Our comprehensive assessment of Peru's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Peru, as well as the latest industry developments that could impact Peru's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Peru before your competitors.

Country Risk

Peru Country Risk

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Core Views:

  • The Peruvian economy will expand at lower average rates in the coming years as a decline in metals prices weighs on private investment into mining and results in slower export growth.

  • However, private consumption and public investment will remain relatively resilient in the coming years due to a rising middle class and an extensive infrastructure project pipeline.

Major Forecast Changes:

  • Real GDP growth fell below our expectations in the first three quarters of 2014, driven by weak exports and investment, prompting us to downgrade our growth forecast. We now project real GDP growth of 3.0% in 2014 and 3.7% in 2015, compared with our previous projections of 3.8% and 4.0% for 2014 and 2015 respectively.

Macroeconomic Forecasts (Peru 2012-...

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Peru Operational Risk Coverage (9)

Peru Operational Risk

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BMI View: Crime in Peru poses a serious security risk to potential investors, whether in terms of property crime, crime committed against an individual, or cybercrime.   Foreigners from well-developed countries present an enticing opportunity to criminals because of their perceived wealth, but this is normally non-violent and rarely life-threatening.   The prevalence of small gangs in larger cities, such as Lima, has contributed to an uptick in 'snatch and grab' robberies, which increases the risk to expatriates.   Of equal risk to foreign workers is the rise in assaults and robberies taking place in unregistered taxis that have been collecting foreigners from airports.   Peru scores 42.4 out of 100 for Crime and...

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Peru Crime & Security

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Peru scores 42.1 out of 100 for Crime and Security Risk.

Crime in Peru poses a serious security risk to potential investors, whether in terms of property crime, crime committed against an individual, or cybercrime. Foreigners from well-developed countries present an enticing opportunity to criminals because of their perceived wealth, but this is normally non-violent and rarely life-threatening. The prevalence of small gangs in larger cities, such as Lima, has contributed to an uptick in 'snatch and grab' robberies, which increases the risk to expatriates. Of equal risk to foreign workers is the rise in assaults and robberies taking place in unregistered taxis that have been collecting foreigners from airports.

Burglary, of both business and residential properties, has become more frequent, occurring mostly during the day and at weekends. Freight theft is also a growing concern in Peru, particularly for mining, oil and...

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Peru Labour Market

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BMI View: Overall, Peru is in the top tier for Labour Market Risk in BMI's Operational Risk Index, with a score of 59.6 ou t of 100, which places it t h ird out of 28 countries in Latin America. Peru's rank is significantly boosted by the size and availability of the country's labour force, but depressed by a severely inadequate secondary and tertiary education system, which has diminished the country's skilled labour pool.

Availability of Labour is the country's highest score in the BMI Labour Market Risk Index, largely due to its large urban population (78%), strong gender equality and large pool of unskilled labour. Peru scores 61.6 out of 100 for this indicator, which is the...

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Peru Logistics

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Peru's relatively developed logistics network is a regional outperformer in the BMI Logistics Risk Index, with an above average score of 59.2 out of 100, placing the country in 52nd place out of 170 nations globally. Within Latin America, Peru is ranked 4th out of 28 countries, behind only Panama, Chile and Mexico. An insufficient level of investment into the maintenance and development of Peru's transport networks has left the country with a low score of 46.7 out of 100 for Transport Quality, the country's worst logistics rating in BMI's index. The score places it 84 th out of 170 countries globally and 12 th out of 28 states in Latin America. However, this is likely to improve with the government planning to invest USD15bn over the next 5 years.

With the exception of the country's 8,808km of navigable waterways, Peru suffers from a substandard network of transport. The...

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Peru Trade & Investment

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Peru has a weak legal system that offers little protection for businesses and suffers from extensive bureaucracy, hindering an investor's ability to open and close a business. However Peru's strong international ties provide good trade opportunities for investors and promote the country's trade and investment score. Overall, Peru is a regional underperformer for Trade and Investment Risk in BMI's Operational Risk Index, with a score of 45.9 out of 100, which places it 16 th out of 28 countries in Latin America and 94 th out of 170 states worldwide.

Peru's weak legal environment poses the most pronounced risk to investors, which is reflected in the country's low score of 46.6 out of 100 for this indicator in our Trade and Investment Risk Index. The country's law enforcement is considered to be highly corrupt, which has led to poor protection of intellectual property and a lack of confidence in the...

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Peru Industry Coverage (19)

Agribusiness

Peru Agribusiness

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BMI View: Our outlook for Peru's agricultural sector remains positive. Export crops such as coffee and cocoa are hampered by a lack of infrastructure and investment, but there is scope for strong growth in both, particularly as Peru is becoming increasingly recognised for organic and speciality crops. The country is set to ben efit from cheaper food imports owing to the lower price of grains as well as the weakness in the Argentine peso, from where it imports a great deal of its grain.

Agribusiness Market Value
BMI Market Value By Commodity (2010-2018)
...

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Autos

Peru Autos

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BMI has become significantly less optimistic on the medium-term outlook for Peruvian new vehicle sales over the past 12 months. We are now forecasting growth of 32.7% (down from 58% previously) over the 2014-17 period. This will see total new vehicle sales rise to 287,343 units by 2017, made up of 211,551 passenger cars and 75,793 commercial vehicles.

Looking at the most recent new vehicle sales data as this report was being compiled (covering the January-October 2013), we can see that Peru has seen a slowing down in growth from the rapid 27% witnessed in 2012. Indeed, as of end-October 2013, year-to-date vehicle sales were up by 8%, at 168,122, according to figures from the Peruvian Association of Automotive Representatives (Araper). For the full year, BMI is forecasting growth of 9%, to reach 207,952 units.

Looking forward, BMI adopts a slightly...

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Commercial Banking

Peru Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Peru Consumer Electronics

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BMI View:   Peru's market for consumer electronics is projected to expand rapidly fuelled by rising incomes and falling prices for devices. This should be helped by the entrance of Entel and Viettel into the mobile market, as the increased competition will benefit uptake in mobile handsets and smartphones. Cheaper smartphones and wider availability of 3G will also contribute to the strong growth, as players such as Firefox OS, look to provide lower cost models. Our economic growth outlook sees middle-class incomes rising, which yields a positive outlook for demand for notebooks, tablets and flat-screen TVs. However, we caution that risks are largely weighted to the downside as weaker metals prices put pressure on the growth outlook. Delays in the switchover from analogue to digital TV might also have a negative impact on TV sales. BMI ...

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Food & Drink

Peru Food & Drink

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BMI View: We maintain a positive longer-term view of Peru's food and drink sector, which will see strong expansion rates and present a number of interesting investment opportunities over the forecast period. Growth will be driven by a strong consumer outlook, supported by improving labour market situation and favourable crediting conditions. More generally, Peru's food and drink sector will continue to benefit from country's largely youthful population and ongoing formalisation of the mass grocery retail (MGR) segment .

Headline Industry Data (local currency)

  • Food consumption...

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Freight Transport

Peru Freight Transport

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BMI maintains its broadly positive view on Peru's freight transport sector. While we expect real GDP growth to level off at around 5.0% during our forecast period, below its recent trend, significant mineral wealth, attractive investment opportunities at the sector level, and an improving consumer story underpin our view that Peru will remain one of the most dynamic economies in Latin America in the coming years.

Further upside risk comes from the recently announced plan to heavily invest in Peru's transport network, which BMI believes will help boost the country's freight transport volumes, through providing easier routes to market. However, we caution that perhaps the plan is overly ambitious, and might not quite hit the desired target by the scheduled date. According to Peru's transport and communications minister, Carlos Paredes Rodrígues, USD22bn is set to be invested in the Latin...

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Information Technology

Peru Information Technology

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BMI View:   We continue to expect the Peruvian IT industry to perform strongly over the next five years, even though the rest of the economy will expand at lower average rates as a decline in metals prices weighs on private investment into mining and results in slower export growth.   This is because the retail sector will remain resilient over this period, given a rising middle-class consumer and declining unemployment. Real private consumption has consistently expanded above headline real GDP growth in recent quarters, a trend we expect to remain in place in the next couple of years. Government policies continue to support IT sector growth and trends in the industry such as declining device prices, improvements in network infrastructure and cloud computing...

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Infrastructure

Peru Infrastructure

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BMI Industry View

BMI View : Peru's construction industry experienced strong growth in the first nine months of 2013, a trend that follows on a remarkable 15.1% real growth in 2012. As a result, we now estimate the industry to grow by 8.1 % in 2014 and an average of 7.4% real growth in the next five years. Our forecast is supported by a robust project pipeline, a growing tourism industry, and high value investment plans to bridge Peru's infrastructure gap, with particular emphasis on the transport sector. However, a deteriorating business environment and severe delay s in the awarding of tenders continue to pose a downside risk to our forecast.

A US$20.5bn budget in infrastructure...

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Medical Devices

Peru Medical Devices

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BMI Industry View: Peru represents the second smallest medical device market in the Americas region and has one of the lowest rates of per capita medical device spending in the region , which indicates potential for growth . W ith a 2013-2018 CAGR projected at around the regional average rate, the market is expected to remain significantly smaller than neighbouring Latin American countries. Lima remains the most attractive area in the private sector, as the urban population has more disposable income to spend on medical devices. Nevertheless, the private sector has seen increasing growth in other provinces as...

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Mining

Peru Mining

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BMI View: Peru's mining industry value will see average annual growth of 3.4% in 2015-2018, reaching USD21.4bn. Both domestic and international firms will continue to develop projects, presenting promising growth opportunities for miners of a wide array of minerals despite ongoing conflicts with local communities.

Peru's mining sector will see continued development on account of its significant untapped reserves and open investment framework. The Peruvian government estimates current mining investment pipelines through 2020 to total nearly USD57bn, although continued protests by local communities are likely to cause project delays and increase costs. Peru will still remain a significant global producer of several base and precious metals, and we expect continued diversification as miners explore and develop new deposits. Copper projects accounting for the largest proportion of new mine...

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Oil & Gas

Peru Oil & Gas

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BMI View: While the Peruvian government has been trying to garner investor interest in the country's upstream potential, we believe that lack of below-ground prospectivity, a history of strong environmental opposition and a highly competitive regional market will be key factors diminishing the attractiveness of country's oil and gas industry over the coming years.

...
Headline Forecasts (Peru 2012-2018)
2012 2013 2014f

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Petrochemicals

Peru Petrochemicals

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Petrochemical plants in Peru have been delayed by a lack of gas and infrastructure such as pipelines, says BMI's latest Peru Petrochemicals Report. Peru's significant commercially viable gas reserves, with ethane content at 10%, promise to drive growth in petrochemicals over the long term. However, the country has so far failed to leverage its potential and create a petrochemicals industry. Developing fertiliser production has been the first choice to add value to the country's natural gas production.

In 2013, Peru continued to possess no production capacity for basic petrochemicals such as ethylene, propylene or polymers such as PE, PP, PVC and PS. A small domestic market would mean any development of the petrochemical sector would have to be export-oriented. Peru's massive gas resources, concentrated in the Camisea gas field, could support at least one world-scale 1mn tpa cracker and downstream production. The country is in a fairly unique...

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Pharmaceuticals & Healthcare

Peru Pharmaceuticals & Healthcare

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BMI View : Strict quality controls for imported medicines, multiple trade agreements with the US and EU, and favourable business and investor environments will allow Peru to continue developing and benefiting from pharmaceutical investments. Steady increases in the growth of the Peruvian pharmaceutical market and a commitment to healthcare improvements will generate revenue opportunities for multinational investors.

Headline Expenditure Projections

  • Pharmaceuticals: PEN4.38bn (USD1.62bn) in 2013 to PEN4.66bn (USD1.64bn) in 2014; +6.6% in local currency terms and +4.0% in US dollar terms. H istoric market size revised upward while...

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Power

Peru Power

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BMI View:  Total power generation  in Peru will  grow by an annual average of 6.6% between 2014 and 2023 -  the fastest  growth  rate  in South America. The energy-intensive mining sector , a   sound business environment and an expanding cons umer base will continue to drive economic growth in Peru - and by extension power consumption .   The e xpansion   in electricity generation will be provided...

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Real Estate

Peru Real Estate

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BMI View:   Weaker economic growth is on the cards for Peru over the next few years however we expect the commercial real estate to remain resilient and record strong growth across all three sub- sectors. Private consumption, foreign investment and infrastructure spending are all on the rise, which will help bolster demand for real estate space. Existing levels of high demand combined with staggeringly low vacancy rates represent a wealth of untapped opportunities for potential developers and investors.

Demand for office space in Lima and Arequipa, the two Peruvian cities we monitor, remains very strong with increasing levels of international investment taking place. An active development pipeline is catering to this demand with the completion of many major projects expected in 2015. There is the possibility that demand may...

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Retail

Peru Retail

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BMI View: The Peruvian retail sector is set to continue to be one of the fastest growing in the region as the economy is becoming increasing open to foreign investment driven by government policy and consumer demand. Our forecasts over the next four years support this view as we expect to see a rise in total household income motivated by a growing middle class, rising household income and purchasing power.

Overall, the country's economy has performed well over the last years and a positive rate of growth looks set to continue over the next four years which will assist development of the retail sector. Comparatively, there are sub sectors which we forecast will see greater development as total household spending is growing faster in these sectors. The sector accounting for the largest percentage of total household spending in the retail market is recreation and culture; its position will be...

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Shipping

Peru Shipping

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BMI maintains its positive outlook on Peru's shipping and port sector. The Peruvian economy will expand at lower average rates in the coming years as a decline in metals prices weighs on private investment into mining and results in slower export growth. External headwinds stemming from lower metals prices associated with weak Chinese demand have intensified in Peru in recent quarters, and we expect this to continue to weigh on economic growth in the coming years. However, private consumption and public investment will remain relatively resilient in the coming years due to a rising middle class and an extensive infrastructure project pipeline.

There are downside risks, nevertheless, with the mining sector and related industries heavily dependent on foreign investment. Underdeveloped infrastructure, capacity constraints, declines in major mining firms' capital expenditure programmes and continued social unrest could...

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Telecommunications

Peru Telecommunications

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BMI View : Peru has the potential to be one of the most dynamic markets in Latin America over the next five years, with increased levels of competition across multiple sectors spurring rapid growth. In the mobile sector, new entrant Viettel officially launched services this quarter, adding a new player to a market dominated by Telefónica . Entel ( Nextel ) has pledged investment of USD1.2bn over the next few years as it aims to become a competitive force. Furthermore, regional MVNO Virgin Mobile is also eyeing up Peru for its next market launch. In the wireline sector, the entrance of DirecTV ...

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Water

Peru Water

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BMI View: This quarter we have substantially adjusted our water forecasts, drawing on new data and revising our future projections. Overall, we expect demand to drive investment into the water supply sector, and increased water metering to boost revenues and reduce non-payment risks to service providers. We maintain our positive outlook with regards to infrastructure developments, owing to the need for e xtensive sanitation developments and additional water supply requirements . However, we note that economic issues mi ght constrain investment.

The water sector has improved dramatically over the past few years. This has largely been due to increased investment by the state and the main water companies, better connections reducing wastewater dumping, increasing revenues, better...

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