PERU
COUNTRY ANALYSIS
c o u n t r y
TRAITS l o c at i o n south america g e o. s i z e 496, 223 sq. miles g e o. r e g i o n s c o a s t, a n d e s , j u n g l e
government Constitutional Republic president O l l a n ta H u m a l a c u r r e n cy Peruvian nuevo sol
c a p i ta l lima
m i n i m u m wa g e 750 pen/month
p o p u l at i o n 30, 147, 935
i n f l at i o n r at e 3.02
languages S pa n i s h + Q u ĂŠ c h u a
# o f F e s t i va l s 3,000
religion r o m a n c at h o l i c
# o f n at i o n a l h o l i d ay s 13 (6 CHristian)
va l u e s fa m i ly + R e l i g i o n
poverty 23.9%
E D U C AT I O N 13 years
l i t e r a cy r at e 94%
c o u n t r y
STABILITY ECONOMIC ENVIRONMENT Peruvian sectors aiding in the country’s continued economic growth include mineral exports, agriculture, tourism, textiles, fishing, forestry, and narcotics. Peru is considered one of the quickest growing economies due to the stable currency exchange rates and low inflation (Peruvian). While the Peruvian economy fluctuates throughout the regions, as a whole, the country is primarily stable. The country’s most recent GDP, as recorded by World Economics, was 202.3 billion USD and is projected to steadily rise in the upcoming years (as seen in the graph on the right). While Peru’s inflation rate has been lower in previous years, it is finally plateauing. This results in less fluctuation and even less uncertainty for those wishing to conduct business on Peruvian soil.
e
j
l
16
130
07
g d p
political ENVIRONMENT According to the CIA’s World Fact Book, Peru operates under a Constitutional Republic, comprised of three separate branches: Executive Branch, Judicial Branch, and Legislative Branch. Within the Executive Branch, President Ollanta Humalais acts as head of government and chief of state followed by Vice President Marisol Espinoza Cruz. The Judicial Branch is comprised of the Supreme Court with 16 acting judges followed by the National Council of the Judiciary or National Judicial Council made up of 7 judges. The Legislative Branch is made of 130 members who are elected directly in multi-seat constituencies by proportional representation vote to serve 5-year terms (World). As a whole, the Peruvian government is stable and is working extremely hard to improve living conditions, decrease poverty, prevent riots, and provide a stable environment.
SOCIAL ENVIRONMENT There have been several instances in Peruvian history that have caused quite a stir. Riots and protests have arisen in a variety of cities in regards to unaware wages, low quality working conditions, and the vast difference in social class throughout the regions.
Ollanta Humalais has continued efforts to aid in the improvement of the political, social, and economic environments throughout the country. Specifically, he aims to maintain free-market policies, decrease the gap in economic distribution throughout the regions, and eradicate the lack of attention presented to the poorer, indigenous people (Taft-Morales). According to Taft, roughly a year and a half into his presidency, he decreased the poverty rate to 26% which is not as equivalent to his initial stance of cutting the poverty by 50%.
60
poverty headcount ratio
50
40
30
2005
2006
2007
2008
2009
2010
2011
http://data.worldbank.org/indicator/SI.POV.NAHC/countries/PE?display=graph
2012
2013
2 0 14
c o u n t r y
LEAD-TIMES L E A D -T I M E FA C T O R S h o l i d a y s 1 3 n at i o n a l h o l i d ays 6 n at i o n a l C h r i s t i a n h o l i d ays
M a u n d y T h u r s d ay G o o d F r i d ay S t. P e t e r a n d S t. P a u l D ay I n d e p e n d e n c e D ay ( 2 d ay s ) S a n ta R o s a D e L i m a D ay C h r i s t m a s D ay
L E A D -T I M E FA C T O R S d i s a s t e r s earthquakes Tsunamis and High tides Flooding and landslides
L E A D -T I M E FA C T O R S f e s t i v a l s
17
y e a r ly f e s t i va l s in lima
C O N D U C T I N G
BUSINESS business etiquette o v e r v i e w Interaction: Group orientation, respect, and trust are three areas that Peruvian businessmen extremely value (Katz). According to Luthar Katz, author of Negotiating International Business - Peru, states that business relationships are made between people, not necessarily businesses. These individuals trust those whom which they have built strong relationships so it is essential to maintain the contact. Communication: It is beneficial to be able to speak Spanish due to the languages spoken within the country. If one does not understand Spanish, it is respectful to ask if having an accompanying interpreter would be allowed. When speaking English, it is best to speak in short and clear statements to avoid the least amount of confusion. It is also crucial to refer to yourself as “North Americans” opposed to Americans because this is viewed as not including South Americans in the “Americans” description. Other: Peruvians, like many other South Americans, prefer to be in close contact with those they are speaking to, so, it would be disrespectful to move away. In terms of dressing for professional settings, men are expected to wear dark suits and look presentable. First impressions are key. When it comes to work outings, it is imperative to know that Peruvians do not feel inclined to arrive at the exact time stated. It is common for them to show up 30 minutes late and still be considered on time. When at these outings, Peruvians will not discuss business during dinner.
business etiquette n e g o t i a t i n g L E V E R A G E R E L AT I O N S H I P S S L O W + P R O T R A C T E D PA C E USED TO HARD BARGAINING DECISIONS BASED ON S I T U AT I O N S N O T P R I N C I P L E S
business etiquette m e e t i n g s choose local i n t e r m e d i a ry well aligned teams are crucial schedule meetings t w o w e e ks i n a d va n c e be punctual A LWAYS B R I N G M O R E B U S I . A LWAYS S TA R T W I T H S M A L L TA L K
A L L I N F O R M AT I O N F O U N D I N N e g o t i at i n g I n t e r n at i o n a l B u s i n e s s - P e r u ( S e e A p p e n d i x )
S T A T E
O F
APPAREL IND. $272
million dollars in textile exports jan-feb 2014 according to sourcing journal
411,000
textile workers according to President o f t h e N at i o n a l I n d u s t r i a l i s t s S o c i e t y
$750
soles per month ($282 USD) according to Human Rights and c o u n t ry g u i d e
a p pa r e l i n d u s t ry b r e a k d o w n The rise of fast fashion has been a huge aid in the success of many South American countries, especially Peru. According to the Sourcing Journal, Peru is valued for its high-quality manufacturing sites where model compliance standards and workmanship have gone unmatched in comparison to other South American competitors. Since 2013, the United States has increased its purchasing power in Peru, strengthening the country’s export revenue by 12.2% (Donaldson (1)). These numbers indicate the increased interest in Peru thus enhancing its projected growth for the future. Peru prides itself on its pima cotton as well as its alpaca fiber textiles (Donaldson). With the quality of these fibers being in such high demand, there have been several big name brands who have migrated their manufacturing to Peruvian soil. Some of these brands include Lilly Pulitzer, Hugo Boss, Marc Jacobs, Theory, John Varvatos, POLO Ralph Lauren, and many more (Donaldson(1)). Many of Peru’s apparel factories are capable of executing advanced processes and finishes such as mercerization and various practices to minimize fabric shrinkage (Donaldson). According to the Sourcing Journal, these factories use the utmost care when handling the product they are manufacturing which has been a key selling point for the high-quality brands that operate in Peru. Trade organizations to be aware of include: International Alpaca Association (IAA), American Apparel Producers’ Network (AAPN) (Academy).
t r a d e
AGREEMENTS United States-Peru Free Trade Agreement (PTPA) created on February 1st, 2009 The first benefit is directly tied to the environment. With environmental issues becoming more and more recognized, it is crucial for companies in all industries to adapt to the necessary changes. This agreement strongly encourages businesses involved to enforce some form of domestic laws that suit the environment as well as, “adopt, maintain, and implement laws, regulations and all other measures to fulfill those obligations.” This area of the agreement also encourages conserving and protecting biodiversity and the opinions and concerns of different communities are heard. This section is important and should be appreciated by all companies. It meets the needs of not only the environment but also meets the personal and moral needs of the consumers that these brands are serving. The second beneficial component of this agreement is the establishing of a safe and reliable legal framework for all United States investors that are operating on Peruvian soil. Thes individuals, “in almost all circumstances the right to establish, acquire and operate investments in Peru on an equal footing with local investors (Peru Trade). This area helps to further ensure the freedom and abilities of U.S. investors. It leaves room for little skepticism and helps to increase the attractiveness of operating in Peru. Finally the third and last key beneficial areas within this agreement is that it allows significant market access within its service sector to now include financial services (Peru Trade). The upside to this area is that the United States is no longer required to hire national professionals opposed the utilization of U.S. professionals to measure the purchasing of local goods. Along with this new adjustment, Peru now allows mutual and pension funds in their country to be used by portfolio managers in our country (Peru Trade).
Source: http://www.limaeasy.com/business-guide/free-trade-agree ments-ftas-with-peru#signed-agreements
OTHER NOTABLE PERUVIAN FREE TRADE AGREEMENTS China Free Trade Agreement (FTA) European Union (EU) Free Trade Agreement (FTA)) World Trade Organization (WTO) Trans-Pacific Partnership Agreement (TPP) * * Pending
M A R I N E
TRANSPORTATION
I N T E R N AT I O N A L P O R T S PORTS: According to the World Port Source, Peru has 33 ports in which they do business. Among these 33 ports, Port of Callao, Port of Ilo, Port of Iquitos, Port of Matarani, Port of Paita, and Port of Salaverry are the ports that service freight companies. Port Callao, Port Matarani, and Port Paita are three key ports that currently have the most scheduled arrivals. Below is an image that depicts where on the Peruvian coastline the ports are located.
S H I P P I N G C O M PA N I E S Mediterranean Shipping Company: A private, world leader in global container shipping that operates in 150 countries. When shipping containers internationally to the United States, it takes roughly two weeks between ports. This transit time was estimated from Peru’s Calloa Port to United States’ Savannah port (Search). Seaboard Marine: Operates between the United States, the Caribbean Basin, and Central and South America (About Us). According to the company website, it takes a shipment about 16 days to be transported from Calloa to Houston, TX.
SHIPPING COSTS
$1571- $1736 Source: http://www.searates.com/maritime/peru.html
f r o m c a l l a o, p e r u
to miami, usa
textil del ville
TEXtimax
about: Textil De Ville is a vertically integrated
about: According to the company’s website,
supplier who specializes in the production of knit garments. Thanks to the impressive machinery, allowing for the production of high quality garments, Textil De Ville is one of Peru’s top factories (Donaldson (2)). According to Sourcing Journal, they are also a certified Worldwide Responsible Apparel Production or WRAP factory. To add to the quality of this manufacturer, there is also an on-site water treatment facility (Donaldson(2)).
Textimax is one of Latin America’s most important vertically integrated manufacturers. They began production in 1991 and since their founding, they have become both WRAP and BASC certified for their Social Responsibility and Integrated Security Management System respectively.
product category : T-shirts, henleys, polos, knit dresses, jackets and pants
production : According to Sourcing Journal, they produces roughly 650,000 garments/month. Orders must meet 600 pieces per color, 2,400 pieces per style minimum requirement . And lead times for basics range from 45 to 60 days and 75 to 90 days for fashion items.
customers : POLO, Lacoste, Juicy Couture and
Burberry, Victoria’s Secret, Dillards, Lands End, Lilly Pulitzer, Tommy Hilfiger
contact : Miss Virginia Vilchez Customer Service Manager Km. 200 Panamericana Sur, Chincha Baja, Ica, Peru E : virginia.vilchez@textildelvalle.pe T : 51 (1) 217-0900 W : http://www.textildelvalle.pe
product category : Knitted graphic tops, T-shirts, tank-tops, fashion shirts, and polos
production : On average, Textimax produces and average of 100,000+ garments per day which adds up to 1-2 million pieces/month (Donaldson (2)). Textimax employees produce 200+ styles and sample 1,200 items/week. 500 pieces per style/ color is the minimum order amount the company will produce (Donaldson (2)).
customers : Ralph Lauren, Express, Boss by Hugo Boss, Under Armour, Old Navy, BCBG, Victoria’s Secret, Calvin Klein, Kennith Cole
contact : Patrick Petch, Commercial Manager T : (511) 713-7000 E : patrick@textimax.com.pe W : http://www.textimax.com.pe/index. php?controllers=contact&action=formcontact&PId=6
L I S T
O F
SUPPLIERS INDUSTRIA TEXTIL DEL PA C I F I C O S. A . about: Founded in 1989, Industria Textil Del Pacifico S.A. is a leading manufacturer in knitted Premium Peruvian Pima (along with a variety of other) garments. Due to their level of quality in production, this company has reached top ten status among all manufactures in the Peruvian region.
product category : Polos, T-shirts, henleys, hoodies, pants and shorts
production : The factory produces roughly 400,000 polo units/month and 700,000 to 1 million basic units/month (Donaldson).
customers : Under Armour, JC Penny, Chico’s, Dillards, Lands End, Eddie Bauer, VF Corporation
contact : T : (51-1) 336-8174 E : intexpac@intexpac.com W : http://intexpac.com/index.php?page=home
hailpesa about: The company began in 1979 has become one of Peru’s largest, vertically integrated manufacturers. Thanks to their vertically integrated status, they are fully able to control all levels of production and quality. A fun fact about this company is that they were one of the fist Peruvian factories to offer organic cotton (Donaldson (2)).
product category : Knit T-shirts, polo shirts, rugby shirts, sweatshirts, pants, and shorts
production : This factory produces 485,000 lbs of knitted fabric/month along with 550,000 cut and sew knit garments/month (Donaldson).
customers : Guess Inc., Nautica Men’s Sportswear, Lucy Activewear Inc., Chico’s, The North Face, Under Armour Inc., Vans
contact : T : (511) 319 20 30 E : info@hailpesa.com W : http://www.hialpesa.com/
A L L I N F O R M AT I O N F O U N D o n c o m p a n y w e b s i t e s a n d S o u r c i n g S p o t l i g h t: M a n u f a c t u r i n g i n P e r b y Ta r a D o n a l d s o n w h e n s tat e d
benefits high literacy rate low + stable inflation rate high quality products and materials gdp is continuously growing wide selection of quality suppliers a part of trade agreement with United States Low working wages
r i s ks drastic difference in social classes Frequent riots + protests due to working conditions Unmet standards in many factories factory working wages do not meet living standards language + behavior barrier
WORKS CITED C O U N T RY T R A I T S “Peru Inflation Rate | 1970-2015.” Trading Economics, 2015. Web. 11 May 2015. <http://www.tradingeconomics.com/peru/inflation-cpi>. “Peru Minimum Monthly Wage | 1990-2015.” . Trading Economics, 2015. Web. 11 May 2015. <http://www.tradingeconomics.com/peru/minimum-wages>. “The World Fact Book: Peru.” Central Intelligence Agency. Central Intelligence Agency, 28 Apr. 2015. Web. 11
May 2015. <https://www.cia.gov/library/publications/the-world-factbook/geos/pe.html>.
C O U N T RY s ta b i l i t y “Peruvian Economy Economic History & Economy in Peru Today.” Peruvian Economy. LimaEasy, n.d. Web. 02 May 2015. <http://www.limaeasy.com/peru-info/peruvian-economy>. “Politics & Political History of Peru Colonial Times until Today.” Politics & Political History of Peru. LimaEasy, n.d. Web. 02 May 2015. <http://www.limaeasy.com/peru-info/peruvian-politics-political-history>. Taft-Morales, Maureen. Peru in Brief: Political and Economic Conditions and Relations with the United States (2013): 1-17. Congressional Research Service, 7 July 2013. Web. 2 May 2015. <https://www.fas.org/sgp/crs/row/R42523.pdf>. “The World Fact Book: Peru.” Central Intelligence Agency. Central Intelligence Agency, 28 Apr. 2015. Web. 11 May 2015. <https://www.cia.gov/library/publications/the-world-factbook/geos/pe.html>. “Poverty Headcount Ratio at National Poverty Lines (% of Population).” Poverty Headcount Ratio at National Poverty Lines (% of Population). The World Bank Group, 2015. Web. 11 May 2015. <http://data.worldbank.org/indicator/SI.POV.NAHC/countries/PE?display=graph>.
l e a d t i m e fa c t o r s “Holidays in Peru in 2015.” Holidays and Observances in Peru in 2015. Time and Date, 2015. Web. 03 May 2015. <http://www.timeanddate.com/holidays/peru/>. Ojeda, Hillary. “Peru: One of the Most Vulnerable Countries to Natural Disasters.” Peru This Week. Peru, 19 Feb. 2015. Web. 11 May 2015. <http://www.peruthisweek.com/news-peru-natural-disasters-left-6344-victims-oct-2014 feb-2015-105327>. “Feasts & Festivals in Lima Peru, a Country with Numerous Feast and Festivals.” Feasts & Festivals in Lima. Li maEasy, Lima Peru, 2006-2016. Web. 11 May 2015. <http://www.limaeasy.com/lima-info/feasts-festivals-in-lima>.
CONDUCTING BUSINESS Katz, Lothar. “Negotiating International Business - Peru.” Negotiating International Business - Peru (n.d.): n. pag. Negotiating International Business - Peru. Negotiating International Business - The Negotiator’s Reference Guide to 50 Countries Around the World, Mar. 2008. Web. 6 May 2015. <http://instruction2.mtsac.edu/rjagodka/BUSM_51_Project/Negotiating/Peru.pdf>.
S TAT E O F A P PA R E L I N D U S T RY “Apparel Manufacturers Associations Worldwide.” Academy of Couture Art- The Couture Fashion College. Academy of Couture Art, 2015. Web. 11 May 2015. <http://www.academyofcoutureart.edu/industry/trends-and-textiles-shows/>. Donaldson, Tara. “Peru Textile and Clothing Exports Up 7%, U.S. Leads Growth - Sourcing Journal Online.” Sourcing Journal Online. Hertzman Media Group, 16 Apr. 2014. Web. 11 May 2015. <https://www.sourcingjournalonline.com/peru-textile-clothing-exports-7-u-s-leads-growth-td/>. Donaldson, Tara. “Sourcing Spotlight: Manufacturing in Peru - Sourcing Journal Online.” Sourcing Journal Online. Hertzman Media Group, 18 Nov. 2014. Web. 11 May 2015. <https://www.sourcingjournalonline.com/sourcing-spotlight-manufacturing-peru-td/>.
trade agreements “Peru Trade Promotion Agreement | United States Trade Representative.” Peru Trade Promotion Agreement | United States Trade Representative. Office of the United States Trade Representative, n.d. Web. 04 May 2015. <https://ustr.gov/rade-agreements/free-trade-agreements/peru-tpa>. “Free Trade Agreements (FTAs) with Peru.” LimaEasy- The Lima Guide. LimaEasy, Lima Peru, 2006 - 2015. Web. 11 May 2015. <http%3A%2F%2Fwww.limaeasy.com%2Fbusiness-guide%2Ffree-trade-agreements-ftas-with- peru%23signed-agreements>.
t r a n s p o r tat i o n “About Us - Seaboard Marine.” Seaboard Marine. Seaboard Marine, 2015. Web. 04 May 2015. <http://www.seaboardmarine.com/about-seaboard-marine/>. “Freight Calculator.” World Freight Rates. World Freight Rates, 2013. Web. 11 May 2015. <http://worldfreightrate. com/en/freight>.“Ports of the World.” FleetMon.com. JAKOTA Cruise Systems GmbH, 2015. Web. 04 May 2015. <http://www.fleetmon.com/en/ports>.
“SEARCH SCHEDULES.” MSC Shipping Schedule. MSC Mediterranean Shipping Co S.A., 2015. Web. 04 May 2015. <https://www.msc.com/per/help-centre/tools/search-schedules>.
suppliers Donaldson, Tara. “Sourcing Spotlight: Manufacturing in Peru - Sourcing Journal Online.” Sourcing Journal Online. Hertzman Media Group, 18 Nov. 2014. Web. 11 May 2015. <https://www.sourcingjournalonline.com/sourcing-spotlight-manufacturing-peru-td/>. http://www.hialpesa.com/ http://intexpac.com/index.php?page=home http://www.textildelvalle.pe http://www.textimax.com.pe/index.php?controllers=contact&action=formcontact&PId=6
taryn ford savannah college of art & design