Since 2006, Peru has signed trade deals with the US, Canada, Singapore, China, Korea, Mexico, and Japan, concluded negotiations with the European Free Trade Association and Chile, and begun trade talks with Central American countries and others. The US-Peru Trade Promotion Agreement entered into force 1 February 2009, opening the way to greater trade and investment between the two economies.
Peru is a focus country under the Government's Latin America Strategy. New Zealand and Peru work together in APEC and Peru is participating in negotiations for an expanded Trans-Pacific Strategic Economic Partnership Agreement.
The Republic of Peru is New Zealand's 70th largest export market (NZ$40.49 million), and our fourth largest market in South America. New Zealand's export to Peru stood at NZ$80 million in 2011, mainly dairy products, frozen fish, and malt extracts.
Investment opportunities for New Zealand in Peru are found particularly in the provision of specialised services related to industries that are pivotal to Peru's economy and where New Zealand has expertise such as agriculture, forestry and energy. Nonetheless, it is worth noting that, given the high rate of growth of the Peruvian economy and the growing needs of a population of almost 30 million people with increasing incomes, there are opportunities for investments of all scales, in practically every sector.
Additionally, Peru's location, strong network of free trade agreements, relatively cheap access to labour, abundance of natural resources, and friendly investment environment makes it an ideal operation centre either for business or production. Moreover, if production is destined for exports, government incentives such as Drawback and Free Trade Zones may apply and prove attractive.
Peru is a founding member of the Pacific Alliance, signed in June 2012, along with Mexico, Colombia, and Chile. The Pacific Alliance is an economic integration initiative between the four countries. New Zealand is an observer which is one of the mechanisms in which New Zealand can engage with those countries and as a result it can open doors for New Zealand by being part of one of the world's most dynamic economic blocs.
Facts about Peru's economy
- GDP growth has been in the 6-9% range for the last three years, due partly to a leap in private investment, especially in the extractive sector, which accounts for more than 60% of Peru's total exports.
- Peru's major trade partners are the United States, China, the European Union, Switzerland, Canada, and Japan. Spain, the United States, and South Africa are the three leading investors in Peru.
- The services sector contributes 70.3% to GDP and employs three quarters of the working population.
- Peru has a population of 30 million people. Its urban and coastal communities have benefited much more from recent economic growth than rural, Afro-Peruvian, indigenous, and poor populations of the Amazon and mountain regions.Peru ranks 43 of 185 in the World Bank's 2013 Ease of Doing Business Report.
Opportunities for New Zealand business
Agriculture accounts for 4.8% of Peru's GDP. Peruvian agriculture is a sector of small producers in which 85% have less than 10 hectares. Peru has 7.6 million hectares with direct agricultural potential, but less than 3.6 million are properly used.
Traditional exports are coffee, sugar and cotton; but a diverse range of products are grown with a higher productivity than in other countries including: artichokes, asparagus, dry paprika, mangos, grapes, avocados, lemons and bananas.
According to estimates by the Ministry of Agriculture, Peruvian agricultural exports will grow at double digit rates over the coming years and the Government aims to double the sector's exports every 5 years. Peruvian biodiversity enables the development of new agricultural exportable products, generating investment opportunities. However, there is still a need to improve agriculture productivity, which is an interesting opportunity for New Zealand companies that provide agritechnology equipment.
With 3,080 kilometres of seashore, 322 kilometres of sea boundary and zones with very ample continental platforms, Peru is a country with a wide range of territory to exploit and diverse marine species to develop. Peru is one of the world's principal fishing countries, second in terms of fish landings and the leading exporter of fishmeal and fish oil. This is due to the high yield and the nutrient rich waters near Peru, the diversity of species and the leadership of national and international enterprises with operations in the country.
The private sector plays an important role in the fishing industry. Companies in this sector are making important investments in the frozen and canned industry, focusing on fishmeal.
Peru's legal framework promotes aquaculture development including through income tax reductions (15% compared to the usual 30%), advanced sales tax return for the production stage and suspension of payment for aquaculture rights.
The US Geological Survey considers Peru to have the third largest reserves of gold, silver, copper and zinc in the world. Mining accounts for 5% of Peru's GDP and 61% of Peruvian exports. Peru is the world's largest producer of silver and the second largest producer of copper and zinc. Peru also is the third largest producer of tin and fourth largest producer of mercury and molybdum. There are opportunities for New Zealand companies to offer products and services targeting the mining industry.
Peru's energy resources make it an ideal place to invest in this sector. In 15 years, Peru has increased its hydrocarbon reserve level four-fold and its electricity generation capacity has risen by more than 70%. In spite of this progress, there is still much to be done to turn Peru into a real energy powerhouse, and private investments will play a key role.
Peru has an estimated potential to generate 3,000 MW of electricity through geothermal energy, which may be a good opportunity for New Zealand companies operating in this sector.