WHY INVEST IN PERU? October 4, 2012
WHY INVEST IN PERU?
1. Internationally acknowledged macroeconomic soundness 2. Friendly investment environment 3. Open trade and market access policy 4. Attractive sectors to Invest
INTERNATIONALLY ACKNOWLEDGED MACROECONOMIC SOUNDNESS
1. MACROECONOMIC SOUNDNESS
Peruvian economy rise rapidly in the last decade ‌ Real GDP, 2000-2011 (Variation %) 6.4 5.0 3.0
8.9
9.8
6.9
5.0
2011
2008
2007
2005
2004
2002
2001
2010
0.9
0.2 2000
8.8
2009
3.9
3.6
4.0
2003
5.1
6.8
5.5
7.7
2006
Real GDP 1952-2011 (aver annual var. %)
GDP , 2000-2011 (thousands of million of US$) 176.8 154.0 127.1 127.4
-0.6
69.8 79.4 53.3 53.9 56.8 61.4
92.4
107.4
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
Source: Central Reserve Bank of Peru, Ministry of Economy and Finances and IMF
2000
1952-1961 1962-1971 1972-1981 1982-1991 1992-2001 2002-2011
1. MACROECONOMIC SOUNDNESS
….. and will continue leading regional growth overpassing the worlds’ average GPD per capita towards 2020. GDP per capita, PPA ( $ to International constant cost of 2005)
Forecast - LATAM: Real GDP 2012-2014 (Average annual % variation) Peru
6.0
16,000
Peru Colombia
4.8
14,000
Chile
4.7
12,000
Brazil
4.3
Argentina Mexico
3.7
Latin America and Caribbean
10,000
8,000
3.4 6,000
Venezuela
World
3.0 4,000
1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 Source: IMF and World Bank
1.1. MACROECONOMIC SOUNDNESS MACROECONOMIC STABILITY ESTABILIDAD MACROECONÓMICA
Economic growth has been driven by rising private investment…. Private Investment 2000-2012 (Annual average variation %)
20.1
23.3
Private Investment 2000-2012 (US$ Billion)
25.9 34.6
12.0 6.3
39.3
22.1
11.7 10.0
8.1
29.5
27.3 22.4 19.5
0.2
15.1
-1.7 -4.7
8.7 8.4 8.4 9.2
10.5
12.3
Source: Central Reserve Bank of Peru and Ministry of Economy and Finance * Preliminary figure
2012*
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
2012*
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
-15.1
1. MACROECONOMIC SOUNDNESS
…… today represents 24% of GDP …. Total investment – LATAM 2011 (% of GDP)
Total investment 2000-2011 (% of GDP)
25.8 4.3
24.1
4.0
18.6 3.1
17.6
17.8
2.8
2.8
17.9 18.4 2.8
2.9
19.5
5.9
24.7
24.6
4.5
19.2
19.6
20.6
5.2
3.4
3.1
15.0
15.1
15.5
2001
2002
2003
2004
2005
2006
2009
14.8
17.7
2008
15.5
16.4
18.2
2007
16.3
2000
21.5
Source: Central Reserve Bank of Peru
24.9
22.9
21.5 20.3
25.6
25.1
2011
Public investment
2010
Inversión Privada Private investment Inversión Pública
Perú Peru
México Mexico
Colombia Chile Colombia Chile
Source: International Monetary Fund
Brasil Brazil
1. MACROECONOMIC SOUNDNESS
… Peru is an attractive market for foreign investment, which represents 4.7% of GDP Foreign direct investment – LATAM 2011 (% GDP)
Foreign direct investment flow 2000 - 2011 (US$ Billion) 8.2 8.1
7.0%
6.9 6.4 5.5
4.7% 4.0% 3.5
1.7%
Source: Central Reserve Bank of Peru and CEPAL
2011
2010
2009
2008
2007
2006
2005
1.6
2004
2002
2003
1.3
1.1
2001
2000
0.8
2.7%
2.6
2.2
1.6%
Chile PerúColombia Colombia Chile Peru Brazil Brasil Mexico México ArgentinaArgentina
1. MACROECONOMIC SOUNDNESS
‌Furthermore, the domestic demand is strengthening ‌. Imports of vehicles for private use (US$ million)
Real domestic demand (real annual Var. % )
11.8
352
1,349
13.1
12.3
Imports of microwaves (million of units)
10.3
83 7.2
4 times
7.5 times
180
2000
5.8
2000
4.1 3.7 3.8
2011
2011
Imports of televisions (million of units)
Domestic travelers by air (million of persons)
1,005
2000 Source: Central Reserve Bank of Peru and SUNAT
3.6
33 veces times
veces 22 times
2011
368 2010
2009
2008
2007
2006
2005
2004
2003
2002
-2.8
6.1
2011
2000
2011
1. MACROECONOMIC SOUNDNESS
‌ generating a massive growth of consumption markets. 2000
Source: Ministry of Economy and Finance
2011
1.1. MACROECONOMIC SOUNDNESS MACROECONOMIC STABILITY ESTABILIDAD MACROECONÓMICA
Complemented with a dynamic international trade… Balance of Trade 2000-2011 (US$ million) 44,000 39,000 34,000 29,000 24,000 19,000 14,000 9,000 4,000 -1,000
2000
2001
2002
2003
Exports
2004
2005
2006
2007
2008
2009
2010
2011
6,955
7,026
7,714
9,091 12,809 17,368 23,830 28,094 31,019 26,962 35,565 46,268
Imports
7,358
7,204
7,393
8,205
Balance of Trade
-403
-179
321
886
9,805 12,082 14,844 19,591 28,449 21,011 28,815 36,967 3,004
Source: Central Reserve Bank of Peru and Ministry of Economy and Finance
5,286
8,986
8,503
2,569
5,951
6,749
9,301
1. MACROECONOMIC SOUNDNESS
... a great diversification in products as well as markets Traditional exports (commodities) (US$ million) 40,000 30,000 20,000
Otros Plomo Petróleo Oro Cobre
Main business partners 2001
7.5 veces
10,000 2001
2006
2011
Non traditional exports (US$ million) 12,000 10,000 8,000
2011
Otros Químicos Textiles
5 veces
2001
2006
6,000 4,000 2,000 Fuente: Banco Central de Reserva del Perú
2011
1. MACROECONOMIC SOUNDNESS
In 2050, Peru will be one of the fastest growing economies ranking among the 30 main economies in the world.. Fastest growing economies
Economy size – World ranking 2010
2050 Ranking
Ranking
Country
1
China
2
India
3
Philippines
4
Egyp
5
Malysia
6
Peru
2050 country
Ranking
country
1
EE.UU.
1
China
2
Japan
2
EE.UU.
3
China
3
India
4
Germany
4
Japan
5
United kingdom
5
Germany
6
France
6
United kingdom
7
Italy
7
Brazil
8
India
8
Mexico
9
Brazil
9
France
10
Canada
10
Canada
44
Chile
26
Peru
46
Peru
32
Chile
1. MACROECONOMIC SOUNDNESS
… all under a stability macroeconomic framework, registering the lowest inflation rate in the region …. CPI – LATAM 2002-2011 ( Average annual variation %)
CPI in LATAM: 2001-2011 (Annual Var. %)
23.7 Peru
10.7
Argentina
6.6
Brazil
5.1
4.3
3.2
2.5
Chile Chile
Perú Peru
Chile
Venezuela Argentina
Brasil
Colombia
Colombia Mexico
México Mexico
CPI – LATAM projections 2012-2014 ( Average annual variation %) 33.5
11.8 2.0
3.0
3.4
3.5
Peru Perú
Chile Chile
Colombia Colombia
Mexico México
5.3
Brazil Brasil
Argentina Venezuela
1. MACROECONOMIC SOUNDNESS
… has kept a stable exchange rate and a country risk below the regional average … Exchange rates in LATAM 2001-2011 (Index, year base 2005 = 100) 180
Index JP Morgan EMBI+ (Basic points) Perú Peru Brasil Brazil
160
Chile Colombia
140
México Mexico
120
900
EMBI+ EMBI + Perú Peru
800 700
Latinoamérica Latin LatinAmerica America
600 500 400
100
300 80
200
E-01 S-01 M-02 E-03 S-03 M-04 E-05 S-05 M-06 E-07 S-07 M-08 E-09 S-09 M-10 E-11 S-11 M-12 Source: Central Reserve Bank of Peru, Ministry of Economy and Finances and CEPAL
J-07 M-07 O-07 M-08 J-08 N-08 A-09 A-09 D-09 A-10 S-10 J-11 M-11 S-11 J-12 M-12 S-12
100
60
1. MACROECONOMIC SOUNDNESS
…and it keeps a healthy debt level in relation with its international reserves… Public Debt - Peru 2003-2011 (% of GDP)
Public Debt – Latin America 2011 (% of GDP)
70
66.2
60 50
43.8
40
44.2
34.7
30 21.2 20 10
9.9
0 Chile Chile Source: Central Reserve Bank of Peru
Perú Peru
Colombia Colombia México Mexico Argentina Argentina Brasil Brazil
Source: IMF figure for Peru , Central Reserve Bank of Peru
1. MACROECONOMIC SOUNDNESS
…and keeps a healthy debt level in relation with its international reserves. Net International Reserves (US$ Billion)
Net International Reserves – Latin America 2011 (% GDP) 30
28
25 20
17 14
15
12 10
10
10
5 0 Peru Perú As of July 20, 2012 Source: Central Banks
Chile Chile
Brazil Brasil
Mexico Colombia México Argentina Argentina Colombia
1. MACROECONOMIC SOUNDNESS
The responsible economic policy granted Peru the investment grade and investors’ confidence. Investment grade Latin America benchmarking Country Chile
S&P
Countries as priority destinations for FDI 2011-2013 (World Ranking among 21 countries) Fitch
Moody´s
A+
A+
Aa3
Mexico
BBB
BBB
Baa1
Peru
BBB
BBB
Baa2
Brazil
BBB
BBB
Baa2
Colombia
BBB-
BBB-
Baa3
Bolivia
BB-
B+
Ba3
Venezuela
B+
B+
B2
Argentina
B
B
B3
Ecuador
B
B-
Caa2
Source: Standard & Poor`s, Fitch Ratings and Moody´s. Updated to Augusta 17, 2012
Brazil
4 3
Dropped 1 position
16
Peru
21
18 18
Chile
2011
2010
Improved 5 positions
Without changes
FRIENDLY INVESTMENT ENVIRONMENT
2. FRIENDLY INVESTMENT ENVIRONMENT
Peru offers a favorable legal framework for foreign investment: Non discriminatory treatment: Foreign investors receive the same treatment as local investors. Unrestrictive access to most economic sectors *. Free transfer of capital. Free competition. Guarantee for Private Property. Freedom to purchase stocks from locals. Freedom to access internal and external credit. Freedom to pay royalties. Network of investments agreements and member of ICSID and MIGA. Peru participates in the Investment Committee of the Organisation for Economic Cooperation and Development (OECD) – It promotes the implementation of the Guidelines for Multinational Enterprises. *Investments that require authorization: Located within 50 km in the frontier line and those destined to arms, ammunitions and explosive. Likewise, a principal local partner for investments in maritime cabotage as well as in air transport is required.
2. FRIENDLY INVESTMENT ENVIRONMENT
Special Regimes: Legal Stability Agreements Regime whereby the Peruvian Government guarantees:
INVESTORS Stability of the regulations regarding non discriminatory treatment. Stability of the income tax regime applicable to dividends.
RECEIVING COMPANY Stability of the recruitment regimes. Stability of the regimes for the promotion of exports. Stability of the Income Tax Regime
Stability to use freely the most favorable exchange rate available in the market. Stability of the free availability and remittance of foreign currency, dividends and royalties regime.
Requirement: Minimum investment of US$ 5 million in any economic sectors. US$ 10 million for hydrocarbon and mining sectors. Validity: 10 years. Concessions: Term according to the contracts life (Max. 60 years).
2. FRIENDLY INVESTMENT ENVIRONMENT
Special Regime: VAT Anticipated Recovery. Regime whereby the Peruvian Government grants the following benefits:
Granting the return of the Value Added Tax during the pre-productive stage of the project (minimum 2-year term). Applicable to all economic sectors For agricultural activity it is not necessary to meet a minimum investment amount. For other activities the minimum investment amount is US$ 5 million. The project can be divided into stages, phases or similar.
2. FRIENDLY INVESTMENT ENVIRONMENT
A steady tax regime: Tax
Applicable Rate 30.0%
Corporate profits
INCOME
Agriculture, agribusiness and aquaculture 15%
Dividends
4.1%
Royalties
30.0%
Interest rate on loans from abroad
4.9%
Value Added Tax (VAT) Financial Transactions Tax Temporary to net assets, applicable to the excess of S/. 1 000 000
18% 0.005% 0.4%
2. FRIENDLY INVESTMENT ENVIRONMENT
Continuous effort to facilitate the establishment and operation of business Peru ranks second in the region in the improvement of business regulations. Venezuela Colombia
177
Doing Business 2012
Guyana
114 Surinam
42
.
158
Ecuador
130
Brazil
Position
Country
1
Chile
2
Peru
3
Colombia
4
Uruguay
5
Paraguay
126
Peru
41
Bolivia Paraguay
102 Uruguay
Chile
153
90
39 Argentina
113
2. FRIENDLY INVESTMENT ENVIRONMENT
Recognition of a favorable investment environment 130
FORBES MAGAZINE
62
Peru ranks second in the list of the best places for doing business in Latin America
114 73 123
42
86 24 61
95
Source: Annual ranking of top economies for business 2011, Forbes magazine
Position 1 2 3 4 5 6 7 8 9 10
Country Chile Peru Uruguay Colombia Brazil Paraguay Argentina Ecuador Bolivia Venezuela
2. FRIENDLY INVESTMENT ENVIRONMENT
Investment Agreements Peru has signed and currently in force Agreements for the Promotion and Reciprocal Protection of Investment and Trade Agreements of further scope that includes investment chapters that underpin our liberalization policy.
Australia China* Korea* Malaysia Singapore* Thailand Japan
* Trade agreements
Canada* United States* Cuba El Salvador
Argentina Bolivia Chile* Colombia Ecuador Paraguay Venezuela
Germany Belgium and Luxemburg Denmark Spain Finland France Netherlands Iceland* Italy Liechtenstein* Norway Portugal United Kingdom Czech Republic Romania Sweden Switzerland*
It has also signed agreements to avoid double taxation with Andean Community, Brazil, Chile and Canada.
OPEN TRADE AND MARKET ACCESS POLICY
FRIENDLY INVESTMENT ENVIRONMENT
Reduced tariff structure with low tariff dispersion 1/
TARIFF LEVELS ADVALOREM + SURCHARGES
NUMBER
PROPORTION (%)
0%
4,224
55.9 %
6%
2,538
33.6 %
11 %
792
10.5 %
Total
7,554
100,0
TARIFF LINES 2/
EFFECTIVE AVERAGE TARIFF STANDARD DEVIATION
3.2 3.8
1/ Elaboration based on duties tariff of 2012, approved by S.D N°238 – 2011 – EF and published on December 24, 2011 2/ Sub-tariff of Chapter 98 Goods with special treatment of duties tariff Source: SUNAT – MEF Elaboration: SUNAT
3.
OPEN TRADE AND MARKET ACCESS POLICY
Working to become a globalized economy, with preferential access to the world’s largest markets
These countries stand for enlarged market of over 4 billion people with a joint GDP over US$ 56 billion 96% of Peruvian exports
Agreements in force
Agreements to become effective
Agreements under negotiations
INVESTMENT OPPORTUNITIES IN ATTRACTIVE SECTORS
AGRIBUSINESS SECTOR
Natural greenhouse. The best agricultural yields in the world 2010.
Sugar cane (2nd)
Asparagus and olives (3rd)
Artichokes (4th)
Grapes (6th)
Avocado (11th)
Seasonal windows in the most important markets. Projections expect that the 90,000 ha currently used for agro exports to double as consequence of large irrigation projects in portfolio. Over US$ 4,500 million in exports of fresh and processed products to over 156 countries. Organic and Natural Products with high export value.
AGRIBUSINESS SECTOR
Agricultural Exports (US$ million FOB)
Source: SUNAT, MINAG, ADEX Data Trade, BCRP and FAO
Agricultural Sector Exports per destination market (2011)
Source: BCRP, FAO, ADEX DataTrade.
FISHERIES SECTOR
Extensive fishing coast (3,080 km) and “water mirrors� that offer adequate conditions for the development of marine and continental aquaculture. First producer of fishmeal and fish oil in the world. Distribution of Peruvian fisheries products to over 100 countries. Trend towards product diversification.
FISHERIES SECTOR
Fisheries Exports (US$ million FOB)
Source: SUNAT
Fisheries Sector Exports per destination market (2011)
Source: ADEX Data Trade, Customs.
FORESTRY SECTOR
Presence of great biological diversity and highly valued timber. Development of hard tropical timber in the forest and soft timber in the highlands of the country. 2nd country with the largest natural forest area in Latin America. 78,8 million ha of natural forests, 10 million ha for reforestation and other areas for afforestation (plantations). Investment opportunities in industrial timber complexes.
FORESTRY SECTOR
Timber Exports (million of US$ FOB)
Timber exports by destination market 2011
250 213
213
219
200 170
168 155 150
167
136 114
108
100
50
0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Adex DataTrade , Aduanas.
TEXTILE SECTOR
Recognized quality of Peruvian pima cotton, considered as one of the most demanded and finest fiber in the world. First world producer of the finest South American camelids fibers: alpaca and vicuna. Long textile tradition favors workforce professionalization and training. International recognition as “full package� supplier of the best brands in the world. Sound trend towards textile and apparel exports growth. Annual average growth of 10% in the last 10 years. In January 2012 the exports reached US$ 162 million, 39% more compared to the last year.
TEXTILE SECTOR
Textile - Apparel Exports (US$ million FOB)
Source: ADEX Data Trade, Customs.
Textile and Apparel Exports Main Destination Countries (2011)
Source: ADEX Data Trade, Customs.
MINING SECTOR MINING SECTOR
Polymetallic country, second in copper, third in zinc and first in silver reserves worldwide. 13.61 % of the territory is subject to mining concessions, and only 1.09 % is used for mining exploration and exploitation. Worldwide: second producer of copper and silver, 3rd of tin and zinc. In Latin America: 1st gold, zinc, tin and lead producer; and 2nd copper, silver and molybdenum producer. In 2011, mining exports grew by 23.25% despite having registered a drop in the volume of production of most minerals. Peru is one of the few countries with nonmetallic mineral deposits, such as diatomite, bentonite, limestone and phosphate.
MINING SECTOR
Mining Exports (US$ million FOB)
Source: Adex Data Trade, MINEM, Customs.
Mining Sector Exports per destination market (2011)
Source: Adex Data Trade, Customs.
ENERGY SECTOR
Great energy potential: Wide availability of water and natural gas resources have made possible to deal with the increasing electric demand of the country (2011 growth rates: 8.3%) Resources to be discovered and exploited: There are other renewable energy sources to explore, such as solar, wind, biomass and geothermal energy sources. Energy matrix mostly based on renewable sources (about 57% of the electric demand is generated with hydro-electric sources, 38% with natural gas, 2% with coal and 3% with other sources) In the last five years, the energy production has increased in 40.38% due mainly to the thermoelectric generation growth with an annual average rate of 16%. Main economic groups that comprise 62% of energy production in Peru are Endesa, Globeleq, Suez and Duke Energy.
ENERGY SECTOR
Peru’s energy matrix , 2010 Participation per sources*
National energy production GWh 2000-2011
Thermal
Source: Ministry of Energy and Mines Elaboration: PROINVERSIÓN * After being in the Transformation Center and/or with deduction of loses.
Source: Ministry of Energy and Mines Elaboration: PROINVERSIÓN
hydarulic
PETROCHEMICAL SECTOR
In 2011, the natural gas production reached 401, 169 million cubic feet, boosted by the greater demand of power generation plants and the major consumption of vehicular, domestic and commercial natural gas. Peru is the only sustainable source of natural gas in the South American Pacific rim. Peru has oil fields which have not been explored yet (26.60 million of ha), becoming therefore, a potential petrochemical pole. Petrochemical industry merges with natural gas production and other hydrocarbons adding an added value using the ÂŤUpstream IntegrationÂť Development Strategy. Fertilizers, plastics and detergents are some of the products made by petrochemical industry. US$ 17,150 million from private investment will be assigned to the construction of two ammonia plants, two ammonium nitrate plants, one urea plant and one ethylene plant to be placed in the departments of Ica and Moquegua.
PETROCHEMICAL SECTOR
Production of Natural Gas, 2001 -2011
Natural Gas exports per destination market -2011 Total exports 2011: US $ 1,288 million
57%
(Million US$ FOB)
Source: Perupetro
Source: Adex Data Trade Elaboration: PROINVERSIĂ“N
TOURIST SECTOR
Important cultural destination to Inca and PreInca cultures archaeological sites. Machu Picchu is one of the new 7 Wonders Worldwide. Diversity of natural landscapes. Birds and orchids watchers ‘ paradise. Lima is the gastronomic capital of Latin America. Significant investment from international recognition.
hotels
of
Investment opportunities in the 8 prioritized tourist destinations: North beaches, Amazonas River, Amazonas-Kuelap, Moche Route, Lima, NazcaParacas, Valle del Colca and Puno-Titicaca Lake.
TOURIST SECTOR
Tourist Entry (thousand of people)
Tourists arrival per Origin Region (2011)
3,000 2,598 2,500
2,299 2,058
2,140
Central America, 1.8% Asia, 3.8%
OceanĂa, 1.4% Africa, 0.2%
1,916
2,000 1,721 1,571 1,500
Europe, 17.7%
1,350 1,064
1,136 North America, 19.8%
1,000
500
0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: MINCETUR. Source: MINCETUR.
South America, 55.2%
REAL ESTATE SECTOR
Annual average growth of construction GDP for January – July 2012 is 15.7.0%.
Housing deficit affects 25% of population.
Lima holds 25% of total deficit, and 48% of quantitative deficit.
There are several programs for housing financing, based on households socio-economic conditions and income level: Techo propio, Fondo Mi Vivienda and commercial banking.
Mortgage credits grew an average of 18% in the last 4 years (2008 -2011).
REAL ESTATE SECTOR
Housing deficit nationwide (2010)
Mortgage credits granted by the Financial System 2006 -2011 (million Soles)
Quantitative deficit 389,745 21%
Qualitative deficit 1,470,947 79%
Source: Census INEI 2007
Source: SBS
Quantitative deficit: Difference between number of families and houses. Qualitative deficit: Conditions of houses according to preestablished minimum standards, such as access to utilities, quality of materials of houses and number of people living in one house. Source: Ministry of Housing
TECHNOLOGICAL SERVICES
The lowest labor cost per operator in Latin America (US$ 270) is a major determinant in an industry with 60% of the costs related to human resources. The industry currently represents 15.574 positions, and it generates 29.665 direct jobs, and exports have tripled in 5 years. The software sector has present in the last 6 years an annual average growth rate of 15%, and it generates 6,000 direct jobs highly qualified. The contact centers services exports, data processing, application of IT program and similar are exempt from VAT. Availability of technological resources and low real estate costs. The implementation of the Data Protection Law (approved in 2011) will strengthen the position of companies, making possible to establish more trading links.
TECHNOLOGICAL SERVICES:
Contact Center Services Exports US$ thousand
Software exports US$ million
*
*
*
Source: PROMPERU * Projection according to PerĂş Service Summit 2011
Source: PROMPERU *Projection according to Service Summit 2011
TRANSPORT INFRASTRUCTURE
Peru has prioritized the development of infrastructure to increase competitiveness and set up a logistics hub that links the South American region with the Asia Pacific Infrastructure investments have boosted integration towards new markets, which have been unfold across the FTAs Concessions in land, port and airport infrastructure represents investment commitments of approximately US$ 7,000 million. The developed infrastructure will be complemented by new investments. By 2016 new projects for more than US$ 20,000 million (Public Works and PPP) will be executed, representing significant investment opportunities for contractors and operators.
TRANSPORT INFRASTRUCTURE
Investment in transport infrastructure projections to 2016
Infrastructure Road
Million of US$ 11,000.00
Railroad
8,300.00
Airports
450.00
Ports
300.00
Waterways Total
Source : MTC
46.40 20, 096.40
www.proinversion.gob.pe contact@proinversion.gob.pe