Public Private
Partnerships and
Works for Taxes
Guide
Public Private Partnerships and Works for Taxes
Guide
Foreword
Peru is one of the most important countries in Latin America. Its most prominent characteristic is its diversity, which includes a variety of climates, a vast territorial expanse, significant natural resources, people with great skills and high academic standards, and a solid economic and industrial background. Today, Peru is considered one of the world’s leading emerging markets due to a recent solid history of economic stability resulting from an uninterrupted average annual Gross Domestic Product (GDP) growth rate of 5.3%, and its people, who are notable for their productivity and entrepreneurship. It should also be mentioned that Peruvian GDP was estimated at US$ 204 billion at the end of 2014; GDP per capita at US$ 6,623 and GDP per capita (Purchasing Power Parity/
PPP) at US$ 11,989 at the close of the same year.
Furthermore, Peru has been given good forecasts by the best-known risk rating agencies, which have not only ratified the country´s investment grade but have also raised the Peruvian sovereign credit rating.
These factors make Peru an excellent destination for foreign investment. Moreover, according to the Association of National Infrastructure Promotion (“AFIN” in Spanish), Peru has an infrastructure gap of US$ 159 billion for the period 2016-2025,
and energy infrastructure needs. The Peruvian Government has announced through ProInversion (its Private Investment Promotion Agency) that it will be awarding private investment contracts for an estimated amount of US$40.1 billion during the period 2015-2017, where at least US$5.2 billion correspond to Public-Private Partnership (PPPs) infrastructure projects, amount that does not include other major projects whose estimated amount of investment is not defined yet. Therefore, PPPs have become an important means toward contributing to the country’s future development and narrow the infrastructure gap. In this regard, ProInversion’s current pipeline consists of 20 projects; of which energy infrastructure projects represent 74% of the total investment amount with 6 projects worth US$3.8 billion. It should be mentioned that as of April 2015 (from 2008), 65 infrastructure PPPs projects have been adjudicated for an amount of US$22.8 billion, where energy and transportation projects account for more than US$10.5 billion and US$7.7 billion, respectively. In the same respect, until October 2015 (from 2008), the total number of executed and awarded projects by Works for Taxes (“OxI” in Spanish) equals to 173 projects,
of the compromised investment corresponds to the transport, sanitation and education sectors. In this scenario, this PPPs and Works for Taxes Guide is a valuable tool for foreign investors, providing key information about the country’s current economic situation and business environment, as well as PPP and Works for Taxes's legal and tax frameworks including relevant Peruvian case studies (awarded projects and next tenders).
I Background Information
1 Government 9
2 Geography 10
3 Currency 11
4 Economy 11
5 Country risk and investment grade 26
6 Investment 30
II Business Environment
1 Investment Promotion Conditions 37
2 Trade agreements 44
3 Pacific Alliance 53
4 Peru and the Organization for Economic Co-operation and
Development (OECD) 56
5 Conference of the Parties on Climate
Change - COP 20 57
III PPPs Legal Framework
1 Public-Private Partnerships (PPPs) 61 2 Relevant clauses in the PPP Contract 67 3 Private Initiative under the PPP Law 68 4 Modifications introduced by the
Legislative Decree No. 1224 69 5 Challenges of the PPP Legal
Framework and its Application 71
Content
IV PPPs from a Tax Perspective
1 Direct Taxes 76
2 Indirect Taxes 83
3 Municipal Taxes 85
4 Customs System 85
5 Legal Stability Agreements 89
V Peruvian Experience in PPPs
1 Awarded - Construction Stage 95 2 Awarded - Operation and
Maintenance Stage 100
3 Next tenders 101
VI Works for Taxes Regime
1 Legal Framework 109
2 Description of the Regime 109 3 Regional and Local Public Investment
Certificate (CIPRL) and National Government Public Investment
Certificate (CIPGN) 111
4 Legal procedure of the Regime 112
5 Tax considerations 113
6 Statistics of the Regime 113
7 Challenges 116
8 Works for Taxes projects 118
VII Public Private Partnerships and Works for Taxes Projects Index
1 Peruvian Experience in PPPs 136
2 Works for Taxes Regime 137
Exhibits
• Principal Regulatory and Promotion
Entities in Peru 143
• Economic Promotion Institutions 1 Ministry of Foreign Affairs - MRE:
Executive Office for Economic
Promotion (DPE) 149
2 Ministry of Foreign Trade and Tourism
- MINCETUR and PromPeru 150
3 Agency for the Promotion of Private Investment (ProInversion) 152 4 Association for the Promotion of
National Infrastructure – AFIN 153 5 Peruvian Foreign Trade Association -
ComexPeru 153
6 National Confederation of Private
Business Institutions - CONFIEP 154 7 Association of Capital Markets
Business Promoters - Procapitales 154
8 inPERU 155
9 Lima Chamber of Commerce - CCL 155 10 National Association of Industries -
SNI 156
11 Peruvian Association of Exporters -
ADEX 157
• Services for PPPs and Works for Taxes
- Advisory 162
- Assurance 163
- Tax 164
- Transactions Advisory Services (TAS) 168
Public Private Partnerships and
Works for Taxes Guide
Background Information
I.
Background Information
I.
1 Government
Peru is a constitutional democratic republic with a multi-party system. Under the current Constitution of 1993, the President is the Head of State and Government, elected for a five-year period, without the possibility of running for immediate re-election. The President designates the Prime Minister and the rest of the Cabinet. There is a 130-member unicameral Congress elected for a five-year term. Bills may be proposed either by the Executive or by the Legislative Branches, and they become law after being passed through Congress and enacted by the President. The Judiciary and the National Electoral Board are independent institutions.
The Peruvian Government is directly elected and voting is compulsory for all citizens between the ages of 18 and 70. In the most recent democratic elections of 2011, Ollanta Humala was elected President of the Republic of Peru until July 2016. Peru has some of the best macroeconomic indicators in Latin America, with an expected Gross Domestic Product (GDP) growth rate well above the regional average.
Country Overview
Type of Government • Constitutional Republic.
Legal System • Constitutional State of Law based on laws and codes.
►Executive Branch • Head of State and Government: President Ollanta Humala (since July 2011).
►• Elections: Every five years by popular vote (consecutive re-election not permitted).
Next elections: April 2016.
►• Cabinet: The Cabinet of Ministers is appointed by the President.
►Legislative Branch • Unicameral Congress.
►• 130 seats.
►• Members are elected by popular vote for a period of five years.
►• Next elections: April 2016.
►Judiciary Branch • Judges are appointed by the National Judge Selection and Evaluation Board.
►Main Autonomous Entities • Superintendency of Banking and Insurance (SBS) and Private Pension Fund Management Companies (AFP).
• Central Reserve Bank of Peru (BCRP).
►• Constitutional Court.
►• National Electoral Board.
►• Controller General’s Office.
►Regional Governments • 2►5 Regional Governments (including the Constitutional Province of Callao).
►• Metropolitan Municipality of Lima.
►Local Governments • 195 Provincial Municipalities.
• 1,647 District Municipalities.
►International Relations ►• Peru has numerous economic cooperation and Free Trade Agreements (FTAs) with multiple countries (see Section II.2: Trade Agreements).
►►• Member of the United Nations since 1945 and a member of the Security Council in 2006 and 2007.
►►• Member of the World Trade Organization (WTO) since 1995.
►►• Member of the Pacific Alliance since its creation in 2011.
►►• In 1998, it became a member of the Asia Pacific Economic Cooperation (APEC) hosting the APEC and EU-LAC summits in 2008 and the Arab-South American Summit (ASPA) in 2012. In 2013, it hosted the World Economic Forum on Latin America.
►►• Peru was the site of the COP 20 (Climate Summit organized by the UN) in 2014;
in October of 2015 it was the site of the World Bank the site of the World Bank (WB) and International Monetary Fund (IMF) Annual Assembly; and it with host the APEC Summit and the meeting of the United Nations Conference on Trade and Development (UNCTAD) in 2016.
Sources: Peruvian Constitution / CIA - The World Factbook / United Nations (UN) / Ministry of Foreign Affairs (MRE)
2 Geography
Peru is located on the west central coast of South America. It is bordered by the Pacific Ocean to the west, by Chile to the south, by Bolivia and Brazil to the east, and by Colombia and Ecuador to the north. With a total land area of 1,285,215.60 km2, Peru is the third largest country in South America after Brazil and Argentina, and can be divided geographically into three natural regions:
• Although the Coast, a narrow strip along the ocean measuring approximately 3,080 km long, accounts for only 10.7% of Peru's territory, it is home to approximately 17.2 million inhabitants. Lima, the political and financial capital of the country, is located in this Region.
• The Highlands, or Sierra, is the site of the Andean Mountain Range, covering 31.8% of national territory and serving as home to approximately 11.1 million inhabitants. This Region contains the country's major mineral deposits.
• The Amazon Rainforest, or Selva, is the largest region and occupies 57.5% of the country’s territory, rich in petroleum and forestry resources. There are approximately 3.6 million inhabitants in this area.
Peru
*Interbank exchange rate as of November 2, 2015
Sources: Central Reserve Bank of Peru (BCRP) / International Monetary Fund (IMF) 31.9 million (estimate 2015)
Urban: 76.6%
Rural: 23.4%
Population
1,285,215.60 km2 Area
Spanish / Quechua / Aymara Principal languages Nuevo Sol (S/.) S/.1 = US$ 0.305 US$1 = S/. 3.28
Currency*
Freedom of Religion Principal Roman Catholic
Religion
Ranges from tropical in the Amazon to dry along the Coast, and from temperate to very cold in the Highlands
Climate
Time Zone
GMT – 5 (five hours Greenwich Mean Time). There is no daylight saving time, and there is only one time zone throughout the entire country
Natural resources
Gold, copper, silver, zinc, lead, hydrocarbons, fising, phosphates and agricultural products as coffee, potato, rice, cotton, asparagus, cocoa and organic banana, artichokes, sugar, quinoa, blueberries and corn.
3 Currency
The official currency of Peru is the Nuevo Sol (S/.). The country has a free-floating exchange rate regime, with the government occasionally intervening for purposes of stabilization. As at November 3rd, 2015, banks were selling US dollars at S/.3.28. The grey market has very similar exchange rates.
According to estimates as of the end of 2015, the Nuevo Sol is one of the least volatile currencies in the world, exhibiting firmness in the face of international market and currency fluctuations. The Central Reserve Bank of Peru (BCRP) implements fiscal stimulus and liquidity control measures. There are no restrictions or limitations on the number of bank accounts in foreign currency or the remittance of funds abroad that an individual or legal entity may make.
Exchange rate evolution: Nuevos Soles per US$1 (end of each year)
*As of November 2nd, 2015, the exchange rate rose to S/.3.28 per US$1.00 Source: Central Reserve Bank of Peru (BCRP)
4 Economy
Gross Domestic Product (GDP) • US$ 208.8 billion (2015)*
GDP per Capita • US$6.5 thousand (2015)*
GDP per Capita (Purchasing Power Parity / PPP) • ► US$11,989*
Net International Reserves • ► US$62.308 billion (2014)
Foreign Debt • ► US$57.5 billion (2014)
Total Public Debt • US$40.72 billion or 20.1% of the GDP (2014) Fixed Gross Investment • 25.9% of the GDP (2014)
Unemployment Rate • ► 5.6% (2014)
Population Living Below the Poverty Line • 22.7% (estimate for 2014)
Minimum Wage • S/.750 (as of December 31, 2014, approximately US$252) Principal Destinations of Peruvian Exports • Germany, Brazil, Canada, Colombia, Chile, China, South Korea, Italy,
Japan, Spain, Switzerland, United States and Venezuela Principal Exports • Gold, copper, silver, zinc, lead, crude oil and byproducts, coffee,
potatoes, asparagus, paprika, organic bananas, quinoa, artichoke, berries, mango, cacao, textiles, fishmeal, and urea
Principal Countries of Origin of Imports to Peru • Germany, Argentina, Brazil, Chile, China, Colombia, South Korea, Ecuador, United States, and Mexico
Principal Imports • Petroleum and byproducts, plastics, machinery, vehicles, iron and steel, wheat and paper
*Estimated
Sources: Central Reserve Bank of Peru (BCRP) / Ministry of Economy and Finance (MEF) / International Labor Organization (ILO) / National Institute of Statistics and Informatics (INEI) / International Monetary Fund (IMF) / EY
2 3 2.5 3.5
0.5 0 1 1.5
3.28 3.43
3.20 3.00 2.89 2.81 2.70
2.55 2.80 2.96
3.14
2008 2010 2011 2012 2013 2014
3.28
2015*
2005
2004 2006 2007 2009
With a population of 31.9 million (the estimate for 2015) Peru also has rich deposits of copper, silver, gold, lead, zinc, natural gas, petroleum, and urea. Owing to climate variations in its regions, as well as its natural and cultural resources, it is internationally classified as a mega-diverse country.
Peru’s economy reflects its varied geography. The abundance of resources is found mainly in mineral deposits in the mountainous regions, while its extensive maritime territory has always traditionally yielded excellent fishing resources. Despite the fluctuations of the world economy, the administration has resisted pressures for fiscal spending and has used the savings generated by the high prices of commodities between 2006 and 2008, investing in 2011 and 2012 in infrastructure and in social aid programs, paying off part of the public debt, and increasing assets.
Peru has achieved significant progress in its macroeconomic performance in recent years, with very dynamic Gross Domestic Product (GDP) growth rates, stable currency exchange rates, and low inflation. In fact, over the past decade, the Peruvian economy has had the lowest annual average inflation rate in Latin America, at 2.5%, below that of Chile (2.9%), Colombia (4.6%), and Brazil (6.0%). There is also its impressive annual growth rate of approximately 5.8% of its GDP achieved in 2013 and of 2.4% in 2014, which gives the country the privileged ranking of one of the fastest-growing economies in the Region, consistently achieving an accumulated annual average growth of approximately 5.3% since the year 2000. This dynamism has been driven by the promotion and diversification of the exportable supply, the rise in world commodity prices, market policies beneficial to investors, and aggressive free trade strategies. Over the past decade, Peru’s GDP has tripled as a result of the country’s economic growth, moving increasingly towards a middle and upper- middle income economy. Its rapid expansion has contributed to the reduction of the national poverty rate in almost 18% in recent years, representing around 22.7% of its total population for 2014.
According to the International Monetary Fund (IMF) Peru is considered a rising star that is part of the new wave of leading emerging markets, (2013) and today has solid fundamentals, a framework of sensible policies, and a prudent macroeconomic approach, all of which enables it to enjoy sustained growth and reduced vulnerability. Likewise, in 2014, the IMF declared that “Peru has a decade of wide growth and (…) the macroeconomic policies that it is putting into practice (…) allow it to achieve a fast development, thereby bringing economic stability to the country (…) are strongly encouraged for the implementation of policies and measures that have been implemented from a monetary, tax and infrastructural aspect”.
The country’s recent boost in economic development has much to do with the monetary and fiscal policies applied over the past two decades, reducing the debt level (from 32.3% of the GDP in 2006 to 20.1% in 2014 and an estimated 22.4% in 2015) and ensuring consistent fiscal surpluses: 2.2% in 2012, and official estimates of 0.6% and 0.1% of the GDP for 2013 and 2014, respectively. All of this has gone hand-in-hand with the liberalization of the goods and labor markets, opening up trade through multiple recent international trade agreements, direct foreign investment, and the maximization of the revenues resulting from its rich natural resources. Peru is also reaping the benefits of the increasing size of its market and domestic consumption, and the development of its financial sector, which can be seen, for example, in the increase of private consumption by an estimated 4.1% in 2014 over the previous year (estimated at 3.5% and 3.5%
for 2015 and 2016, respectively). Likewise, as of December 31, 2014, net international reserves stood at approximately 30.75% of the GDP as of the same date.
The Peruvian economy for 2015 is expected to be the first fastest growing in Latin America, with an increase of 3.1% of its GDP (3.9 % as at May of 2015). This is driven principally by private consumption (3.5% for 2015) domestic demand (estimated in 2.7% for 2015), improved employment indicators and the recovery of total exports. At the same time, the development of fixed private investment in 2015 is expected to be situated at -5.5% and 2% for 2016.
The total GDP and GDP per capita (measured in Purchasing Power Parity - PPP) of the main economies of Latin America, according to the International Monetary Fund (IMF) as at 2014 and projected to 2019, are given below:
GDP and GDP per capita (Purchasing Power Parity-PPP) of the principal economies of Latin America (2015 and 2019)
Country
2015* 2019
GDP in US$ billions
(PPP) GDP per capita in US$
(PPP) GDP in US$ billions
(PPP) GDP per capita in US$
(PPP)
Brazil 3,207 15,690 3,654 17,347
Argentina 964 22,375 1,031 22,895
Colombia 665 13,793 814 16,149
Venezuela 491 15,891 454 13,821
Peru 385 12,076 495 14,585
Chile 424 23,563 512 27,251
Mexico 2,220 18,335 2,694 21,261
*Estimate
Source: International Monetary Fund (IMF), World Economic Database, October 2015
Peru has signed a number of Free Trade Agreements (FTAs) covering approximately 95% of its exports as of December 31, 2014. Free Trade Agreements (FTAs) have been entered into with the United States, China, Thailand, the European Union, the European Free Trade Association (EFTA), the Southern Common Market (MERCOSUR), South Korea, Canada, Costa Rica, Chile, Mexico, Venezuela, Panama, Singapore, and Cuba.
It also has 28 Bilateral Reciprocal Investment Promotion and Protection Agreements. Finally, Peru has commenced trade negotiations corresponding to the Trans-Pacific Partnership Agreement, which includes Chile, the United States, Singapore, Australia, and New Zealand, among others.
The Free Trade Agreement (FTA) with the United States entered into force on February 1, 2009, opened the way to greater trade and investment between both countries. Likewise, the Free Trade Agreement (FTA) with China became effective in 2010. More recently, the Free Trade Agreement (FTA) with Japan came into force on March 1, 2012. Additionally, Peru entered into the Framework Agreement for the Pacific Alliance in April 2011. Peru forms part of this trading bloc together with Chile, Colombia, and Mexico, which is aimed at encouraging regional integration and the greater growth, development, and competitiveness of their economies, as well as achieving the free circulation of goods, services, capital, and people.
Peru’s main traditional exports are gold, copper, petroleum oil, natural gas, zinc, lead, iron, fishmeal, and coffee, and its principal trading partners are the United States, China, Bolivia, Brazil, Chile, Colombia, Ecuador, Argentina, Venezuela, Switzerland, South Korea, Japan, Canada, Germany, Spain, Holland, The United Kingdom, Mexico, and Italy.
Evolution of financial indicators
Sources: Central Reserve Bank of Peru (BCRP) / Lima Stock Exchange (BVL) Appreciation / Depreciation and inflation
As of the end of 2014, the inflation rate in Peru was 3.22% (real rate of 2.9% in 2013). The annual depreciation rate of the Nuevo Sol against the US Dollar for 2014 is 6.4% (real appreciation rate of 9.6% in 2013).
*Estimated as of November, 2015
Sources: Central Reserve Bank of Peru (BCRP) / EY
By the end of 2015, inflation is expected to be within the target range set by the Central Reserve Bank of Peru (BCRP) at 3.5% to 4%. Meanwhile, as of August 2015, the average interbank interest rate in local currency set by the BCRP was 3.69%, while the preferential corporate rate was 5.5%.
-2.04.06.00.02.08.0 10.0
Nuevo Sol DepreciationNuevo Sol Appreciation
-8.0 -6.0-4.0 12.0
1.5 2.5
4.7 3.1
3.7
-1.9 1.5 2.9
1.1
-6.5 -6.2
3.5 0.3
3.0
-2.5 6.7
3.9
6.4 9.6
-4.2
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*
Inflation Appreciation / Depreciation -1.1
-3.4 -0.7
-4.4
0.2
2.1 2.6
3.2 3.4 3.5 -0.1-0.1
2006
2005 2007 2008 2009 2010 2012
2003
Net External Debt Internacional Reserves GDP
Inflation
Traded Volume Equity Stock Capitalization Lima Stock Exchange (BVL) Traded Volume Debt Instrument
2011 2013 2014
-20,000 2004 50,000 100,000 150,000
0 200,000
250,000US$ Millions Index
100,000
10,000
1,000
100
10
1
0 2,435.043,710.39
4,802.25
12,884.2017,524.79 7,048.67
14,167.2023,374.57 19,473.31
20,629.35
750.00 750.00
2.48
1,106.50897.93 983.06 769.991,100.431,444.75 1,063.50
640.70 641.72 515.41
3.48
1.49 1.14 3.93
6.65
2.08 4.74
2.65
0.25
65,663
93310,19492115,415 61,356 69,704
79,389 92,324
107,251
126,869 125,923 153,811
177,000 193,000
19,015
12,631 14,097 17,274
27,688 31,195 33,135 44,105
1,214 2,127 4,647 9,287 5,110 1,146
-1,062 -2,307 -942
126 254
1,349 -613
1,276
202,000 204,081
1,276 4,007 5,027 6,241 6,108 4,101 1,078
48,815
63,991 62,307
37,683
56,626 61,472
100,261 99,993
144,538 116,441
142,743
120,653 120,520
2.90 3.22 15,754.40 14,724.48
Dollarization rate of bank deposits
*Estimate
Source: Central Reserve Bank of Peru (BCRP) Peru’s principal economic activities
In 2014, the non-traditional productive markets that registered the highest exports were the agricultural (21.2%) and handcraft (61.9%) markets. The main non-traditional products exported in 2014 were quinoa (US$196 million, an increase of 147.1%), mangoes (US$138 million, a growth of 3.60%), asparagus (US$533 million, drop of 7%), organic bananas (US$119 million, a growth of 33.99%), grapes (US$641 million, an increase of 44.39%), berries (US$30 million, a growth of 71.24%), refrigerated asparagus (US$38 million, a drop of 24.05%), avocado (US$384 million, a decrease of 6.96%), cocoa (US$152 million, an increase of 82.5%), artichokes (US$92 million, a growth of 3.81%), tangerines (US$60 million, an increase of 38.78%), paprika and capsicum (US$41 million, a decrease of 8.88%), natural calcium phosphates, refined copper wire, giant squid, squid, either frozen, dried or in brine. With regards to the traditional products, the most important were gold, copper, silver, lead, zinc, gas, petroleum oil, coffee and fishmeal.
In mining, according to the Mineral Commodity Summaries Publication authored by the U.S. State Department, Peru ranked third in the world in 2014 in the production of silver, copper, tin and zinc, fourth in molybdenum and lead, fifth in mercury, and sixth in gold, besides having large deposits of iron ore, phosphates, manganese, petroleum, and gas.
Principal industries in the different regions of Peru
Source: EY 40 60 50
10 0 20 30
53.0
46.8 46.1 45.1
40.7 38.1 43.0
2012 2009
2008 2010 2011 2014
43.3
2015*
2013
Petroleum Gold Au
Silver Ag
Copper Cu
Zn Zinc Lead Pb
Iron Fe
Phosphates Po
Natural Gas
Sugar Refinery
C Cement Plant Oil Refinery Fishmeal Plant Textile Industry Chemicals Plant
Metals Industry Foundry
Cabo Blanco Piura Talara
Pucallpa
La Oroya
Cusco Cajamarca
Au Po
AgZn Pb
PbCu Zn
Zn Fe Zn
Au Ag Ag
Cu AuAg AuAg
Iquitos
C
C
C C
Trujillo
Ica
ArequipaPuno Chimbote
Paramonga
C Lima - Callao Huacho - Chancay
Pisco Mollendo Ilo Pacasmayo
Chiclayo
Metal-Mechanical Plant
Coffee Mangoes Grapes Asparagus
Gross Domestic Product (GDP) / Trade Balance
The Gross Domestic Product (GDP) for 2014 was US$202.6 billion and it’s expected to be US$208.9 billion for 2015. At the end of 2014, total FOB exports came to US$37,913 billion, while imports totaled US$42,377 billion. The principal exports came from the mining, hydrocarbons, and agricultural and livestock industries.
Real Gross Domestic Product (GDP) (annual percentage change)
*Estimated as September, 2015
Source: Central Reserve Bank of Peru (BCRP)
Real Gross Domestic Product (GDP) (in millions of US$)
*Estimated as of September, 2015
Sources: Central Reserve Bank of Peru (BCRP) / World Economic Forum Gross Domestic Product (GDP) by industry - Annual % change
2008 2009 2010 2011 2012 2013 2014 2015* 2016*
Agriculture and livestock 8.0 1.3 4.3 4.1 5.9 1.0 1.6 2.6 1.6
Fisheries 3.0 -3.4 -19.6 52.9 -32.2 18.1 -27.9 16.5 -1.2
Mining 7.3 -1.4 -0.7 -1.1 2.2 4.3 -2.1 11.7 11.2
Hydrocarbons 10.3 16.1 28.4 19.7 2.3 7.2 4.0 -10,9 8.1
Manufacturing 8.6 -6.7 10.8 8.6 1.5 5.1 -3.6 0.4 1.8
Electricity, gas and water 8.1 1.1 8.1 7.6 5.8 5.5 4.9 5.2 5.5
Construction 11.0 -0.5 12.5 8.9 7.2 8.9 1.6 -6.2 3.0
Commerce 16.8 6.8 17.8 3.6 15.8 5.9 4.4 3.8 3.8
Other services 8.7 3.6 8.8 7.0 7.3 6.2 5.0 4.1 3.8
GDP 9.1 1.0 8.5 6.5 6.0 5.8 2.4 3.1 4.2
*Estimated as of September, 2015
Sources: Central Reserve Bank of Peru (BCRP) / National Institute of Statistics and informatics (INEI) (2014) 6.0
8.0
4.0 10.0
2.0 12.0
0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016* 2017*
9.1 6.3
7.5 8.5
1.0 8.5
3.1
4.2 5.0
2.4 5.8 6.5
6.0
Gross Domestic Product (GDP)
0 50 100 150 200 250 300
53.3 2000
53.9 2001
56.8 2002
61.7 2003
69.7
2004 79.4
2005 92.3
2006 108
2007 128
2008 127
2009 154
2010 177
2011 193 202
2013 2012
203
2014
209 218 229
2015*2016*2017*
Peru Gross Domestic Product (GDP) by economic sector in %, using the economic structure with a base estimate year of 2007
Source: National Institute of Statistics and informatics (INEI) Net International Reserves (in US$ millions)
*Estimated as of September, 2015 Source: Central Reserve Bank of Peru (BCRP)
Net International Reserves (in percentage of GDP, estimate for 2015)
Sources: Central Reserve Bank of Peru (BCRP), International Monetary Fund (IMF) / EY Commerce
10.18%
Construction 5.10%
Electricity, gas and water
1.72%
Fisheries 0.74%
Mining and hydrocarbons 14.36%
Agricultural 5.97%
Accommodation and restaurants 2.86%
Telecommunications 2.66%
Finance and insurance 3.22%
Transport and couriers 4.97%
Public administration and Defence 4.29%
Services provided to companies 4.24%
Manufacturing 16.52%
Other services 14.89%
8,613 0 10,000 20,000
2001Dec.
2003Dec.
2002Dec.
2005Dec.
2004Dec. Dec.
2006 Dec.
2007 Dec.
2008 Dec.
2009 Dec.
2010 Dec.
2011 Dec.
2012 Dec.
2013 30,000
40,000 50,000 60,000 70,000
12,631 14,09717,275 27,689
44,105 48,816 63,991
33,135 31,196
9,598 10,194
65,663
2014Dec.
62,298
2015*Dec.
62,711
15
10 20 25
5 30 35
0 Chile 15.9
32.5 15.7
16.9 Peru
Mexico Colombia
Indicators of emerging economies: Net International Reserves vs. Gross Domestic Product (GDP) and Fiscal Deficit/Surplus of emerging economies (estimated for 2013)
Source: Central Reserve Bank of Peru (BCRP)
Gross Domestic Product (GDP) by spending type (percent change)
Variables 2008 2009 2010 2011 2012 2013 2014 2015*
Gross Domestic Product 9.1 1.0 8.5 6.5 6.0 5.8 2.4 3.1
Imports 26.2 -16.0 29.3 9.8 10.4 3.6 -1.3 -1.3
►Domestic Demand 12.3 -2.8 13.1 7.1 7.3 7.0 2.5 2.7
a. Private Consumption 8.7 2.4 6.3 6.4 5.8 5.3 4.3 3.5
b. Public Consumption 2.1 16.5 7.9 4.8 9.4 6.7 6.4 6.5
►Private Investment 25.9 -15.1 22.1 11.4 13.5 6.4 -1.5 -5.5
►Public Investment 33.6 21.2 26.7 -18.0 20.8 12.1 -3.6 -2.0
►Exports 9.9 -2.9 4.8 8.8 5.4 -0.9 -2.2 0.1
*Estimate
Source: Central Reserve Bank of Peru (BCRP) Domestic demand (percent change)
*Estimated as of September, 2015 Source: Central Reserve Bank of Peru (BCRP)
8.0 12.0 14.0 10.0
2.0 0.0 -2.0 -4.0 4.0 6.0
10.3% 11.8%
-2.8%
12.3%
7.1%
13.1%
7.3% 7.0%
2.2% 2.7%
2011 2008
2007
2006 2009 2010 2012 2013 2014 2015*
Average 2006 - 2012: 8.4%
Fiscal Deficit/Surplus
Net International Reserves / GDP (in %)
Below Average
Below Average
Above Average
Above Average Hungary
0
0.5 1.5
-0.5 -1.5 -2.5
-3.5 -4.5 -5.5 -6.5 -7.5
-8.5
5 10 15 25 30 35 40
Israel
Poland India
China
Peru
Russia Chile Argentina
Colombia Turkey Mexico Brazil
20
Number of companies with annual revenues of more than US$360 million (more than one billion Nuevos Soles)
Sources: Top 10k – Peru Top Publications / Peruvian Business Directory - Dun & Bradstreet / Prepared by EY Balance of payments (in US$ millions)
*Estimated as of September, 2015 Source: Central Reserve Bank of Peru (BCRP)
Trade balance (in US$ billions)
*Estimated as of September, 2015
Sources: Central Reserve Bank of Peru (BCRP) / ComexPeru 200
50 0 100 150
2011 2008
2007 2009 2010 2012 2013
2006 2005 2004 2003 2002
Companies with a turnover >= US$725 MM Companies with a turnover >= US$360 MM
Companies with a turnover >= US$900 MM Companies with a turnover >= US$545 MM
30 30 30
20 15 15 15 8 13
3 6 6
1,628 2,0000 -2,000 4,000
-4,000
2006
2005 2007 2008 2009 2010 2011 2012 2013 2014
6,000 8,000 10,000 12,000 14,000 16,000
3,169 1,043
11,192
2,907 2,000
-2,178
2015* 2016*
-552 14,827
4,724 2,753
9,654
0 10
10 2007 2008 2009 2010 2011 2012 2013 2014* 2015*
20 30 40 50
28.1 27.1
35.8
46.2 43.4
39.540.8 31.0
Exports lmports Trade balance
46.4
35.9
-0.9 -1.3
20.5 7.6
30.1
0.9 21.5
5.6 30.2
5.6 38.2
8.2 42.5
3.7 42.5
33.8
-2.0 34.636.6
2016*
-2.1
According to estimates, by 2015, Peruvian exports will total nearly US$33.8 billion, while imports will come to approximately US$35.9 billion. Likewise, the projection for the 2011-2021 period of the total in billions of US Dollars of Peruvian exports is as follows:
Projection of regional exports of Peruvian goods 2011 – 2021 (in US$ billions)
Source: Oxford Economics / Prepared by EY
Annual change in exports by economic sector, in percentage (2014/2013)
*Non-traditional
**Traditional Source: ComexPeru
Petroleum and Byproducts**
Fisheries*
Handycrafts*
Fishing**
Metal-mechanic*
Fisheries*
Textile*
Skins and Leather*
Various (inc. jewelry)*
Woods and Papers*
Mining non-metalic*
Mining**
Farming**
Chemical*
Steelworks and Metallurgy*
-18.5-14.6 0.1
6.0 21.2
-7.3 -0.9 -14.6
-9.0 -3.4 4.6 10.7 4.3
10.8 61.9
40.0 20.0 0 20.0 40.0 60.0 80.0
Europe
China India
Peru Rest of Latin America
2021 2011
Middle East and North Africa United
States
Rest of Asia 9
7
7 3
7
6
8
5
4 7
5 1
9
17
Annual change in imports by economic sector, in percentage (2014/2013)
*Traditional
**Non-traditional Source: ComexPeru
Exports by trading partner in US$ millions – Top ten partners (2014)
Source: ComexPeru
Imports by trading partner in US$ millions – Top ten partners (2014)
Source: ComexPeru
-9.8 6.0
203.4 -46.4 -3.9 -1.0
4.0 -0.1 -2.2
4.4 4.0 -10.4 -12.0
2.0 0.9
-100.0 -50.0 0 50.0 100.0 150.0 200.0 250.0
Petroleum and Byproducts Fisheries*
Handycrafts
Fishing**
Metal-mechanic Fisherie Textile
Skins and Leather Various (inc. jewelry)
Woods and Papers Mining non-metalic
Mining Farming Chemical
Steelworks and Metallurgy
6,948 6,037
2,640
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,0004,500 5,000 5,500 6,000 6,500 7,000 China
Switzerland
Chile Canada Brazil Japan
Germany Colombia Spain United States
1,580 1,546 1,521
1,229 1,219 1,353
2,476
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000
1,774 1,511 1,383
1,246 1,253 1,283
8,858 2,000
1,950 China
Brazil
South Korea
Colombia Mexico Ecuador Germany
Argentina Chile United States
8,928
Traditional and non-traditional exports in US$ billions (2014)
Sources: ComexPeru / Central Reserve Bank of Peru (BCRP)
In 2014, the non-traditional markets that registered the highest exports were the agricultural (21.2%) and handcraft (61.9%) markets. The main non-traditional products exported in 2014 were quinoa (US$196 million, a growth of 147.1%), mangoes (US$138 million, an increase of 3.60%), asparagus (US$533 million, a drop of 7.00%), organic bananas (US$119 million, a growth of 33.99%), grapes (US$641 million, an increase of 44.39%), berries (US$30 million, a growth of 71.24%), refrigerated asparagus (US$38 million, a drop of 24.05%), avocado (US$384 million, a decrease of 6.96%), cocoa (US$152 million, a growth of 82.5%), artichokes (US$92 million, an increase of 3.81%), tangerines (US$60 million, a growth of 38.78%), paprika and capsicum (US$41 million, a decrease of 8.88%), natural calcium phosphates, refined copper wire, giant squid, squid, either frozen, dried or in brine. With respect to the traditional products, the most important were gold, copper, silver, lead, zinc, gas, petroleum oil, coffee and fishmeal.
6.3
7.6 6.2
7.8 10.2 11.2
21.8 23.4 20.9
35.0
11.1 31.4 36.1
0 10,000 20,000 30,000 40,000
5,000 15,000 25,000 35,000
2007 2008 2009 2010 2011 2012 2013
Traditional Non-traditional 28.1
2014 11.6 26.3
Exports in the agricultural and livestock sector in US$ millions FOB, annual percent change, first 30 products
Product 2013 2014 Change %
Fresh grapes 444 641 44.39%
Asparagus fresh or refrigerated 413 384 -6.96%
Fresh avocados 184 306 66.20%
Quinoa 80 196 147.11%
Cocoa in grain, whole or split, raw 83 152 82.53%
Asparagus, prepared or canned 150 149 -0.17%
Other processed products used for animal feed 109 141 30.02%
Fresh mangoes 133 138 3.60%
Evaporated milk, unsweetened 104 121 16.83%
Other fresh bananas: "Cavendish Valery" type 89 119 33.99%
Artichokes processed or canned 89 92 3.81%
Other vegetables, fruit and other edible plant parts processed or canned 51 69 35.51%
Onions and shallots (allium ascalonicum) fresh or refrigerated 63 65 2.59%
Other vegetables processed or canned (except in vinegar or in acetic acid) 54 61 12.33%
Mandarins (including tangerines and satsumas) fresh or dried 43 60 38.78%
Mango (mangifera indica 1.) uncooked or cooked with water or steamed, unsweetened, frozen 40 49 21.97%
Palm oil, crude 21 48 132.49%
Cocoa butter with an acid indicator expressed in oleic acid superior to 1% 32 48 47.09%
Fruit of the capsium or pepper type: dried, neither crushed nor powdered: paprika 50 46 -8.82%
Sweet biscuits (with sweetener) 40 43 7.78%
Piqulillo pepper (capsicum annuum) processed and canned (except in vinegar) 45 41 -8.88%
Asparagus cooked in water or steamed, frozen 51 38 -24.05%
Juice of any other fruit or vegetable 30 38 25.21%
Other food pastes uncooked, unfilled and unprocessed in any other way 40 38 -3.84%
Olives, processed or canned (excluding in vinegar or acetic acid) 22 36 62.96%
Seaweed: others 37 33 -10.00%
Tara powder (caesalpinea spinosa) 32 33 3.49%
Chestnuts shelled, fresh or dried 29 31 6.40%
Berries or myrtle fruit and other fruit of the vaccinium type fresh 17 30 71.24%
Other clementines, wlilkings and hybrids similar to citrus fruit fresh or dried 24 29 20.75%
Total first 30 products 2,599 3,274 25.97%
Source: National Superintendency of Tax Administration (SUNAT) / Prepared by ComexPeru Non-Traditional exports by trading partner in US$ millions (2014)
Source: ComexPeru
0 200 400 600 800 1,0001,2001,4001,6001,800 2,0002,2002,4002,6002,8003,000 Chile 658
The Netherlands 652
China 468 Ecuador 744 Colombia 792
Bolivia 571
Spain 469 Brazil 485 Venezuela 482
United States 2,829
Concentration of export basket (2012)
Country HHI* Products with higher weight in total exports Joint Participation
Italy 95 Refined oil, medicines, parts and replacements 12.0%
►United States 108 Cars, refined oil, planes and helicopters 11.8%
►Sweden 164 Refined oil, medicines, phones 16.0%
►Spain 171 Cars, refined oil, medicines 18.8%
►Denmark 174 Medicines, refined oil, crude oil 18.1%
►Germany 191 Cars, replacement parts, packaged medicines 19.0%
►Finland 228 Refined oil, couche paper, Iaminates, stainless steel pianos 21.7%
Korea 316 Refined oil, integrated circuits, cars 25.5%
Canada 345 Cars, planes and helicopters, coal briquettes 21.7%
Mexico 386 Crude oil, automobiles, computers 27.4%
Brazil 391 Iron mineral, crude oil, soya 28.7%
Peru 874 Copper mineral, gold, refined oil 45.0%
Singapore 891 Refined oil, integrated circuits, computers 39.8%
Australia 917 Iron mineral, coal briquettes, gas and oil 45.4%
Chile 1,264 Refined copper, copper mineral, unprocessed copper 52.4%
Norway 1,997 Crude oil, gas, refined oil 67.0%
Colombia 2,116 Crude oil, coal briquettes, refined oil 64.2%
*Herfindahl Hirschman indicator. Measures the market concentration, where 0 represents the maximum diversification Source: ComexPeru
Economic results (Fiscal Surplus / Deficit) of the non-financial public sector (in % of the Gross Domestic Product - GDP)*
*Estimated as of September, 2015 Source: Central Reserve Bank of Peru (BCRP)
Tax pressure (in % of the Gross Domestic Product - GDP)
*Estimated as of April, 2015
Sources: Central Reserve Bank of Peru (BCRP) / National Superintendency of Customs and Tax Administration (SUNAT)
2.3 2.9
2.4
-1.3
2.0 2.2
-0.2
0.9
-0.3
-2.2 -2.7 -1.0
-1.5 1.0 0.5 -0.5 1.5 0 2.0 2.5 3.0
-2.0 -2.5
-3.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016*
13.6
02 4
2007 2006
2005 2008 2009 2010 2011 2012 2013 2014
68 12 16 10 14
18 15.7
13.8 14.8 16.4 16.8
15.2 15.6 15.5 16.9
2016*
2015*
15.4 15.7
During 2014, according to the National Superintendency of Customs and Tax Administration (SUNAT) the tax base was broadened by 3.4%. This was due in large part to auditing, control, and facilitation actions, which have helped tax collection to exceed the national average rate in many regions of the country. In 2014, the tax revenues collected totaled S/. 95,389 billion and the registered taxpayers increased by 6% in comparison to 2013.
Public debt (% of the Gross Domestic Product -GDP)
*Estimated as of August, 2015
Sources: Central Reserve Bank of Peru (BCRP) / Ministry of Economy and Finance - MEF Debt of non-financial public sector
*Estimated as of September, 2015 Source: Central Reserve Bank of Peru (BCRP)
0 5 10 15 20 30 40 25 35 50 45
2000 2006 2012 2013 2014 2015* 2016*
32.3
23.2 9.0
9.5 19.7
10.2
7.1 19.6
12.5
19.7 22.4 24.8
9.6 46.0
36.4
Non-domestic Domestic 7.7 12.0
11.0 11.4
12.8 12.0
10
0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
20 30 40 50 45.2
34.1 29.9
24.3
8.6 20.4
5.0 42.1
Gross debt Net debt 26.9
3.7 36.8 33.6
25.2
18.0 14.1 12.2
27.2 14.3
22.1 19.6
3.9 20.1
2015*
6.5 22.4
5 Country risk and investment grade
Peru has been given good forecasts by the best-known risk rating agencies, which have not only ratified the country’s investment grade but have also raised the Peruvian sovereign credit rating. The factors that back this rating are the solid economic prospects reflected in a growth of 2.4% of the Gross Domestic Product (GDP) for 2014, and an estimated 3.1% for 2015 (as of September of 2015). These economic forecasts are backed by the rapid growth in investment and the significant drop in fiscal and external vulnerabilities, all within the context of several sources of growth, with low inflation and strong macroeconomic fundamentals.
Obtaining the investment grade has permitted Peru to attract a great deal of international attention.
Recently, an increasing number of multinational corporations have been looking at Peru with greater interest.
The subsequent increase in jobs and decrease in poverty will predictably help improve social wellbeing.
The progress made in watching out for the tax results, the promotion of investment in important job creation sources (such as infrastructure, mining, hydrocarbons and telecommunications) the implementation of tenders as a specific “countercyclical” measure in response to the economic slowdown (i.e. infrastructural projects of the Gas Pipeline of the South, Line 2 of the Electric Train, the Airport of Chincheros, the General Terminal of the Port of San Martin de Pisco, among others) as well as the measures taken to modify the tax system included in Sections V and VI of this Guide (Taxes and Labor System, respectively) allow us to observe how Peru aims its development towards improving its level of investment.
Peru’s investment grade ratings
Country S&P Fitch Moody's
Chile AA- A+ Aa3
Peru BBB+ BBB+ A3
Mexico BBB+ BBB+ A3
Colombia BBB BBB Baa2
Brazil BB+ BBB- Baa3
Uruguay BBB BBB- Baa2
Bolivia BB BB Ba3
Paraguay BB BB Ba1
Ecuador B B B3
Venezuela CCC CCC Caa3
Argentina SD RD Caa1
Sources: Standard & Poor's / Fitch Ratings / Moody's
S&P / Fitch Moody's Feature
AAA Aaa Risk free
AA+, AA, AA- Aa1, Aa2, Aa3 High grade
A+, A, A- A1, A2, A3 High repayment capacity
BBB+, BBB, BBB- Baa1, Baa2, Baa3 Moderate repayment capacity
BB+, BB, BB- Ba1, Ba2, Ba3 Some repayment capacity
B+, B, B- B1, B2, B3 Highly uncertain repayment capacity
CCC+, CCC, CCC-,CC Caa1, Caa2, Caa3 Extremely vulnerable to default
SD/D Ca Default
Investment Grade Source: Bloomberg
