Peru was one of the fastest growing Latin American economies between 2004 and 2013, growing at an average rate of 6 percent per year. Though growth slowed from 2014-2018, the country recovered and grew by 4 percent in 2018, significantly higher than the estimated 1.2 percent regional average. The government’s counter-cyclical stimulus spending, consumption, and private investment are the driving forces of this growth. Private investment totaled USD 41 billion in 2018. As the economy has grown, poverty in Peru has decreased, falling from 56 percent in 2005 to 20.5 percent in 2018. President Martin Vizcarra aims to increase private investment by fostering strong public investment, streamlining administrative processes, and reducing bureaucracy, while addressing corruption and social conflict.
The Government of Peru (GOP) has encouraged integration with the global economy by signing a number of free trade agreements, including the United States-Peru Trade Promotion Agreement (PTPA), which entered into force in February 2009. In 2018, trade of goods between the United States and Peru totaled USD 17.5 billion, up from USD 9.1 billion in 2009, the year the PTPA entered into force. From 2009 to 2018, Peruvian exports of goods to the United States jumped from USD 4.2 billion to USD 7.9 billion (a 88 percent increase) while U.S. exports of goods to Peru jumped from USD 4.9 billion to USD 9.6 billion (a 96 percent increase). The United States also enjoys a favorable trade balance in services; exports of services in 2016 to Peru amounted to USD 2.7 billion and contributed to a USD 1.1 billion services surplus the same year.
Corruption and social conflicts around extractive projects continue to negatively affect Peru’s investment climate. Transparency International ranked Peru 105th out of 180 countries in its 2018 Corruption Perceptions Index. In 2016, Brazilian company Odebrecht admitted it had paid USD 29 million in bribes in Peru, leading to investigations involving high-level officials of the last four Peruvian administrations and halting progress on major infrastructure projects. Odebrecht agreed to pay Peru USD 180 million in civil reparation in December 2018. According to the Ombudsman, there were 132 active social conflicts in Peru as of March 2019, of which 71 befell mining projects.
- Extractive industries are a key draw of foreign investment. According to Peru’s Private Investment Promotion Agency (ProInversion), 22 percent of foreign direct investment in 2018 went to the mining sector, 21 percent to the communications sector, and 18 percent to the financial sector. Other destinations for investment included energy (13 percent) and industry (12 percent).
|TI Corruption Perceptions Index||2018||105 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report “Ease of Doing Business”||2018||68 of 190||http://www.doingbusiness.org/rankings|
|Global Innovation Index||2018||71 of 126||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country (M USD, stock positions)||2017||$6, 400||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2017||$5,960||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
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: .
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 ( ). 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.
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.
Peru has not had any third-party investment policy review (IPR) through the OECD, WTO, or UNCTAD in the past three years.
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 ( ), and prepare a deed of incorporation through Portal de Servicios al Ciudadano y a las Empresas ( ). 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.
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.
2. Bilateral Investment Agreements and Taxation Treaties
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.
3. Legal Regime
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
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.
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.
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.”
4. Industrial Policies
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.
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.
5. Protection of Property Rights
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).
6. Financial Sector
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.
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.
7. State-Owned Enterprises
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: .
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 ( ) 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.
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.
8. Responsible Business Conduct
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).
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
General Comptroller’s Office
Jr. Camilo Carrillo 114, Jesus Maria, Lima
(51) (1) 330-3000
Contact at “watchdog” organization (international, regional, local or nongovernmental organization operating in the country/economy that monitors corruption, such as Transparency International):
ProEtica, the Peruvian chapter of Transparency International
Calle Manco Capac 816, Miraflores, Lima
(51) (1) 446-8581, 446-8941, 446-8943
10. Political and Security Environment
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 or http://travel.state.gov.
11. Labor Policies and Practices
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/
12. OPIC and Other Investment Insurance Programs
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.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
|Host Country Statistical Source||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|Host Country Gross Domestic Product (GDP) (M USD)||2018||$225,259||2017||$211,390||www.worldbank.org/en/country|
|Foreign Direct Investment||Host Country Statistical Source||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|U.S. FDI in partner country (M USD, stock positions)||2017||$2,757||2017||$6,370||BEA data available at|
|Host country’s FDI in the United States (M USD, stock positions)||N/A||N/A||2017||$164||BEA data available at|
|Total inbound stock of FDI as % host GDP||N/A||N/A||2017||47.4%|
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.
14. Contact for More Information
U.S. Embassy Peru