Martin Quevedo
Quality Control Partner at Kreston Perú
Investing in Peru: Factors increasing Foreign Direct Investment
March 7, 2024
Martín Quevedo, Quality Control Partner at Kreston Perú, discusses investing in Peru, and explains the factors influencing the increase in Foreign Direct Investment (FDI). The article highlights the nation’s favourable environment, macroeconomic stability, and specific policies, positioning Peru as an attractive destination for international investors despite lingering challenges.
Peru’s strategic initiatives for FDI
Peru is undertaking key initiatives to stimulate Foreign Direct Investment (FDI), standing out for its favourable environment and policies to consolidate its position as an attractive destination for international investors. The implemented measures include signing free trade agreements with over twenty countries, facilitating access to global markets and promoting smoother trade. A strong legal framework has also been established to protect investors, ensuring legal stability and intellectual property protection, crucial elements for attracting foreign investment.
Macroeconomic stability: Investing in Peru
Peru is distinguished by its impressive macroeconomic stability, a feature that places it among the most competitive countries in Latin America. The country’s macroeconomic indicators reflect sustained economic
growth, controlled inflation that has maintained single-digit figures for twenty-six
consecutive years until the end of 2023, and international reserves representing 29.4% of GDP. Furthermore, the fiscal deficit has remained at manageable averages, with 3.4% of GDP over the last five years and a projection aiming for a reduction to 1.6% by the end of 2023. On the other hand, public debt is estimated not to exceed 33% of GDP by the end of the same year.
Sectoral opportunities: mining, finance, communications, and energy
This favourable macroeconomic panorama, combined with specific policies to promote FDI, suggests that Peru is wellpositioned to experience a significant increase in foreign investment in the coming years. Despite previous political challenges that may have generated some hesitation in the investment environment, there is evidence of recovery and renewed interest in the country as an investment destination. FDI is primarily directed towards strategic sectors such as mining, finance, communications, and energy, demonstrating the diversity and richness of opportunities available in the Peruvian market.
Although Kreston Peru does not directly work with companies in these sectors, it is ready to advise on macroeconomic indicators and other relevant information that could be crucial for locating foreign investments in Peru.
Additionally, significant mining projects that had been paused due to conflicts between the Peruvian state and local communities, driven by political differences, are expected to be reactivated. In the mining sector alone, the reactivation of projects exceeding $9 billion in investment is anticipated, which could make a significant difference in FDI flows in the post-2023 period.
Navigating Peru’s investment landscape
However, it is important to recognise that challenges such as insecurity and the perception of political corruption remain present and could negatively impact the investment climate. Nevertheless, Peru’s solid macroeconomic fundamentals, along with the independence of the Central Reserve Bank of Peru, the confidence placed by current investors, and a government direction leaning towards a centreright stance, suggests that the country maintains a conducive environment for sustained economic growth and continued attraction of foreign investment. This set of factors highlights the resilience of the Peruvian economy and its ability to overcome adversities, maintaining a promising outlook for foreign investment.
If you would like to speak to someone about doing business in Peru, please get in touch.
