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 H114, coming in at 3.3% year-on-year (y-o-y), driven by weak exports and investment, prompting us to downgrade our growth forecast. We now project real GDP growth of 3.8% in 2014 and 4.0% in 2015, compared with our previous projections of 4.5% and 5.0% for 2014 and 2015 respectively.

  • With the Peruvian sol...

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Peru Operational Risk Coverage (9)

Peru Operational Risk

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BMI View: Peru possesses a fairl y well-developed maritime logistics network that greatly enhances its attractiveness as a regional hub. The most significant logistics advantage is the country's competitive trade procedures and governance environment, which offers comp etitive import and export costs. Other assets include low electricity and fuel prices and a well-established export infrastructure system that facilitates Peru ' s export development. Risks lie in the poor state of the country ' s road and rail network, the underdevelopment of the country...

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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 54.9 out of 100, which places it seventh 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 65.9 out of 100 for this indicator, which is the third-highest score in Latin America and shows a strong comparative advantage over its regional peers.

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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. The livestock sector is very dynamic, and investment into the country's ethanol sector is boosting sugar production. 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. We caution that a lack of profitability threatens to weaken the dairy sector; this could be further exacerbated by the entry into force of the free trade agreement with the EU. 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...

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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 consumer electronics market is expected to expand rapidly as declining device prices and rising incomes converge .   Economic g rowth is relatively broad - based relative   to other regional markets, which yields a positive outlook for demand for devices such as notebooks, tablets, smartphones and flat-screen TVs.   BMI forecasts consumer electronics sales to grow by 7 .3% in 2014, backed by a rise in consumer spending and low penetration of devices such as PCs and smartphones. Meanwhile, the launch of 4G LTE...

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Food & Drink

Peru Food & Drink

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We expect headline growth in Peru to remain slightly lower than the previous five-year period. The slowdown in the Chinese economy will hinder the expansion of the country's mining sector, which accounts for around 10% of the Peruvian GDP. A weakening currency and ticking up inflation will weigh on consumer spending over the short term, affecting all consumer sectors, including food and drink. Nevertheless, 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.

Headline Industry Data

  • Per capita food consumption value (local currency) growth (y-o-y) in 2013: +8.77%; compound annual growth rate (CAGR) to 2017: +8.20%;

  • Alcoholic drinks value sales (local currency) growth (y-o-y) in 2013: +6.19%; CAGR to 2017 = +6....

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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:   At the end of 2013, the IT industry accounted for around 0.9% of GDP, but with rising incomes and supportive government policy we expect this to rise gradually to 1.1% by 2018. The government is boosting development through several initiatives, for instance   improving supporting infrastructure, for instance through the Fibre Optic Backbone Network, and boosting domestic IT enterprise development through StartUp Peru and the One Laptop Per Child policy. We   believe Peru's IT market will perform strongly over the medium term due to a combination of a...

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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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Espicom Industry View: The Peruvi an medical device market i s the second smallest in the Americas region but is projected to register an above average 2013-2018 CAGR in the region. Per capita medical device expenditure is low, which indicates potential fo r growth. 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 private health insurance has risen . Public hospital modernisation will also contribute to market growth.

...

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Mining

Peru Mining

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BMI View: We forecast average mining industry value growth of 2.3% per year from 2014-2018, reaching USD21.3bn. Both d omestic and international firms have projects in development, and the sector presents promising growth opportunities for miners of a wide array of minerals. The Peruvian government estimates current mining investment pipelines through 2020 to total nearly US D 5 7 bn, although continued protests by local communities is likely to reduce figure as project delays mount and costs rise.

We expect Peru's mining...

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Oil & Gas

Peru Oil & Gas

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BMI View: Despite continued opposition from environmentalist groups and the indigenous population, we maintain a broadly bullish outlook on Peru's hydrocarbons sector. Given the country's comparatively favourable business environment, attractive fiscal and licensing terms and a broadly supportive government, we forecast an uptick in exploration activity feeding growing oil and gas production over our forecast period. In particular, we see significant upside potential stem from proposed revisions to the country's hydrocarbons law, which could remove major bureaucratic obstacles to exploration and accelerate development of the country's sizeable resource base.

The main trends and developments we highlight in the Peruvian oil and gas sector are:

  • Peru's natural gas prospects remain bright, led by continued development of its Ucayali basin....

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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 : The steadily growing Peruvian pharmaceutical market will provide revenue-earning opportunities for pharmaceutical companies. The country's stringent quality control on imported medicines is also to the advantage of foreign companies from the list of 'High Sanitary Surveillance' practice countries. In addition, the relatively weak domestic pharmaceutical industry, the ongoing liberalisation of bilateral trade agreements and healthcare reform , as well as Peru's investor-friendly business environment , will further benefit foreign companies.

Headline Expenditure Projections

  • ...

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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:   On the back of rising private consumption and foreign investment, and supported by strong GDP growth and infrastructure spending, Peru's commercial real estate market will be characterised by strong growth across the board over the next few years. We see particular opportunities in the expansion of retail facilities and meeting high demand for office space.

While Peru's economic growth is set to slow in the years ahead, on the back of lower demand from China for key metals products, we see two key areas in which the economy will support demand for commercial real estate. Firstly, private consumption will remain strong, driven by falling unemployment and an increasingly large and prosperous middle class. This will provide the domestic market the Peru needs in order to diversify its economy away from reliance on mineral exports. Secondly, state investment will...

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Retail

Peru Retail

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BMI View:   Peru's retail market is expected to continue developing at a moderate rate over BMI 's forecast period into 2018. International retailers will be able to penetrate and expand into underserved markets outside of the capital , with record levels of infrastructure investment and the proliferation of shopping malls in second tier cities.

BMI forecasts Peru's GDP at USD215bn in 2015. Total household spending will represent 62.7% of the country's GDP at USD135bn. More Peruvians are joining the middle class with BMI forecasting that 18.4% of total households in the USD10,000-plus income bracket in 2015. By 2018, 28.8% of...

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Shipping

Peru Shipping

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BMI maintains its positive outlook on Peru's shipping and port 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 a growing consumer story underpin our view that Peru will remain one of the most dynamic economies in Latin America in the coming years.

There are downside risks, nevertheless, with exports to China comprising over 15.0% of total exports in 2012 and 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 also weigh on shipping volumes. Because of these risks, we maintain our below-consensus view on real GDP growth, and anticipate a wider current account deficit and further...

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Telecommunications

Peru Telecommunications

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BMI View : Movistar   launch ed 4G services in January 2014, the first ope rator to do so in Peru, improving the outlook for the Peruvian telecoms market. Although Peru trails regional peers in terms of wireless data service uptake, the rollout of 4G services and stronger competition from Claro ,   Entel ( Nextel ) and the expected launch of Viettel in 2014 should help to close the gap. Meanwhile, there continue s to be high levels of postpaid growth among mobile...

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Water

Peru Water

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BMI View: Peru's water sector is of major importance to the country, due to the fact that one of the main sources of economic strength, the mining industry, relies heavily on water. Despite this, the sector is not of a particularly high standard with an outdated and inefficient infrastructure as well as a severe lack of wastewater treatment facilities. Major investment is needed to bring the sector up to speed and it appears that this may just be starting to happen with the government's pledge to spend USD 7bn over the next thr e e years in a bid to connect a further 4mn people to mains water.

In order to aid the development of the water sector the Ministry of Housing, Construction and Sanitation have implemented The National Sanitation Plan. The goals of this nationwide initiative are to modernise the...

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