reasons that land in Japan lacks a titleholder are: Japan’s population is declining; Japanese are increasingly moving from rural areas to urban areas; heirs are difficult to locate and there may be multiple heirs, especially if the deceased did not have children; and heirs do not re-register the land under their own names due to the cost of the initial and continuing taxes and the time and difficulty to change the title.  On June 6, 2018, the Japanese Diet enacted a special law to promote the use of unclaimed land in the public interest, as more and more properties are expected to become available amid the decreasing population.  The act goes into effect on June 1, 2019, and will enable the heads of local governments to authorize use of the unattended land for up to 10 years for public purposes such as community halls, parks, and health clinics. If the landowner appears and reclaims the land, the property will be returned after the term of the land-use contract ends.  If no one reclaims the land, the land-use period can be extended.

Virtually all the large banks, as well as some other private companies, offer loans to purchase property in Japan.

Intellectual Property Rights

Japan maintains a robust legal framework for intellectual property (IP) and provides reasonably strong enforcement to rights holders.  The U.S. Chamber of Commerce International IP Index ranked Japan’s intellectual property framework eighth worldwide in its 2019 report7.  While IP piracy remains a problem, its prevalence in Japan is similar to other developed markets.

Japan established a dedicated IP High Court in 2005 to speed decisions in intellectual property cases.  In 2017, cases before the court required an average of 7.3 months from commencement to disposition.  The number of cross-border IP-related litigations is increasing due to the globalization of business activities.  IP High Court judges have access to neutral technical advisors to aid in interpreting complex cases, but a constrained discovery system can limit the evidence that can be used at trial.  Typical awarded damages are considerably lower than those seen in the United States.

On December 8, 2017, Japan and the European Union (EU) finalized negotiations on an Economic Partnership Agreement, which includes provisions related to IP including geographic indications.  The agreement entered into force on February 1, 2019.

The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) which entered into force on December 30, 2018 harmonizes intellectual property rights among the 11 member nations (including Japan).  However, the CPTPP suspended a number of provisions considered U.S. priorities in the original Trans-Pacific Partnership Agreement (TPP) chapter on IP in areas such as patents and pharmaceuticals, copyright, Internet service provider (ISP) liability, and IP rights enforcement.

Japan’s Customs and Tariff Bureau publishes a yearly report on good seizures, available online in English (http://www.customs.go.jp/mizugiwa/chiteki/pages/g_001_e.htm  ).  Japan seized USD 13.5 billion yen (USD 121.5 million) of goods in 2018, mostly due to intellectual property infringement.  China is by far the largest source of seized goods in Japan, accounting for 94 percent of all seizure cases and 89 percent of all seized goods by value.

U.S. stakeholders have recently expressed concern that Japan’s pharmaceutical reimbursement system does not adequately reward innovation and provide incentives for companies to invest in the research and development of advanced medical devices and innovative pharmaceuticals. Specifically, there are concerns that recent policy changes to the Price Maintenance Premium put Japanese companies at an advantage over U.S. companies.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/  

Capital Markets and Portfolio Investment

Japan maintains no formal restrictions on inward portfolio investment.  Foreign capital plays an important role in Japan’s financial markets, with foreign investors responsible for the majority of trading volume in the country’s stock market.  Historically, many company managers and directors have resisted the actions of activist shareholders, especially foreign private equity funds, potentially limiting the attractiveness of Japan’s equity market to large-scale foreign portfolio investment, although there are signs of change.  Some firms have taken steps to facilitate the exercise of shareholder rights by foreign investors, including the use of electronic proxy voting. The Tokyo Stock Exchange (TSE) maintains an Electronic Voting Platform for Foreign and Institutional Investors. All holdings of TSE-listed stocks are required to transfer paper stock certificates into electronic form.

The Japan Exchange Group (JPX) operates Japan’s two largest stock exchanges – in Tokyo and Osaka – with cash equity trading consolidated on the TSE since July 2013 and derivatives trading consolidated on the Osaka Exchange since March 2014.

In January 2014, the TSE and Nikkei launched the JPX Nikkei 400 Index.  The Index puts a premium on company performance, particularly return on equity.  The inclusion in the Index is determined by such factors as three year average returns on equity, three year accumulated operating profits, and market capitalization, along with other metrics such as the number of external board members.  Inclusion in the index has become an unofficial “seal of approval” in corporate Japan, and many companies have taken steps, including undertaking share buybacks, to improve their return on equity. The Bank of Japan purchases JPX-Nikkei 400 ETFs as part of its monetary operations, and Japan’s massive Government Pension Investment Fund (GPIF) uses the JPX-Nikkei 400 index as an outside asset managers’ benchmark, putting an additional premium on membership in the index.

Japan does not restrict financial flows, and accepts obligations under International Monetary Fund (IMF) Article VIII.

Credit is available via multiple instruments, both public and private, although access by foreigners often depends upon visa status and the type of investment.

Money and Banking System

Banking services are easily accessible throughout Japan; it is home to three of the world’s largest private commercial banks as well as an extensive network of regional and local banks.  Most major international commercial banks are also present in Japan, and other quasi-governmental and non-governmental entities, such as the postal service and cooperative industry associations, also offer banking services (e.g., the Japan Agriculture Union offers services through its bank, Norinchukin Bank, to members of the organization).  Japan’s financial sector is generally acknowledged to be sound and resilient, with good capitalization and with a declining ratio of non-performing loans. While still healthy, most banks have experienced pressure on interest margins and profitability as a result of an extended period of low interest rates capped by the Bank of Japan’s introduction of a negative interest rate policy in 2016. 

The country’s three largest private commercial banks, often collectively referred to as the “megabanks,” are Mitsubishi UFJ Financial, Mizuho Financial, and Sumitomo Mitsui Financial.  Collectively, they hold assets approaching USD 7 trillion. Japan’s second largest bank by assets – with USD 2 trillion – is Japan Post Bank, a financial subsidiary of the Japan Post Group that is still majority state-owned.  Japan Post Bank offers services via 24,000 Japan Post office branches, at which Japan Post Bank services can be conducted, as well as Japan Post’s network of 29,100 ATMs nationwide.

A large number of foreign banks operate in Japan offering both banking and other financial services.  Like their domestic counterparts, foreign banks are regulated by the Japan Financial Services Agency. According to the IMF, there have been no observations of reduced or lost correspondent banking relationships in Japan.  There are 443 correspondent banking relationships available to the country’s central bank (main banks: 125; trust banks: 13; foreign banks: 50; credit unions: 251; other: 4).

Foreigners wishing to establish bank accounts must show a passport, visa, and foreigner residence card; temporary visitors may not open bank accounts in Japan.  Other requirements (e.g., evidence of utility registration and payment, Japanese-style signature seal, etc.) may vary according to institution. Language may be a barrier to obtaining services at some institutions; foreigners who do not speak Japanese should research in advance which banks are more likely to offer bilingual services.

Japan accounts for approximately half of the world’s trades of Bitcoin, the most prevalent blockchain currency (digital decentralized cryptographic currency).  Japanese regulators are encouraging “open banking” interactions between financial institutions and third-party developers of financial technology applications through application programming interfaces (“APIs”) when customers “opt-in” to share their information.  The government has set a target to have 80 banks adopt API standards by 2020.  Many of the largest banks are participating in various proofs of concept using blockchain technology.  While commercial banks have not yet formally adopted blockchain-powered systems for fund settlement, they are actively exploring options, and the largest banks have announced intentions to produce their own virtual currencies at some point.  The Bank of Japan is researching blockchain and its applications for national accounts, and established a “Fintech Center” to lead this effort.  The main banking regulator, the Japan Financial Services Agency (FSA) also encourages innovation with financial technologies, including sponsoring an annual conference on “fintech” in Japan.  In April 2017, amendments to the Act on Settlements of Funds went into effect, permitting the use of virtual currencies as a form of payment in Japan, but virtual currency is still not considered legal tender (e.g., commercial vendors may opt to accept virtual currencies for transactional payments, though virtual currency cannot be used as payment for taxes owed to the government).  The law also requires the registration of virtual currency exchange businesses.  There are currently 19 registered virtual currency exchanges; 1 other exchange operates while its registration is pending with FSA.

Foreign Exchange and Remittances

Foreign Exchange Policies

Generally, all foreign exchange transactions to and from Japan—including transfers of profits and dividends, interest, royalties and fees, repatriation of capital, and repayment of principal—are freely permitted.  Japan maintains an ex-post facto notification system for foreign exchange transactions that prohibits specified transactions, including certain foreign direct investments (e.g., from countries under international sanctions) or others that are listed in the appendix of the Foreign Exchange and Foreign Trade Act.

Japan has a floating exchange rate that fluctuates based on market principles.  Japan has not intervened in the foreign exchange markets since November 2011, and has joined statements of the G-7 and G-20 affirming that countries would not target exchange rates for competitive purposes.

Remittance Policies

Investment remittances are freely permitted.

Sovereign Wealth Funds

Japan does not operate a sovereign wealth fund.

Japan has privatized most former state-owned enterprises (SOEs).  Under the Postal Privatization Law, privatization of Japan Post group started in October 2007 by turning the public corporation into stock companies.  The stock sale of the Japan Post Holdings Co. and its two financial subsidiaries, Japan Post Insurance (JPI) and Japan Post Bank (JPB), began in November 2015 with an initial public offering that sold 11 percent of available shares in each of the three entities.  The postal service subsidiary, Japan Post Co., will remain a wholly owned subsidiary of Japan Post Holdings (JPH). The Japanese government conducted an additional public offering of stock in September 2017, reducing the government ownership in the holding company to approximately 57 percent.  There were no additional offerings of the stock in the bank or insurance subsidiaries: JPH currently owns 88.99 percent of the banking subsidiary and 89.00 percent of the insurance subsidiary. Follow-on sales of shares in the three companies will take place over time, as the Postal Privatization Law requires the government to sell a majority share (up to two-thirds of all shares) in JPH, and JPH to sell all shares of JPB and JPI, as soon as possible.  The Ministry of Finance announced in April 2019 that the government will sell additional shares of JPH. Media reported that as a result of the third sale of the government JPH share holdings possibly to be implemented as early as this fall, its holdings would account for slightly above one-third of outstanding shares, the lower limit specified in the Postal Privatization Law.

These offerings mark the final stage of Japan Post privatization begun under former Prime Minister Junichiro Koizumi almost a decade ago, and respond to long-standing criticism from commercial banks and insurers—both foreign and Japanese—that their government-owned Japan Post rivals have an unfair advantage.

While there has been significant progress since 2013 with regard to private suppliers’ access to the postal insurance network, the U.S. government has continued to raise concerns about the preferential treatment given to Japan Post and some quasi-governmental entities compared to private sector competitors and the impact of these advantages on the ability of private companies to compete on a level playing field.  A full description of U.S. government concerns with regard to the insurance sector, and efforts to address these concerns, is available in the United States Trade Representative’s National Trade Estimate (NTE) report for Japan.

Privatization Program

In sectors that were once dominated by state-owned enterprises but have been privatized, such as transportation, telecommunications, and package delivery, U.S. businesses report that Japanese firms sometimes receive favorable treatment in the form of improved market access and government cooperation.

The liberalization of Japan’s power sector, now more than 25 years in the making, took a step forward in April 2016 with the full liberalization of the retail sector. This has led to an influx of new electricity retailers, though the generation and transmission of electricity remain in the hands of the legacy utility companies, which have been privatized.  The liberalization is expected to come to a head with the legal “unbundling” of the monopolies by 2020.

American energy companies have reported increased opportunities in this sector, but the former utility monopolies still have immense power over the regulatory regime, market, and infrastructure.  For example, there is a wholesale market on which new retailers can buy electricity to sell to their customers, but the legacy utilities, which control most of the generation, sell very little power into that market.  This leaves new retailers in a supply crunch. Also, new entrants in power generation are given limited access to the power grid because the system is already at capacity with baseload generation from the legacy firms.

More information on the power sector from the Japanese Government can be obtained at: http://www.enecho.meti.go.jp/en/category/electricity_and_gas/electric/electricity_liberalization/what/  

Japanese corporate governance has been criticized for failing to sufficiently prioritize shareholder interests, due in part due to a lack of independent corporate directors and to cross-shareholding agreement among firms.  The Abe government has made corporate governance reform a core element of its economic agenda with the goal to reinvigorate Japan’s business sector by encouraging a stronger focus by management on earnings and shareholder value.

Progress has been made through efforts by the Financial Services Agency (FSA) and Tokyo Stock Exchange (TSE) to introduce non-binding reforms through changes to Japan’s Companies Act in 2014 and to adopt of a Corporate Governance Code (CSR) by in 2015.  Together with the Stewardship Code for institutional investors launched by the FSA in 2014, these initiatives encourage companies to put cash stockpiles to better use by increasing investment, raising dividends, and taking on more risk to boost Japan’s growth.  Positive results of these efforts are evidenced by rising shareholder returns, unwinding of cross-shareholdings, and increasing numbers of independent board members.  Moreover, more than 90 percent of listed firms now have two or more independent directors.

Awareness of corporate social responsibility among both producers and consumers in Japan is high, and foreign and local enterprises generally follow accepted CSR principles.  Business organizations also actively promote CSR. Japan encourages adherence to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas.

Japan’s penal code covers crimes of official corruption, and an individual convicted under these statutes is, depending on the nature of the crime, subject to prison sentences and possible fines.  With respect to corporate officers who accept bribes, Japanese law also provides for company directors to be subject to fines and/or imprisonment, and some judgments have been rendered against company directors.

The direct exchange of cash for favors from government officials in Japan is extremely rare.  However, the web of close relationships between Japanese companies, politicians, government organizations, and universities has been criticized for fostering an inwardly “cooperative”—or insular—business climate that is conducive to the awarding of contracts, positions, etc. within a tight circle of local players.  This phenomenon manifests itself most frequently and seriously in Japan through the rigging of bids on government public works projects. However, instances of bid rigging appear to have decreased over the past decade. Alleged bid rigging between construction companies was discovered on the Tokyo-Nagoya-Osaka maglev high-speed rail project in 2017, and the case is currently being prosecuted.

Japan’s Act on Elimination and Prevention of Involvement in Bid-Rigging authorizes the Japan Fair Trade Commission (JFTC) to demand that central and local government commissioning agencies take corrective measures to prevent continued complicity of officials in bid rigging activities and to report such measures to the JFTC.  The Act also contains provisions concerning disciplinary action against officials participating in bid rigging and compensation for overcharges when the officials caused damage to the government due to willful or grave negligence. Nevertheless, questions remain as to whether the Act’s disciplinary provisions are strong enough to ensure officials involved in illegal bid rigging are held accountable.

Japan has ratified the OECD Anti-Bribery Convention, which bans bribing foreign government officials.  However, there are continuing concerns over the effectiveness of Japan’s anti-bribery enforcement efforts, particularly the very small number of cases prosecuted by Japanese authorities compared to other OECD members.

For vetting potential local investment partners, companies may review credit reports on foreign companies which are available from many private-sector sources, including, in the United States, Dun & Bradstreet and Graydon International.  Additionally, a company may inquire about the International Company Profile (ICP), which is a background report on a specific foreign company that is prepared by commercial officers of the U.S. Commercial Service at the U.S. Embassy, Tokyo.

Resources to Report Corruption

Businesses or individuals may contact the Japan Fair Trade Commission (JFTC), with contact details at:  http://www.jftc.go.jp/en/about_jftc/contact_us.html  

Political violence is rare in Japan.  Acts of political violence involving U.S. business interests are virtually unknown.

Japan currently faces one of the tightest labor markets in decades, in part due to demographic decline, with a shortage of workers in sectors such as information services, hospitality, construction, transportation, maintenance, and security.  Unemployment is near a 25 year low, at 2.3 percent in March 2019. Traditionally, Japanese workers have been classified as either regular or non-regular employees. Companies recruit regular employees directly from schools or universities and provide an employment contract with no fixed duration, effectively guaranteeing them lifetime employment.  Non-regular employees are hired for a fixed period. Companies have increasingly relied on non-regular workers to fill short-term labor requirements and to reduce labor costs.

Japan has a robust structure for collective bargaining in which roughly 17 percent of workers are represented by unions active in nearly every industry, including textiles.  The government provides benefits for workers laid off for economic reasons through a national employment insurance program. Some National Strategic Special Zones allow for special employment of foreign workers in certain fields, but those and all other foreign workers are  subject to the same national labor laws and standards as Japanese workers. Japan has comprehensive labor dispute resolution mechanisms, including labor tribunals, mediation, and civil lawsuits. A Labor Standards Bureau oversees the enforcement of labor standards through a national network of Labor Bureaus and Labor Standards Inspection Offices.

The number of foreign workers is rising, but at just over 1.46 million as of October 2018, they still represent a fraction of Japan’s nearly 68 million-worker labor force.  The Japanese government has made additional changes to labor and immigration laws to facilitate the entry of larger numbers of skilled foreign workers in selected sectors. For example, the Immigration Control and Refugee Recognition Law was revised in 2014 to improve the “Points System” for highly skilled foreign professionals, easing the requirements for residency.  Special economic zones may permit foreign workers in certain categories, such as domestic employees and agricultural workers.

The Japanese government has also taken steps to expand the Technical Intern Training Program (TITP).  Originally intended as a skills-transfer program for workers from developing countries, TITP is currently used to address immediate labor shortages in specific sectors, such as construction and agriculture.  In 2014, the Japanese government expanded TITP in the construction sector through FY2020, the year of the Tokyo summer Olympics, extending the period of stay for construction workers under TITP from three years to five, and permitting re-entry of former interns and trainees for another two to three years.  In November 2017, the legislation that passed the Diet in November 2016 went into effect, which extended the period of stay under TITP to five years for more categories of workers, and strengthened supervision of the program and companies to deter human rights abuses. At the same time, nursing care service was added to the list of work categories permitted for TITP, and the government expanded oversight to address abuses of the program.

To address Japan’s acute labor shortage in specific industries, the Japanese government revised the Immigration Control and Refugee Recognition Law again in December 2018, to create new visa categories for lower-skilled foreign workers.  This marks a major turning point in Japan’s policy on foreign workers, which encouraged the entry of highly-skilled professionals, but had no visa category specifically for low-skilled foreign workers.  Ministerial Ordinances, Cabinet Orders, and Operating Guidelines were released in March 2019, laying out details of the program. Fourteen industries have been identified to be suffering from acute labor shortage, in which lower-skilled foreigners will be permitted to work under the “Specific Skills” status of residence.   The new system began on April 1, 2019. The Japanese government estimates that approximately 47,550 foreign workers will be accepted within the first year, and 345,000 will be accepted within five years.

Also, to address the labor shortage resulting from population decline and a rapidly aging society, Japan’s government has pursued measures to increase participation and retention of older workers and women in the labor force.  A law that went into force in April 2013 requires companies to introduce employment systems allowing employees reaching retirement age (generally set at 60) to continue working until age 65. Since 2013, the government has committed to increasing women’s economic participation as well.  The Women’s Empowerment Law passed in 2015 requires large companies to disclose statistics about the hiring and promotion of women, and to adopt action plans to improve their numbers. In the six years under the second Abe Administration since he became Prime Minister in 2012, approximately 3 million women have joined the labor force.

On June 29, 2018, the Diet passed the Workstyle Reform package bills.  The legislation revised eight labor laws, including the Labor Standards Law and Labor Contract Law.  The package introduces a legal cap on overtime work at less than 100 hour per month and 720 hours per year with penalties for violators, such as imprisonment of up to six months or fines of up to 300,000 yen.  A key provision, however, is the so-called “White Collar Exemption,” originally submitted to the Diet in 2015, which would implement a merit-based wage system for certain highly-skilled professionals and exempt firms from paying such workers overtime or premium overtime pay for late night, weekend, or holiday work.  In addition, an “equal-pay-for-equal-work” provision seeks to reduce compensation gaps between regular and non-regular employees.  Most measures took effect in April 1, 2019, although equal-pay provisions would be implemented from 2020.  The package offers some flexibility on implementation for small and medium-sized enterprises (SMEs).

Although independent labor unions play a role in the annual determination of wage scales throughout the economy, that role has been declining along with union membership.  Union members today make up only 17 percent of the labor force, down from 25 percent in 1990.

Japan has ratified 48 International Labor Organization (ILO) Conventions (including six of the eight core Conventions).  As part of its agreement in principle on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with 10 other trading partners, Japan agreed to adopt the fundamental labor rights stated in the ILO Declaration including freedom of association and the recognition of the right to collective bargaining, the elimination of forced labor and employment discrimination, and the abolition of child labor.  CPTPP entered force in Japan on December 30, 2018.

Overseas Private Investment Corporation (OPIC) insurance and finance programs are not available in Japan. However, OPIC and its Japanese counterpart, Japan Bank for International Cooperation, are supporting opportunities for U.S. investors to partner with Japanese investors in third countries.

Japan is a member of the Multilateral Investment Guarantee Agency (MIGA).  Japan’s capital subscription to MIGA is the second largest, after the United States.

Other foreign governments have very limited involvement in Japan’s domestic infrastructure development, and most financing and insurance is managed domestically. 

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

*2017 Nominal GDP data (Calendar Year Data) from “Annual Report on National Accounts for 2017”, Economic and Social Research Institute, Cabinet Office, Japanese Government, released on December 25, 2018  . (Note: uses 2017 yearly average exchange rate of 112.2 Yen to 1 U.S. Dollar)

** 2017 FDI data from “JETRO Invest Japan Report 2018 (Summary) and FDI stock, Japan’s Outward and Inward Foreign Direct Investment,” Japan External Trade Organization (JETRO).

The discrepancy between Japan’s accounting of U.S. FDI into Japan and U.S. accounting of that FDI can be attributed to methodological differences, specifically with regard to indirect investors, profits generated from reinvested earnings, and differing standards for which companies must report FDI.

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Michael Cavanaugh
Economic Section
U.S. Embassy Tokyo
1-10-5 Akasaka, Minato-ku, Tokyo 107-8420
Japan
+81 03-3224-5000

Policies Towards Foreign Direct Investment

The GOP seeks to attract investment — both foreign and domestic — in nearly all sectors of the economy.  The GOP prioritized USD 10.3 billion in public-private partnership projects in transportation infrastructure, electricity, mining, broadband expansion, gas distribution, health and sanitation for 2019-2021.  The Ministry of Energy and Mines aims to spur exploration and investment in the mining sector, increase oil and gas exploration, and modernize the Talara refinery.

The 1993 Constitution grants national treatment for foreign investors and permits foreign investment in almost all economic sectors.  Under the Constitution, foreign investors have the same rights as national investors to benefit from investment incentives, such as tax exemptions.  In addition to the 1993 Constitution, Peru has several laws governing foreign direct investment (FDI) including the Foreign Investment Promotion Law (Legislative Decree (DL) 662 of September 1991) and the Framework Law for Private Investment Growth (DL 757 of November 1991).  Other important laws include the Private Investment in State-Owned Enterprises Promotion Law (DL 674), the Private Investment in Public Services Infrastructure Promotion Law (DL 758), and specific laws related to agriculture, fisheries and aquaculture, forestry, mining, oil and gas, and electricity.  Article 6 of Supreme Decree No. 162-92-EF (the implementing regulations of DLs 662 and 757) authorizes private investors to enter all industries except investments in natural protected areas and manufacturing of weapons.

Peruvians and Americans benefit from the United States-Peru Trade Promotion Agreement (PTPA), which entered into force on February 1, 2009.  The PTPA established a secure, predictable legal framework for U.S. investors operating in Peru. The PTPA protects all forms of investment. U.S. investors enjoy the right to establish, acquire, and operate investments in Peru on an equal footing with local investors in almost all circumstances.

The GOP created ProInversion, in 2002, based on an existing, similar investment promotion agency.  ProInversion has completed both privatizations and concessions of state-owned enterprises and natural resource-based industries.  The agency regularly organizes international roadshow events, including in the United States, to attract investors and manages the GOP’s public-private investment project portfolio.  Major recent concession areas include ports, water treatment plants, power generation facilities, mining projects, electrical transmission lines, oil and gas distribution, and telecommunications.  Project opportunities are available on ProInversion’s Project Portfolio page at: http://www.proyectosapp.pe/modulos/JER/PlantillaProyectoEstadoSector.aspx?are=1&prf=2&jer=5892&sec=30  .

The GOP passed legislative decrees in July 2018 to attract and facilitate investment.  These include measures to reform the public-private partnership (PPP) process. The reforms establish the Economy and Finance Ministry (MEF) as the PPP policymaking authority in the country and allows government entities to contract out PMO services throughout all stages of the PPP process, including through the GOP promotion investment agency Proinversion. The regulations also established that Proinversion’s board of directors will be composed of GOP Ministers, reversing an earlier decree that allowed for two private sector representatives on the board. The GOP established an investment research portal within the invierte.pe public investment online database (https://www.mef.gob.pe/es/aplicativos-invierte-pe?id=5455).  While ProInversion does not maintain an ongoing dialogue with investors, it has authority to oversee PPP investments throughout their lifecycles. The GOP plans to publish a National Infrastructure Plan in July 2019, with infrastructure projects keyed to critical sectors outlined in a National Competitveness Plan that will be published by the end of 2019.

To spur project financing, the GOP loosened banking regulations to enable an entity to operate more than one tier-one financial institution in the country.  A new Tourism Entrepreneurship Fund created in 2017 will provide grants to finance or co-finance business ventures that incorporate conservation, sustainable use, and economic development in the tourism industry. The GOP later developed a four-year Tourism Entrepreneurship Program to channel the USD 3 million fund to tourism ventures (http://turismoemprende.pe/  ).  The program aims to fund 24 new tourism ventures worth USD 450,000 in 2018.

Although all Peruvian administrations since the 1990s have vowed to support private investment and abide by Peruvian laws, the GOP occasionally passes measures that some observers regard as a contravention of Peru’s open investment laws.  Furthermore, the GOP in December 2011 signed into law a 10-year moratorium on the entry into Peru of live genetically modified organisms (GMOs) to be used for cultivation. Peru also implemented two sets of rules for importing pesticides, one for commercial importers, which requires importers to file a full dossier with technical information, and another for end-user farmers, which only requires a written affidavit.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Constitution (Article 6 under Supreme Decree No. 162-92-EF) authorizes foreign investors to carry out any economic activity provided investors comply with all constitutional precepts, laws, and treaties.  Exceptions exist, including exclusion of foreign investment activities in natural protected reserves and manufacturing of military weapons, pursuant to Article 6 of Legislative Decree No. 757. While long-term concessions are granted, the law states Peruvians must maintain majority ownership in certain strategic sectors:  media; air, land and maritime transportation infrastructure; and private security surveillance services.

Prior approval is required in the banking and defense-related sectors.  Foreigners are legally prohibited from owning a majority interest in radio and television stations in Peru; nevertheless, foreigners have in practice owned controlling interests in such companies.  Under the Constitution, foreign interests cannot “acquire or possess under any title, mines, lands, forests, waters, or fuel or energy sources” within 50 kilometers of Peru’s international borders. However, foreigners can obtain concessions and rights within the restricted areas with the authorization of a supreme resolution approved by the Cabinet and the Joint Command of the Armed Forces.

The GOP does not screen, review, or approve foreign direct investment outside of those sectors that require a governmental waiver.

Other Investment Policy Reviews

The World Trade Organization (WTO) published a Trade Policy Review on Peru in 2013.  The WTO commented that foreign investors receive the same legal treatment as local investors in general, although foreign investment on maritime services, air transport, and broadcasting is restricted.  The report also noted that the Peruvian government promotes public-private partnerships to build infrastructure and spur economic growth, with tax exemptions and low-cost financing available for domestic and foreign investors alike.

Report available at: https://www.wto.org/english/tratop_e/tpr_e/tp389_e.htm  

Peru aspires to become a member of the Organization for Economic Cooperation and Development (OECD).  Peru launched an OECD Country Program on December 8, 2014, comprising policy reviews and capacity building projects, and allowing it to participate in substantive work of OECD’s specialized committees.  An 18-month OECD review identified economic, social, and political obstacles that could hamper Peru’s OECD membership aspirations. The government noted that the study would act as a “roadmap” for Peru’s goal to achieve membership by 2021.  The OECD published the Initial Assessment of its Multi-Dimensional Review of Peru in October 2015, finding that in spite of economic growth, Peru “still faces structural challenges to escape the middle-income trap and consolidate its emerging middle class.”  In every year since this study was published, Peru has enacted and implemented dozens of governance reforms to modernize its governance practices in line with OECD recommendations.

Report: www.oecd.org/countries/peru/multi-dimensional-review-of-peru-9789264243279-en.htm  

Peru has not had any third-party investment policy review (IPR) through the OECD, WTO, or UNCTAD in the past three years.

Business Facilitation

The GOP does not have a regulatory system to facilitate business operations but the Competition and Consumer Protection Agency (INDECOPI) regulates the enactment of new regulations by government entities that can place burdens on business operations.  INDECOPI’s authority allowing it to block any new business regulations can limit restrictions of businesses. In addition, the GOP passed in 2016 a “sunset law” that requires a review of existing regulations by government agencies.

Peru allows foreign business ownership, provided that a company has at least two shareholders and that its legal representative is a Peruvian resident.  The process takes an average of 43 days and involves 11 procedures. An entrepreneur must reserve the company name through the national registry, SUNARP (www.sunarp.gob.pe  ), and prepare a deed of incorporation through Portal de Servicios al Ciudadano y a las Empresas (http://www.serviciosalciudadano.gob.pe/  ).  The deed is then signed and filed with a Public Notary, with notary fees of up to 1 percent of a company’s capital, before submission to the Public Registry.  The company’s legal representative must obtain a Certificate of Registration and tax identification number from the National Tax Authority. Finally, the company must obtain a license from the municipality of the jurisdiction in which it is located.

All foreign investments must be registered with ProInversion.  The agency helps potential investors navigate investment regulations and provides sector-specific information on the investment process.

Outward Investment

The GOP promotes outward investment by Peruvian entities through the Ministry of Foreign Trade and Tourism (MINCETUR).  Trade Commission Offices of Peru (OCEX’s), under the supervision of Peru’s export promotion agency (PromPeru) are located in numerous countries, including the United States, and promote the export of Peruvian goods and services and inward foreign investment.  The GOP does not restrict domestic investors from investing abroad.

The United States-Peru Trade Promotion Agreement (PTPA) eliminated the need for a bilateral investment agreement between the United States and Peru.  Peru also has free trade agreements with Canada, Chile, China, Venezuela, Costa Rica, the European Union, the European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland), Honduras, Japan, Mexico, Panama, Singapore, South Korea, and Thailand.  It has Framework Agreements with MERCOSUR countries (Argentina, Brazil, Paraguay, Uruguay, and Venezuela). It has a partial preferential agreement with Cuba. More agreements have been signed and await full implementation, including with Guatemala, the Pacific Alliance (Mexico, Colombia, and Chile), Brazil, Australia, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership CPTPP (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Singapore and Vietnam). Peru has also ratified the WTO Agreement on Trade Facilitation, which entered into force in February 2017.

Peru has bilateral investment agreements in force with Argentina, Australia, Belgium-Luxembourg, Bolivia, Canada, Chile, China, Colombia, Cuba, Czech Republic, Denmark, Ecuador, El Salvador, Finland, France, Germany, Italy, Japan, Korea, Malaysia, Netherlands, Norway, Paraguay, Portugal, Romania, Singapore, Spain, Sweden, Switzerland, Thailand, United Kingdom, and Venezuela.  In total, Peru is a party to 32 bilateral investment agreements.

Peru does not have a bilateral taxation treaty with the United States.  Peru has signed tax treaties with the Andean Community (Bolivia, Colombia, Ecuador), Chile, Brazil, Canada, Mexico, Switzerland, South Korea, Portugal, and is negotiating one with Spain.  After taking office in July 2016, former President Pedro Pablo Kuczynski initiated a series of reforms, among them alterations to the tax regime. Beginning on January 1, 2017, real estate income tax for foreigners decreased from 30 percent to 5 percent and taxes on dividends and other forms of distribution decreased from 6.8 percent to 5 percent.  Corporate income taxes increased from 28 percent to 29.5 percent.

Transparency of the Regulatory System

Laws and regulations most relevant to foreign investors are enacted and implemented at the national level.  Most ministries and agencies make draft regulations available for public comment. El Peruano, the state’s official gazette, publishes regulations at the national, regional, and municipal level.  Ministries generally maintain current regulations on their websites. Rule-making and regulatory authority also exists through executive agencies specific to different sectors. The Supervisory Agency for Forest Resources and Wildlife (OSINFOR), the Supervisory Agency for Energy and Mining (OSINERGMIN), and the Supervisory Agency for Telecommunications (OSIPTEL) can enact new regulations that affect investments in the economic sectors they manage.  These agencies also have the remit to enforce regulations with penalties varying by sector, with information on enforcement published. Enforcement actions can be appealed through administrative processes. Regulation is reviewed on the basis of scientific and data-driven assessments, but public comments are not always received or made public.

Accounting, legal, and regulatory standards are consistent with international norms.  Peru’s Accounting Standards Council endorses the use of IFRS standards by private entities.

International Regulatory Considerations

Peru is a member of regional economic blocs.  The Andean Community issues supranational regulations – based on consensus of its members – which supersede domestic provisions.  Under the Pacific Alliance, Peru looks to harmonize regulations and reduce barriers to trade with other members: Chile, Colombia, and Mexico.

Legal System and Judicial Independence

Peru has an independent judiciary.  The executive branch does not interfere with the judiciary as a matter of policy.  Peru is in the process of transitioning to an accusatory legal system. The new system is already in place in the regions outside Lima.  Regulations and enforcement actions are appealable through administrative process and the court system.

Laws and Regulations on Foreign Direct Investment

Peru’s legal system is available to investors.  All laws relevant to foreign investment along with pertinent explanations and forms can be found on the ProInversion website at: http://www.ProInversion.gob.pe/modulos/LAN/landing.aspx?are=1&pfl=1&lan=9&tit=institucional  

Competition and Anti-Trust Laws

The Institute for the Protection of Intellectual Property, Consumer Protection, and Competition (INDECOPI) is the GOP agency responsible for reviewing competition-related concerns of a domestic nature.  In 2016, INDECOPI levied sanctions against a U.S. company and its Chilean counterpart for fixing the price of toilet paper in Peru. The Peruvian Congress is evaluating a bill that would require prior approval by INDECOPI for mergers and acquisitions with the goal of eliminating anticompetitive practices.

Expropriation and Compensation

Congress passed a law streamlining expropriation procedures in August 2015.  The GOP announced in January 2017 that it would create a body within ProInversion to focus on acquiring land for infrastructure projects.  The Peruvian Constitution states that the GOP can only expropriate private property on the basis of public interest, such as public works projects or for national security.  In order to expropriate, Congress is required to pass a legislative decree. The Government of Peru has expressed its intention to comply with international standards concerning expropriations.  Peruvian law bases compensation for expropriation on fair market value. Concessionaires have complained that the government has been slow in implementing expropriations, causing delays to their investment commitments.

Illegal expropriation of foreign investment has been alleged in the extractive industry.  A U.S. company alleged indirect expropriation due to changes in regulatory standards. Landowners have also alleged indirect expropriation due to government inaction and corruption in ‘land-grab’ cases that have at times been linked to local government endorsed projects.

Dispute Settlement

ICSID Convention and New York Convention

Peru is a party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and to the International Center for the Settlement of Investment Disputes (ICSID convention).  Disputes between foreign investors and the GOP regarding pre-existing contracts must still enter national courts, unless otherwise permitted, such as through provisions found in the PTPA. In addition, investors who enter into a juridical stability agreement may submit disputes with the government to national or international arbitration if stipulated in the agreement.  Several private organizations – including the American Chamber of Commerce, the Lima Chamber of Commerce, and Universidad Catolica – operate private arbitration centers. The quality of such centers varies and investors should choose arbitration venues carefully.

The PTPA includes a chapter on dispute settlement, which applies to implementation of the Agreement’s core obligations, including labor and environment provisions.  Dispute panel procedures set high standards of openness and transparency through the following measures: open public hearings, public release of legal submissions by parties, admission of  special labor or environment expertise for disputes in these areas, and opportunities for interested third parties to submit views. The Agreement emphasizes compliance through consultation and trade-enhancing remedies.  The Agreement also encourages arbitration and other alternative dispute resolution measures for disputes between private parties.

Investor-State Dispute Settlement

The PTPA provides investor-state claim mechanisms.  It does not require that an investor

exhaust local judicial or administrative remedies before a claim may be filed.  The investor may submit a claim under various arbitral mechanisms, including the Convention on the Settlement of Investment Disputes (ICSID Convention) and ICSID Rules of Procedure, the ICSID Additional Facility Rules, the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules, or, if the disputants agree, any other arbitration institution or rules.  Peru has paid previous arbitral awards; however, a U.S. court found in one case that Peru altered its tax code prior to payment, thus reducing interest payments.

In 2011, a claimant filed an arbitral challenge against Peru stemming from the alleged failure by the state to undertake agreed-upon environmental remediation at a mining facility.  The arbitration was dismissed in 2016 on grounds of jurisdiction.

In February 2016, a U.S. investor filed a Notice of Intent to pursue international arbitration against the GOP for violation of the U.S.-Peru Trade Promotion Agreement.  The investor, which refiled its claim in August 2016, holds agrarian land reform bonds it argues the GOP has undervalued.

There is no recent history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

The 1993 Constitution allows disputes among foreign investors and the government or state-controlled enterprises to be submitted to international arbitration.  The Supreme Court ruled in 2005 that all arbitration awards are final and are not subject to appeal.

Bankruptcy Regulations

Peru has a creditor rights hierarchy similar to that established under U.S. bankruptcy law, and monetary judgments are usually made in the currency stipulated in the contract.  However, administrative bankruptcy procedures under INDECOPI (the Antitrust, Unfair Competition, Intellectual Property Protection, Consumer Protection, Dumping, Standards and Elimination of Bureaucratic Barriers Agency) have proven to be slow and subject to judicial intervention.  Compounding this difficulty are occasional laws passed to protect specific debtors from action by creditors that would force them into bankruptcy or liquidation. In August 2016, the GOP extended the period for bankruptcy from one to two years. Peru does not criminalize bankruptcy.  World Bank’s 2018 Doing Business Report ranked Peru 88th of 190 countries for ease of “resolving insolvency.”

Investment Incentives

Peru offers both foreign and national investors legal and tax stability agreements to stimulate private investment.  These agreements guarantee that the statutes on income taxes, remittances, export promotion regimes (such as drawbacks, or refunds of duties), administrative procedures, and labor hiring regimes in effect at the time of the investment contract will remain unchanged for that investment for 10 years.  To qualify, an investment must exceed USD 10 million in the mining and hydrocarbons sectors or USD 5 million within two years in other sectors. An agreement to acquire more than 50 percent of a company’s shares in the privatization process may also qualify an investor for a legal or tax stability agreement, provided that the added investment will expand the installed capacity of the company or enhance its technological development.

Foreign Trade Zones/Free Ports/Trade Facilitation

Peruvian law currently covers two types of trade zones:  export, transformation, industry, trade and services zones (CETICOS), and a free trade zone (ZOFRATACNA) in Tacna.  The rules and tax benefits applying to these zones are the same for foreign and national investors. These zones have failed to attract sizable investment and their economic importance is negligible.

CETICOS exist at Ilo, Matarani, and Paita.  A CETICOS is authorized in Loreto department but is not operational.  There is concern that the GOP does not have the proper WTO waivers to validate the CETICOS export requirement.  The U.S. automotive industry has expressed a specific concern that U.S. brands are unable to compete with used Japanese vehicles that enter the Peruvian market duty-free through the CETICOS.  The Ministry of Transportation and Communications banned the importation of right-hand drive vehicles in 2013, citing environmental, and safety concerns. Imports of used cars more than five years old and used buses and trucks more than two years old are prohibited.

Performance and Data Localization Requirements

The PTPA has greatly reduced burdensome investor requirements in Peru.  Under the PTPA, Peru made concessions beyond its commitments to the World Trade Organization (WTO), eliminating investment barriers such as the requirement for U.S. firms to hire nationals rather than U.S. professionals, and measures requiring the purchase of local goods.  The GOP does not maintain any measures that are inconsistent with Trade-Related Investment Measure (TRIM) requirements, according to a WTO Committee on Trade-Related Investment Measure notification dated August 19, 2010.

Current law limits foreign employees to 20 percent of the total number of employees in a local company (whether owned by foreign or national interests).  The combined salaries of foreign employees are limited to no more than 30 percent of the total company payroll. However, DL 689 from November 1991 provides a variety of exceptions to these limits.  For example, a foreigner is not counted against a company’s total if he or she holds an immigrant visa, has a certain amount invested in the company (approximately USD 4,000), or is a national of a country that has a reciprocal labor or dual nationality agreement with Peru.  The United States and Peru tolerate dual nationality, but do not have a formal agreement. Furthermore, the law exempts foreign banks, and international transportation companies from these hiring limits, as well as all firms located in free trade zones. Companies may apply for exemptions from the limitations for managerial or technical personnel.  Sector-specific regulating bodies enforce performance requirements.

Although there are no discriminatory or onerous visa requirements, residence, or work permit requirements that inhibit foreign investors’ mobility, the application and approval process can be cumbersome and lengthy.

There are no performance requirements that apply exclusively to foreign investors.  Peruvian civil law applies to legal stability agreements, which means the GOP cannot unilaterally alter agreements.  Notwithstanding these protections, investors should be aware that government officials have delivered negative remarks to the press regarding companies exercising their contractual rights and obligations.

Peru does not follow a policy in which foreign investors must use domestic content in goods or technology.

Data Storage

A data controller who processes personal data must notify the National Authority for Personal Data Protection (ANPDP for its Spanish acronym), which keeps a public register of data processors and the type of data they collect.  Personal data is defined by the Law as any information on an individual which identifies or makes him/her identifiable through means that may be reasonably used. Sensitive personal data means any of the following: biometric data, data on racial and ethnic origin; political, religious, philosophical or moral opinions or convictions, personal habits, union membership, and information related to health or sexual preference.  Unless otherwise exempted by statute, data controllers are generally required to obtain the consent of data subjects for the processing of their personal data. Consent must be prior, informed, expressed, and unequivocal. In the case of sensitive personal data, consent must also be given in writing, which may be done digitally. Even without the consent of the subject, sensitive data may be processed when authorized by law, provided it is in the public interest.

Data controllers may process personal data without consent:

• When the personal data are compiled or transferred for public entities in control of the personal data and in the performance of its duties;
• When personal data is accessible to the public or is intended to be accessible to the public;
• To comply with other laws related to financial solvency and credit;
• In the case of a law for the promotion of competition in regulated markets under certain circumstances;
• When necessary to perform a contract to which the data subject is a party;
• For personal data related to health, under certain circumstances;
• When processing is carried out by non-profit organizations with political, religious or union purposes, under certain circumstances; or
• In an anonymization or disassociation procedure.

A data controller may transfer personal data to places outside of Peru only if the recipients have adequate protection measures.  The ANPDP supervises compliance with this requirement. That provision does not apply in the following cases:

• When the data subject has given his/her prior, informed, express and unequivocal consent;
• Agreements under international treaties to which Peru is a party;
• International judicial cooperation;
• International cooperation between intelligence agencies for the fight against terrorism, illegal drug trafficking, money laundering, corruption, human trafficking and other forms of organized crime;
• When necessary to implement a contract to which the data subject is a party;
• To comply with laws concerning the transfer of bank or stock exchanges; or
• When the transfer is for the prevention, diagnosis or medical or surgical treatment of the data subject; or when necessary to carry out epidemiological or similar studies (provided that adequate disassociation procedures are applied).

Data controllers must adopt technical, organizational, and legal measures to guarantee the security of personal data and avoid their alteration, loss, unauthorized processing or access.  Peru’s law does not require any notifications to any data subject or any other entity upon a breach. Peru does not mandate special regulations be enacted for the processing of personal data of minors.  The ANPDP is responsible for enforcement and can issue the following administrative sanctions/fines based upon whether the violation is mild, serious or very serious. The law provides a “principle for availability of recourse for the data subject” stating that any data subject must have the administrative and/or jurisdictional channel necessary to claim and enforce his/her rights when they are violated by the processing of his/her personal data.  There are no requirements for foreign IT providers to turn over source code and/or provide access to encryption.

Peru adopted the Personal Data Protection Law (N° 29733) in July 2011 and went into effect on March 22, 2013.  The Law is available here in English: https://www.huntonprivacyblog.com/wp-content/uploads/sites/28/migrated/Peru percent20Data percent20Protection percent20Law percent20July percent2028_EN percent20_2_.pdf 

The implementing regulations are available in Spanish here: http://spij.minjus.gob.pe/normas/textos/220313T.pdf  (page 28)

Real Property

World Bank’s 2018 Doing Business Report ranked Peru 45th  of 190 for ease of “registering property.”  Property rights and interests are enforced in the country.  Mortgages and liens exist, and the recording system is reliable, and is performed by SUNARP, the National Superintendency of Public Records. Foreigners and/or non-resident investors cannot own land within 50 km of a border.

Intellectual Property Rights

Peru is listed on the Watch List under the U.S. Trade Representative’s (USTR) 2019 Special 301 Report.

Peru’s legal framework provides for easy registration of trademarks and inventors have been able to patent their inventions since 1994.  Peru’s 1996 Industrial Property Rights Law provides an effective term of protection for patents and prohibits devices that decode encrypted satellite signals, along with other improvements.  Peruvian law does not provide pipeline protection for patents or protection from parallel imports. Peru’s Copyright Law is generally consistent with the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property (TRIPS).

The National Institute of the Defense of Free Competition and the Protection of Intellectual Property (INDECOPI) continues to be the most engaged GOP agency and is a reliable partner for the USG, the private sector, and civil society, having made good faith efforts to decrease the trademark and patent registration backlog and filling time.  The average filing time is two months for trademarks and is 43 months for patents.

Peruvian law provides the same protections for U.S. companies as Peruvian companies in all intellectual property rights (IPR) categories under the U.S.-Peru Trade Promotion Agreement (PTPA) and other international commitments such as the World Intellectual Property Organization (WIPO) and the TRIPS Agreement.  Peru joined the Global Patent Prosecution Highway Agreement (GPPH) with Japan effective in 2019. Peru is reinforcing its Patent Support System with the adoption of the WIPO – Technology and Innovation Support Center (TISC) Program.

INDECOPI, established in 1992, is the GOP agency charged with promoting and defending intellectual property rights.  However, IPR enforcement also involves other GOP agencies and offices: the Public Ministry (Fiscalia), the Peruvian National Police (PNP), the Tax and Customs Authority (SUNAT), the Ministry of Production (PRODUCE), the Judiciary, and the Ministry of Health’s (MINSA) Directorate General for Medicines (DIGEMID).

Peru took a number of positive steps relating to IPR protection and enforcement over the last three years.  Peru successfully seized and shuttered several Spanish-language websites known to host large volumes of pirated content, and has blocked infringing sites on the major ISPs. Peru has significantly improved inter-agency coordination and has specialized IP prosecutors in Lima Norte, Callao, Tumbes, Puno, and Ventanilla, although there are still many areas of the country where this expertise is unavailable.

The GOP continues to improve its enforcement of IPR.  The Commission for Fighting Customs Crimes and Piracy (CLCDAP) is made up of the Ministry of Production, Public Ministry, the Judiciary, the National Police, the Ministry of the Interior, SUNAT, the Ministry of Transport and Communications (MTC), the telecommunications agency (OSPITEL), The IP Agency (INDECOPI), and the private sector.  The CLCDAP was designed to provide solutions to IPR issues through operational actions, institutional strengthening, improvement of the legal framework, and public awareness activities. The CLCDAP has set up a number of working groups, including on software piracy, editorial piracy, online and pay TV piracy, and audiovisual piracy. Importantly, the participation of the private sector in these working groups has led to increased private sector coordination with numerous agencies.

Indecopi’s 2018 Section 301 comments filed show an increase in precautionary measure seizures ordered by the Copyright, Trademarks and Patent Directorates from 371 in 2017 to 467 in 2018. The number of infringedment cases increased from 694 in 2017 to 903 in 2019.  Indecopi held 739 raids during 2018, almost double the 416 raids in 2017.

However, there are specific concerns that must be addressed.  This includes Peru’s limited progress in developing ISP limited liability regulations and a system of pre-established damages, and issues such as enforcement against camcording.  Another area of concern relates to the standards of patent eligibility for inventions involving new methods of using a previously approved pharmaceutical product. In addition, stakeholders are concerned that penalties are not sufficient to be deterrent.

There is insufficient political commitment to intellectual property rights protection and widespread counterfeiting and piracy exist with insufficient judicial, prosecutorial, and law enforcement processes in Peru. 

The World Economic Forum’s 2018 Global Competitiveness Index ranked Peru as 63rd out of 140 economies.  Peru’s competitiveness is improving (it was ranked 69th in 2016 and 72nd last year), it is still behind fellow South American countries Colombia (60), Chile (33), and Mexico (46). http://www3.weforum.org/docs/GCR2018/05FullReport/TheGlobalCompetitivenessReport2018.pdf 

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/details.jsp?country_code=PE  .

Capital Markets and Portfolio Investment

The GOP allows foreign portfolio investment.  Neither the GOP nor its Central Bank place restrictions on international transactions.

The country has its own stock market, the Lima Stock Exchange (Bolsa de Valores de Lima or BVL).  The BVL is a member of the Integrated Latin American Market (MILA), which includes the stock markets from Pacific Alliance countries (Peru, Chile, Colombia, and Mexico) and seeks to integrate their stock exchanges to develop their capital markets.  In December 2017, the GOP implemented a capital markets promotion law that enables mutual funds registered in Pacific Alliance countries to trade in the Lima Stock Exchange starting in July 2018. In July 2018 the Securities Market Superintendence (SMV) published implementing regulations to enable the trade of funds in Pacific Alliance countries.

The Securities Market Superintendence is the GOP entity charged with regulating the securities and commodities markets.  Following the IMF’s recommendations, the GOP passed a law reforming the SMV’s predecessor, CONASEV (the National Commission for the Supervision of Companies, Securities, and Exchanges).  SMV’s mandate includes controlling securities market participants, maintaining a transparent and orderly market, setting accounting standards, and publishing financial information about listed companies.  SMV requires stock issuers to report events that may affect the stock, the company, or any public offerings. This requirement promotes market transparency, and aims to prevent fraud. Trading on insider information is a crime, with some reported prosecutions in past years.  SMV must vet all firms listed on the Lima Stock Exchange or the Public Registry of Securities. SMV also maintains the Public Registry of Securities and Stock Brokers. SMV is studying ways to improve the regulatory system to encourage and facilitate portfolio investment.

Morgan Stanley Capital International (MSCI) maintained the Emerging Market status of the Lima Stock Exchange (BVL), which was under review for reclassification to Frontier status in 2017.

The private sector has access to a variety of credit instruments.  Mutual funds managed USD 7.8 billion in December 2016. Private pension funds managed a total of USD 45 billion in December 2018.

Money and Banking System

Economic opening since the 1990s, coupled with competition, has led to banking sector consolidation.  Sixteen commercial banks comprise the system, with assets accounting for 89.4 percent of Peru’s financial system.  In 2018, three banks accounted for 71 percent of local loans and 69 percent of deposits among commercial banks. Of USD 128 billion in total banking assets at the end of December 2018, assets of the three largest commercial banks amounted to USD 79.99 billion.

The banking system is considered generally sound, thanks to lessons learned during the 1997-1998 Asian financial crisis, and continues to revamp operations, increase capitalization, and reduce costs.  Non-performing bank loans rose to 2.95 percent of gross loans as of December 2018, down from a high of 11 percent in early 2001. Able bank supervision and strong GDP growth over the last decade also helped banks weather the 2008-2009 global financial crises with little trouble.

The Central Reserve Bank of Peru (BCRP) serves as the country’s central bank.  The BCRP is an independent institution, free to manage monetary policy to maintain financial stability.  The BCRP’s primary goal is to maintain price stability, via inflation targeting. Inflation at year-end in Peru reached 6.7 percent in 2008, 0.2 percent in 2009, 2.1 percent in 2010, 4.7 percent in 2011, 2.6 percent in 2012, 2.9 percent in 2013, 3.2 percent in 2014, 4.4 percent in 2015, 3.2 percent in 2016, 1.4 percent in 2017, and 2.2 percent in 2018.  Peru’s target inflation range is 1-3 percent.

Under the PTPA, U.S. financial service suppliers have full rights to establish subsidiaries or branches for banks and insurance companies.

Peruvian law and regulations do not authorize or encourage private firms to adopt articles of incorporation or association to limit or restrict foreign participation.  There are no private or public sector efforts to restrict foreign participation in industry standards-setting organizations. However, larger private firms often use “cross-shareholding” and “stable shareholder” arrangements to restrict investment by outsiders — not necessarily foreigners — in their firms.  As close families or associates generally control ownership of Peruvian corporations, hostile takeovers are practically non-existent. In the past few years, several companies from the region, China, North America, and Europe have begun actively buying local companies in power transmission, retail trade, fishmeal production, and other industries.  While foreign banks are allowed to freely establish banks in the country, they are subject to the supervision of Peru’s Superintendent of Banks and Securities (SBS).

The country has not explored or made announcements on its intention to implement or allow the implementation of blockchain technologies in banking transactions.

Peru’s financial system has 11 specialized institutions (“financieras”), 27 thriving micro-lenders and savings banks (although several large banks also lend to small enterprises), one leasing institution, two state-owned banks, and one state-owned development bank.  In 2018, the Economist Intelligence Unit again ranked Peru number two worldwide, after Colombia, on microfinance business environment because of its sophisticated legal and regulatory framework and competitive microfinance sector. The GOP established regulations to supervise savings and loan associations in January 2019.  These institutions had until the end of March to register with the SBS which will supervise savings and loan associations nationwide; 413 saving and loan cooperatives are registered with the SBS for supervision.

Foreign Exchange and Remittances

Foreign Exchange Policies

There are no reported difficulties in obtaining foreign exchange.  Under Article 64 of the 1993 Constitution, the GOP guarantees the freedom to hold and dispose of foreign currency.  The GOP has eliminated all restrictions on remittances of profits, dividends, royalties, and capital, although foreign investors are advised to register their investments with ProInversion to ensure these guarantees.  Exporters and importers are not required to channel foreign exchange transactions through the Central Reserve Bank of Peru (BCRP) 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. Under the PTPA, portfolio managers in the United States are able to provide portfolio management services to both mutual funds and pension funds in Peru, including funds that manage Peru’s privatized social security accounts.

The 1993 Constitution guarantees free convertibility of currency.  However, limited capital controls still exist as private pension fund managers (AFPs) are constrained by how much of their portfolio can be invested in foreign securities.  The maximum limit is set by law (currently 50 percent since July 2011), but the BCRP sets the operating limit AFPs can invest abroad. Over the years, the BCRP has gradually increased the operating limit.  Peru reached the 50 percent limit in September 2018.

A combination of GOP policies and market forces has led to gradual de-dollarization of the economy.  U.S. dollars account for a decreasing share of banking system transactions, according to the Bank Supervisory Authority (SBS).  In 2001, U.S. dollars accounted for 82 percent of loans and 73 percent of deposits. The amount of credit issued in USD increased 1.5 percent and deposits in 0.4 percent in 2018 compared to the previous year.  In December 2018, dollar-denominated loans reached 28 percent, and deposits 37 percent.  Funds associated with any form of investment can be freely converted into any world currency.

The foreign exchange market operates freely, for the most part.  To quell “extreme variations” of the exchange rate, the BCRP intervenes through purchases and sales in the open market without imposing controls on exchange rates or transactions.  Since 2014, the BCRP has pursued de-dollarization to reduce dollar denominated loans in the market and purchased U.S. dollars to mitigate the risk that spillover from expansionary U.S. monetary policy might result in over-valuation of the Peruvian Sol relative to the U.S. dollar.  As the U.S. economic recovery begins to tighten credit conditions and stronger terms of trade support a more stable currency, this policy may shift. Because of the free convertibility of currency, the U.S. Embassy purchases Peruvian currency for expenses on an as-needed basis at the market exchange rate.  The USD averaged PEN 3.29/USD in 2017.

Remittance Policies

There have not been any new developments related to investment remittance policies.

Peruvian law grants foreign investors the following rights: freedom to buy shares from national investors; free remittance of earnings and dividends; free capital repatriation; unrestricted access to local credits; freedom to hire technology and to pay back royalties; freedom to hire investment insurance abroad; possibility to sign juridical stability agreements for their investments in Peru with the Peruvian state.

Article 7 of the Legislative Decree N° 662 provides that foreign investors may send, in freely convertible currencies, remittances of the entirety of their capital derived from investments, including the sale of shares, stocks or rights, capital reduction or partial or total liquidation of companies, the entirety of their dividends or proven net profit derived from their investments, and any considerations for the use or enjoyment of assets that are physically located in Peru, as registered with the competent national entity, without a prior authorization from any national government department or decentralized public entities, or regional or municipal Governments, after having paid all the applicable taxes.

Sovereign Wealth Funds

Peru’s Ministry of Economy and Finance (MEF) manages the Fiscal Stabilization Fund.  The fund had a balance of USD 5.8 billion at the end of 2018 and consists of treasury surplus, concessional fees, and privatization proceeds, with a cap of 4 percent of GDP.  The MEF released investment guidelines for the Fiscal Stabilization Fund in December 2015. The guidelines permit investment in demand deposits, variable and fixed interest rate time deposits, and seven currencies including the USD.  The Fund is not a party to the IMF International Working Group or a signatory to the Santiago Principles. The fund serves as a buffer for the GOP’s fiscal accounts in the event of adverse economic conditions.

Several electricity, water and sewage, bank, and oil companies remain state-owned and state-operated.  The GOP wholly owns 35 SOE’s, 34 of which are under the parastatal conglomerate FONAFE. The list of SOE’s under FONAFE can be found here: https://www.fonafe.gob.pe/empresasdelacorporacion  .

The most notable area of SOE activity pertains to the petroleum sector, where the state-owned petroleum company PetroPeru is an oil refiner and operator of an oil pipeline.  Over the last two decades, PetroPeru has experienced significant attrition in managerial and technical expertise. This, coupled with limited financial resources, cast into doubt the company’s ability to implement its long-held plans to expand and upgrade its aging Talara refinery – which continues to produce dirty gasoline and diesel fuel, a situation the government permits by not enforcing regulatory standards.  Limited resources and expertise also downplay expectations following repeated announcements from its leadership regarding entrance to upstream, and participation in a proposed gas pipeline and petrochemical complex in southern Peru. In November 2015, Peru’s Congress overrode a Presidential veto, adopting a law that allowed Peru’s oil and gas promotion agency, PeruPetro, to sign a contract directly with PetroPeru to operate Lot 192, Peru’s largest oil concession, following a failed bidding process for the claim.  Critics note the prescriptive nature of the legislation conflicts with Peru’s competition and concession laws, and that PetroPeru lacks the financial and technical resources to serve as an operator.

Peru is not party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization.

The GOP’s role as an enterprise owner is specified through several publically available laws and regulations.  Ownership practices are generally consistent with OECD guidelines, although not all guideline subsections are specifically addressed.  Central entity FONAFE (http://www.fonafe.gob.pe/  ) exercises ownership of SOEs with the exception of those considered intangible under the Peruvian constitution (including public university services).  FONAFE appoints an independent board of directors for each SOE using a transparent selection process. There is no notable third party analysis on SOEs’ ties to the government.

Privatization Program

The GOP initiated an extensive, but not yet complete, privatization program in 1991, in which foreign investors were encouraged to participate.  Since 2000, the GOP has promoted multi-year concessions as a means of attracting investment in major projects. In 2000, the government granted a 30-year concession to a private group (Lima Airport Partners) to operate the Lima airport.  In 2006, the government granted a 30-year concession to Dubai Ports World to build and operate a new container terminal in the Port of Callao. The terminal’s first phase became operational in May 2010. In 2006, the Swiss-Spanish-Peruvian consortium Swissport received a 25-year concession to manage nine of Peru’s northern airports.  In 2011, the GOP awarded the Argentine-Peruvian consortium Aeropuertos Andinos a 25-year concession to manage six of Peru’s southern airports. Also in 2011, the government granted a 30-year concession to a Danish-Peruvian consortium led by the Danish-based A.P. Moller-Maersk Group to operate and modernize the multipurpose northern terminal at the Port of Callao.  On June 2, 2015, the GOP awarded Spanish construction company Sacyr a 25-year concession to maintain 875 kilometers of the Andean Longitudinal Highway. The concession for Line Three of Lima’s metro, expected to be awarded in late 2016, was delayed due to corruption allegations in the Line Two project. The GOP established a single transportation authority for the city of Lima and Callao in January 2019 that will take on overall planning and issue tenders for the remaining Lima metro lines 3 and 4.  The Urban Transportation Authority (ATU) will become operational in 2019.

The concessions process is challenging for U.S. and other international companies interested in bidding on projects.  ProInversion, the government agency responsible for drawing up and completing PPP concession projects, has come under considerable criticism over the years for its bidding process, deadlines, and unrealistic timetables.  Despite the criticism, ProInversion is actively working to improve management of the PPP process.  The agency hired an international consulting firm to develop standard PPP contracting guidelines and has implemented internal reforms to streamline its processes and ensure better project management.  ProInversion re-designed its website to provide project listings in both Spanish and English and is holding outreach events to increase competition.

The GOP increased its use of government-to-government (G2G) contracting for infrastructure projects, especially as it sought to expedite and facilitate procurement and priority projects following the Odebrecht scandal.  The Organizing Committee of the Lima 2019 Pan American Games under the Ministry of Transportation and Communications (MTC) contracted with the United Kingdom government in 2017 to  organize and deliver infrastructure for the Lima 2019 Pan American Games, and the MTC is pursuing a G2G contract for construction of the Chinchero Airport in Cusco.  The G2G mechanism poses limitations for U.S. government involvement and could potentially limit the ability of U.S. firms to compete.

Project opportunities are available on ProInversion’s Project Portfolio page at  ProInversion Projects: http://www.proyectosapp.pe/modulos/JER/PlantillaProyectoEstadoSector.aspx?are=1&prf=2&jer=5892&sec=30  .

The GOP does not have a holistic action plan or national standards for responsible business conduct (RBC).  Many multinational companies already adhere to high standards for RBC. Standards for conduct on environmental, social, and governance issues are implemented through sector-specific regulation.  Supreme Decree No. 042-2003-EM promotes social responsibility in the mining sector, encouraging local employment opportunities, support to communities’ projects, development activities, and purchase of local goods and services.  The decree requires mining companies to publish an annual report on sustainable development activities. The Ministry of Energy and Mines has a guidebook for community relations, as well as public information on social measures related to the mining and energy sectors.  In February 2011, INDECOPI adopted the Peruvian Technical Regulation of Social Responsibility ISO 26000 that serves as a voluntary guide to CSR activities.  

Peru continues to implement its National Strategy to Combat Forced Labor, which emphasizes the state’s role to protect and promote labor rights.  The plan simultaneously prioritizes building capacity and empowering vulnerable groups to transform their environment and enforce their rights. The plan addresses both medium and long-term multi-sector plans to eliminate or reduce conditions that enable forced labor.  Despite these efforts, the government did not effectively enforce labor laws in all cases. Child labor (particularly in informal sectors), forced labor, and employers engaging in antiunion practices remain significant problems.

In some regions, lack of capacity hinders the government’s ability to enforce regulations.

In February 2013, the superintendent of the Lima Stock Exchange published the Code on Good Corporate Governance for Peruvian Companies, developed in conjunction with thirteen public and private entities including the Ministry of Economy and Finance.  The document outlines shareholder protections.

Several independent NGOs monitor and promote RBC, notably Peru 2021.  These organizations are able to work freely.

ProInversion serves as the National Point of Contact (NCP) for the OECD Guidelines for Multinational Enterprises, to which Peru is an adherent.  The NCP held a workshop to promote MNE guidelines in Arequipa in October 2017, attended by representatives from several companies, the regional government, and the Arequipa Chamber of Commerce.  ProInversion has also hosted a number of activities in 2017 to promote the OECD guidelines such as an event with the Embassy of France and the French Chamber of Commerce in April 2017 and another one to attract investment that promotes responsible enterprise conduct with the Netherlands Embassy in September 2017.

On February 15, 2012, Peru was listed as a compliant country under the Extractive Industries Transparency Initiative (EITI), as the GOP and extractive industries openly publish all company payments and government revenues from oil, gas, and mining.  Peru is one of two EITI-compliant countries in Latin America.

It is illegal in Peru for a public official or employee to accept any type of outside remuneration for the performance of his or her official duties.  The law extends to family members of officials and to political parties. Regulations published in March 2017 aim to limit conflicts of interest.

Peru has ratified both the UN Convention against Corruption and the Organization of American States Inter-American Convention against Corruption.  Peru is not a member of the Organization of Economic Cooperation and Development (OECD), but it signed a Country Program agreement in December 2014 to provide an anchor for policy reforms aimed at meeting OECD standards and practices.  It has signed the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. The Contraloria General is the responsible government agency for overseeing proper procedures in public administration.  In January 2017, the GOP passed legislative decrees extending the scope of civil penalties for domestic acts of bribery, including by NGOs, corporate partners, board members, and parent companies if its subsidiaries acted under authorization.  Penalties include an indefinite exclusion from government contracting and substantially increased fines.  The Controlaria General also began implementing audits of reconstruction projects that run in parallel to the project, rather than after project implementation, in an effort to improve transparency.

U.S. firms have reported problems resulting from corruption, usually in government procurement processes and in the judicial sector, with defense and police procurement generally considered among the most problematic in spite of PTPA’s stipulations and of Peru’s Government Procurement Law (Legislative Decree No. 1017, DL 1017, one of several laws passed with the specific intention to implement PTPA).  Transparency International lowered Peru’s ranking to 105th out of 180 countries in its 2018 Corruption Perceptions Index from 96th in 2017.

Of the 25 regional governors elected in 2018 regional elections, at least five were under preliminary investigation or had been convicted of corruption-related charges.  A study published in May of 2014 by the office of the anti-corruption solicitor reported that 92 percent of the over 1,800 district-level mayors in office between 2011 and 2014 had been investigated for criminal activity.  A study published in August 2017 counted 395 investigations of corruption or trials against current or former governors, with 30 percent of the cases in the regions of Pasco, Tumbes, and Ucayali. It also identified 1,052 investigations of corruption or trials against 530 current or former mayors, with Lima leading the list with 109 cases (10.4 percent of the total).  https://plataformaanticorrupcion.pe/wp-content/uploads/2017/07/INFORME-CORRUPCION-SOBRE-GOBERNADORES-Y-ALCALDES.pdf 

In December 2016, Brazilian company Odebrecht admitted in a settlement with the United States, Brazil, and Switzerland that it had paid USD 29 million in bribes in Peru between 2004 and 2015.  In 2017, the Peruvian Government issued an emergency decree restricting the sale of Odebrecht assets to ensure payment of corruption-related reparations. In May 2018, the Peruvian Government formally filed a request with the United States to extradite former President Alejandro Toledo (2001-2006) who resides in the United States, for allegedly laundering over USD 20 million in Odebrecht bribes in exchange for facilitating Odebrecht’s winning bid to build the Inter-Oceanic Highway.  High-ranking officials from the last four Peruvian administrations have also been investigated in connection with the Odebrecht scandal.

Resources to Report Corruption

Susana Silva Hasenbank
Secretary of Public Integrity of the Prime Minsiter Office and General Coordinator
High Commission to Fight Corruption (CAN)
Jr. Carabaya Cdra. 1 S/N – Lima
(51) (1) 219-7000, ext. 7118
Email: ssilva@pcm.gob.pe

General Comptroller’s Office
Jr. Camilo Carrillo 114, Jesus Maria, Lima
(51) (1) 330-3000
Email: contraloria@contraloria.gob.pe

Contact at “watchdog” organization (international, regional, local or nongovernmental organization operating in the country/economy that monitors corruption, such as Transparency International):

Samuel Rotta
Executive Director
ProEtica, the Peruvian chapter of Transparency International
Calle Manco Capac 816, Miraflores, Lima
(51) (1) 446-8581, 446-8941, 446-8943
Email: srotta@proetica.org.pe

Although political violence against investors is rare, protests, sometimes violent, have taken place in or near communities with extractive industry operations.  Environmental and service delivery concerns were often the reason cited. Protestors often objected to the fact that environmental impact assessments were reviewed by the Ministry of Energy and Mines, rather than the Ministry of Environment.  In January 2016, the Ministry of Environment’s National Service for Environmental Assessments (SENACE) assumed responsibility for evaluating and approving environmental impact assessments and monitoring related to mining and hydrocarbons, eliminating the previous conflict of interest with the Ministry of Energy and Mines responsible for oversight.  In many cases, protestors sought public services not provided by the government. Ideological opposition to foreign mining firms, not opposition to mining itself, often leads to protests incited by NGOs. Protests related to extractives activities stopped operations of Peru’s northern oil pipeline for nearly two months in 2018 and effectively closed Peru’s second largest copper mine, Las Bambas for a month in early 2019.  According to the Ombudsman, there were 132 active social conflicts in Peru as of March 2019, of which 71 affected mining projects.

Politically motivated movements at times have opposed large extractive projects.  In some cases, these movements have been successful in delaying large investments, as occurred in the USD 4.8 billion Conga mine project in Cajamarca in August 2012.  In 2015, protestors in Arequipa delayed Mexican-owned Southern Copper’s planned USD 1.4 billion Tia Maria copper mine. In other cases, protests have stopped such investments entirely.

The Secretariat of Dialogue and Social Management  within the Vice-Ministry of Territorial Governance in the Prime Minister’s office (created January 2017) are actively engaged in mitigating social conflict connected to the extractive industry in Peru.  The offices are responsible for addressing conflict in a broader community development context, rather than only responding to social conflicts after they have already erupted. To this end, using the Social Progress Fund (created in January 2017 and implementing regulations published March 2018), the government plans to provide education, infrastructure, and health care services in areas where extractive industry projects are planned or under development.  The goal is to increase government presence and reduce potential for conflict in areas that are historically underserved and often remote.

Peru issued the Prior Consultation Law in 2011, approving implementing regulations in 2012.  The law requires the GOP to consult with indigenous communities before enacting any legislation, administrative measures, or development projects that could affect communities’ rights of territorial demarcation.  There have been several successful prior consultation processes related to the extractive industry, but the law remains controversial. Critics believe it creates burdensome processes and results in delays. The National Society of Mining, Electricity and Petroleum (SNMPE) and the government have become involved in assisting local governments to access the extractive industry “canon” (tax revenue-sharing scheme with funding for public works projects) as a way to both stimulate local development and prevent conflicts.  Although these efforts have been effective in some mining regions, in others, conflicts have continued or expanded.

Violence remains a concern in coca-growing regions.  The Shining Path narco-terrorist organization continued to conduct a limited number of attacks in its base of operations in the Valley of the Apurimac, Ene, and Mantaro Rivers (VRAEM) emergency zone, which includes parts of Ayacucho, Cusco, Huancavelica, Huanuco, and Junin regions.  In November 2016, the Department of State designated Victor Quispe Palomino, Jorge Quispe Palomino, and Tarcela Loya Vilchez as Specially Designated Global Terrorists (SDGTs) under Executive Order (E.O.) 13224, which imposes sanctions on foreign persons and groups determined to have committed, or pose a significant risk of committing, acts of terrorism that threaten the security of U.S. nationals or the national security, foreign policy, or economy of the United States.

At present, there is little government presence in the remote coca-growing zones of the VRAEM, although President Vizcarra has pledged to “pacifiy” the VRAEM by Peru’s bicentennial in 2021.  The U.S. Embassy in Lima restricts visits by official personnel to these areas because of the threat of violence by narcotics traffickers and columns of the Shining Path. Information about insecure areas and recommended personal security practices can be found at http://www.osac.gov   or http://travel.state.gov.

Labor is abundant, although several large investment projects in recent years led to localized shortages of highly skilled workers in some fields.  While the legal framework to uphold international labor standards is well defined, the government does not effectively enforce the law in all cases.

Mining sector contacts praise the technical knowledge and professional dedication of Peruvian engineering graduates.  Since the 1960s, the number of jobs created by the Peruvian economy was consistently below the number of new entrants to the labor market.  The situation meant underemployment or seeking work in the informal economy. According to the National Bureau for Statistics (INEI), 73.2 percent of the labor force is informal.

The statutory monthly minimum wage is PEN 930/month (approximately USD 281).  INEI estimated the poverty line to be PEN 328/month (USD 99) per person, although it varied by region due to different living costs.  The Ministry of Labor (MOL) enforces the minimum wage only in the formal sector. Many workers in the unregulated informal sector, most of them self-employed, make less than the minimum wage.  Wages are sometimes higher than U.S. wages in the mining sector for management positions and consulting services. Workers in Peru are paid by the month, not by the year. Some workers, like formal miners, are highly paid and also (per statute) receive a share of company profits up to a maximum total annual amount of 18 times their base monthly salary.  Peru’s labor law provides for a 48-hour workweek and one day of rest, and requires companies to pay overtime for more than eight hours of work per day and additional compensation for work at night. Noncompliance with the law is a punishable infraction. There is no prohibition on excessive compulsory overtime. Micro-enterprise workers are entitled to social security and pensions.

Unemployment was 5 percent in 2017.  Urban unemployment is most prevalent among 14-24 year olds (13.7 percent unemployment in 2017).  Additionally, 96 percent of unemployed people reside in urban areas. The ILO’s Global Wage Report 2018/2019 stated that average real wages in Peru grew at over 0.8 percent in 2016 and decreased by 0.2 percent in 2017.

Foreign employees may not comprise more than 20 percent of the total number of employees of a local company (whether owned by foreign or Peruvian persons) or more than 30 percent of the total company payroll.  However, under the PTPA, Peru has agreed not to apply most of its nationality-based hiring requirements to U.S. professionals and specialty personnel. Peru also has bilateral agreements with Spain and Argentina, for example, so that Spaniards and Argentines working in Peru do not count as foreigners and vice versa.

Employers are not obligated to pay severance if the reason for dismissing an employee is covered by law.  If the dismissal is found to be arbitrary, severance pay is required. Unemployed workers are eligible for benefits through the Compensation for Time of Service program.

Peru does not have a specific unemployment insurance program.  The country does, however, have the “Compensation for Time of Service” (CTS) requirement that mandates an employer pay one month’s salary of an employee per year worked into the employee’s CTS Account.  When the employee stops working for the employer (willingly or not), she/he can access the CTS Account. The amount will vary according to how much the employee earned and how long she/he worked for the employer.  In addition, a fired employee receives one month’s salary per year worked, up to a maximum of twelve months.

Peru’s Decree Law 22342 relaxed labor laws for the non-traditional exports (NTE) sector, which includes textiles and certain agricultural products.  Law 27360, published in 2000, also gave such exceptions in the agricultural sector.  The laws allow businesses in the NTE and agricultural sectors to employ workers indefinitely on consecutive short-term contracts, in contrast to the 5-year limit on consecutive short-term contracts in place for other sectors.  Peru used the exceptions to boost these industries.  On March 18, 2016, the U.S. Department of Labor identified serious concerns that the provisions may violate the U.S.-Peru Trade Promotion Agreement by infringing on workers’ freedom of association. As of April 2018, two proposed bills seek to end the exceptions, which would stop the indefinite use of short-term contracts and provide a path for contract workers to become full time employees.

Labor unions are independent of the government and employers.  Approximately six percent of Peru’s private sector labor force was organized in 2017, with unionization highest in electricity, water, construction, and mining (from 39 percent to 22 percent) and generally low in the rest of the economy.  The labor procedure law (No.29497) requires the resolution of labor conflicts in less than six months, allows unions or their representatives to appear in court on behalf of workers, requires proceedings to be conducted orally and video-recorded, and relieves the employee from the burden of proving an employer-employee relationship.  The labor procedure law was in effect in 30 of Peru’s 31 judicial districts in 2017.

Either unions or management can request binding arbitration in contract negotiations.  Strikes can be called only after approval by a majority of all workers (union and non-union), voting by secret ballot, and only in defense of labor rights.  Unions in essential public services, as determined by the government, must provide a sufficient number of workers during a strike to maintain operations.

Foreign-owned extractive projects are frequently the source of social unrest (see section 11, Political and Security Environment).  In August 2017, Indigenous communities in Loreto region seized facilities from a Canada-based oil company, claiming lack of consultation with local communities over changes to operations.  In March 2017, union workers at the Freeport McMoran’s Cerro Verde mine initiated a strike over pay and working conditions.

While the government has made improvements in recent years, it often does not dedicate sufficient personnel and resources to labor law enforcement.  The Ministry of Labor created the National Labor Inspectorate Superintendence (SUNAFIL) in April 2014 and opened nine regional offices to represent the labor inspectorate nationally.  SUNAFIL opened four new regional offices in Callao, Lambayeque, Cusco, and Piura in 2017 and two in Ayacucho and Puno in 2018. There are now 16 SUNAFIL offices in Lima, Huanuco, La Libertad, Loreto, Cajamarca, Ica, Moquegua, Tumbes, Ancash, Arequipa, Callao, Lambayeque, Cusco, Piura, Ayacucho, and Puno.  As of November 2018, SUNAFIL had 636 labor inspectors, compared to 480 in 2017. The Ministry has announced plans to open up additional SUNAFIL offices in 2019 and 2020. SUNAFIL labor inspectors also help identify and investigate cases of forced and child labor. Additional information on forced labor in Peru can be found in the 2019 Trafficking in Persons Report:  https://www.state.gov/reports/2019-trafficking-in-persons-report-2/peru/

The Overseas Private Investment Corporation (OPIC), an independent U.S. Government agency, offers medium-to-long-term financing and political risk insurance.  There is an OPIC agreement between Peru and the United States. From 2010 thru 2014, OPIC supported solar power plants, consumer lending, operation and expansion of retail stores, microfinance, installation/operation of stereotactic radiosurgery equipment, consulting services, export services, import-export logistical services, and portfolio expansion of SME, micro-credit and consumer loans, in the form of commitments totaling more than USD 21 million.  Peru is a member of the Multilateral Investment Guarantee Agency.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Table 3: Sources and Destination of FDI

Data not available.

Table 4: Sources of Portfolio Investment

Data not available. IMF Coordinated Portfolio Investment Survey data for 2016 is not available for Peru.

Elizabeth Powers
Economic Officer
U.S. Embassy Peru
+51 1-618-2414
Email: powersem@state.gov