The Government of Peru’s (GOP’s) tradition of pursing sound fiscal and macroeconomic policies contributed to extended periods of region-leading growth over the last two decades. Since 2020, however, increased levels of political instability and related social conflict negatively impacted investor confidence and growth prospects according to each of the major credit rating agencies (i.e., Fitch, Moody’s, and S&P). Peru’s GDP growth in 2022 was 2.7 percent, below the nation’s pre-pandemic trend and well below its four to five percent growth trends achieved prior to 2015. In March 2023, the Central Reserve Bank of Peru (BCRP) forecasted GDP growth in 2023 would remain relatively low at 2.6 percent due in large part to continued social conflicts curtailing the mining and tourism sectors as well as adverse climatic conditions restricting agriculture and fishing production. After significant COVID-19 related spending, the GOP’s deficit stabilized to 1.6 percent of GDP in 2022. The BCRP anticipated government debt levels to also improve, from 34.0 percent of GDP in 2022 to 32.1 percent of GDP by the end of 2024, according to its March 2023 reporting. The country’s net international reserves remain strong at $74.0 billion. External global forces pushed Peru’s inflation to 8.5 percent in 2022, a significant spike from 1.8 percent in 2020. The BCRP’s March 2023 report forecasted year-end 2023 inflation would settle at 3.0 percent (within the BCRP’s acceptable one to three percent range).
Along with recent political instability – in 2022, President Dina Boluarte became Peru’s fifth president since 2020 – corruption and social conflict pose risks to Peru’s investment climate. Transparency International ranked Peru 101st out of 180 countries in its 2022 Corruption Perceptions Index. Peru’s Ombudsman reported 162 active social conflicts in the country as of February 2023. More than half of them (95) occurred in the mining sector, which represents 10 percent of Peru’s economic output. Citing political instability, including governance challenges and contentious relations between the administration and congress, the three major credit rating agencies (Fitch, Moody’s, and S&P) downgraded Peru’s sovereign credit ratings between September 2021 and March 2022. All three, however, maintained Peru at investment grade.
Private sector investment made up 79.9 percent of Peru’s total investment in 2022. Peru fosters an open investment environment, which includes strong protections for contract and property rights, and grants national treatment for foreign investors. Peru is well integrated in the global economy including with the United States through the United States-Peru Trade Promotion Agreement (PTPA), which entered into force in 2009 and helped drive more than $22 billion in two-way trade in 2022. Peru’s investment promotion agency, ProInversion, seeks foreign investment in nearly all areas of the economy, particularly to support infrastructure. In the past few years, several companies from the region, and from China, North America, and Europe have begun actively buying local companies in key sectors such as energy generation and distribution, power transmission, fishmeal, and retail. Prospective investors would benefit from seeking local legal counsel to navigate Peru’s complex bureaucracy.
|TI Corruption Perceptions Index||2022||101 of 180||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2022||65 of 132||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2021||USD 7,544||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2021||USD 6,460||https://data.worldbank.org/indicator/NY.GNP.PCAP.CD|