Overseas Information Overseas Market Information Peru Fiscal Burden Synopsis of the Country Peru has moderate income tax rates. Both the flat income tax rate and the top corporate tax rate are 30 percent. Other Capital : Lima taxes include a value-added tax (VAT), a property transfer Currency : Peruvian Nuevo Sol (PEN) tax, and a capital gains tax. In the most recent year, overall Official language : Spanish, Quechua, Aymara tax revenue as a percentage of GDP was 15.1 percent. Business : Spanish, English Languages Government Intervention Population : 6831306 (July 2008 est.) Total government expenditures, including consumption and Total Area : 1285220 sq. kms transfer payments, are low. In the most recent year, GDP : $131.4 billion (2008 est.) government spending equaled 16.5 percent of GDP. The GDP Growth Rate : 4.5% (2008 est.) government has restructured the privatization agency to focus on large enterprises. A group of concessions was GDP Per Capita : $8,500 (2008 est.) offered in energy and transportation beginning in early 2008. Major Exports : Copper, gold, zinc, crude petroleum and petroleum products, coffee, Foreign Investment potatoes, asparagus, textiles, Peru provides national treatment to foreign investors and fishmeal there is no screening process. Investments in domestic and Exports Value : $33.27 billion f.o.b. (2008 est.) foreign banking and in defense-related industries require Major Countries : US, China, Canada, Japan, Chile, prior approval and certain sectors are reserved for domestic of Export Switzerland, Spain investors. Other deterrents to investment include weak Major Imports : Petroleum and petroleum products, enforcement of contracts, non-transparent and burdensome plastics, machinery, vehicles, iron bureaucracy, restrictive labour regulations, and corruption. and steel, wheat, paper Residents and non-residents may hold foreign exchange Imports Value : $29.08 billion f.o.b. (2008 est.) accounts. There are no restrictions or controls on payments, Major Countries: US, China, Brazil, Ecuador, Argentina, transactions, transfers, or repatriation of profits. Capital of Import Chile, Colombia transactions face minimal restrictions. Foreign investors may not acquire mines, lands, forests, waters, or fuel or Peru has emerged from the political instability of the late energy sources within 50 kilometers of Peru's borders. 20th century, and former President Alberto Fujimori has been imprisoned and faces additional charges for offenses Regulation allegedly committed during a decade of autocratic rule and The overall freedom to start, operate, and close a business a successful campaign against the Shining Path and other is only moderately protected under Peru's regulatory insurgents. President Alan Garcia, who served one term in environment. Starting a business takes an average of 65 the 1980s and was re-elected in 2006, has maintained the days, compared to the world average of 38 days. Obtaining trend toward economic liberalism and portrays himself as a business license takes slightly less than the world the market-friendly alternative to Venezuela’s Hugo Chávez. average of 225 days. Closing a business can be a relatively Significant natural resources include gold, copper, and lengthy process. silver. Although economic liberalization and fiscal and monetary stability have combined to reduce poverty, more Foreign trade in figures than 40 percent of Peruvians remain poor. Economic growth Foreign trade indicators 2005 2006 2007 2008 2009 has improved, and a free trade agreement between Peru and Imports of goods 12,502 15,312 20,464 29,982 21,706 the United States was ratified by both countries in 2007. (millions USD) Trade Policy Exports of goods 17,368 23,830 27,882 31,529 26,885 Peru's weighted average tariff rate was 5.3 percent in 2006. (millions USD) Import restrictions, export and import taxes, price bands for Imports of services 2,996 3,297 4,133 5,425 4,508 sensitive agricultural products, restrictive labeling, sanitary (millions USD) and phytosanitary regulations, and weak enforcement of Exports of services 2,164 2,519 3,209 3,502 3,408 intellectual property rights add to the cost of trade. Ten (millions USD) points were deducted from Peru's trade freedom score to account for non-tariff barriers. (Source: WTO - World Trade Organization) Engineering Export Info-Bulletin, Vol. 12, Issue No. 34, August 23, 2010 29 Overseas Information Economic Indicators Breakdown of economic Agriculture Industry Services Peru’s economy is one of the most dynamic in Latin activity by sector America, showing strong growth over the last five years. Employment by sector Recent economic expansion has been driven by (in % of total employment) 9.3 42.1 48.6 construction, mining, investments (particularly for the Value added natural gas project in Camisea region), domestic demand (in % of GDP) 7.2 36.2 60.1 and exports. Unlike its Latin American neighbours such as Value added Brazil and Argentina, the country did not suffer from (annual % change) 7.2 10.1 9.6 currency devaluation, thanks to a vigilant monetary policy and a stable currency. The county should succeed in (Source : World Bank - last available data) keeping inflation anchored around the 2.5% central target. Monetary indicators 2004 2005 2006 2007 2008 In the coming years, Peru will have to face two main challenges: poverty (50% of the population is still living Peruvian Nuevo Sol 3.41 3.30 3.27 3.13 2.92 below the poverty line) and unemployment, estimated at (PEN) - Average annual around 10%. Exchange rate for 1 USD Main indicators 2008 2009 2010 2011 2012 (Source: World Bank) GDP (billions USD) 127.41e 126.77 146.28 154.47 161.67e Foreign Trade in Figures GDP (constant prices, Peru is very open to international trade. It is a member of annual % change) 9.8e 0.9 6.3 6.0e 5.7e the WTO. Its economy substantially benefits from the Trade Promotion Agreement (TPA) with the USA. Peru’s three GDP per capita (USD) 4,446e 4,356 4,950e 5,147e 5,305e main export partners are the United States, China and Chile. Inflation rate (%) 5.8 2.9 1.5e 1.8e 2.0e The main export commodities are ores, precious stones, copper and oil. The three main import partners are the United Unemployment rate States, China and Brazil. Peru mainly imports fuels, (% of the labour force) 8.3 - - - - machinery, electronic equipment, plastic products and Current Account vehicles. (billions USD) -4.72 0.25 -1.01e -2.73 -4.48 Foreign trade indicators 2005 2006 2007 2008 2009 Current Account Imports of goods 12,502 15,312 20,464 29,982 21,706 (in % of GDP) -3.7e 0.2 -0.7 -1.8e -2.8 (millions USD) Exports of goods 17,368 23,830 27,882 31,529 26,885 (Source : IMF - World Economic Outlook Database; (millions USD) CIA - The world factbook) Imports of services 2,996 3,297 4,133 5,425 4,508 Note: (e) Estimated data (millions USD) Main sectors of Industry Exports of services 2,164 2,519 3,209 3,502 3,408 (millions USD) Agriculture contributes around 10% to the country’s GDP Imports of goods and 10.9 13.1 21.3 19.9 - and barely employs 1% of the population. The main services (annual % change) agricultural products are cotton, sugarcane, coffee, wheat, Exports of goods and 15.2 0.8 6.2 8.2 - rice, corn and barley. services (annual % change) The industry sector employs almost 24% of the population. Imports of goods and 19.2 19.9 22.4 26.5 - Peru has a large mining industry, which was privatized services (in % of GDP) during the1990s and attracts significant investments. Peru Exports of goods and 25.1 28.5 28.8 27.1 - is the world’s second biggest producer of silver, sixth services (in % of GDP) biggest producer of gold and copper, and a considerable Trade Balance 5,286 8,934 8,356 3,090 - supplier of zinc and lead. The country also has significant (miillions USD) natural gas and oil reserves, even though it is a net energy Trade Balance 4,452 8,153 7,429 1,161 - importer. (including service) The main manufacturing activities are textiles, consumer (millions USD) goods, food processing and fish products. The tourism Foreign trade (in % of GDP) 44.3 48.4 51.2 53.6 - sector is also well developed. The tertiary sector contributes around 56% of the GDP. (Source : WTO - World Trade Organization, World Bank) 30 Engineering Export Info-Bulletin, Vol. 12, Issue No. 34, August 23, 2010 Overseas Information Tax Rates Corporate Taxes Consumption taxes Company tax Nature of the tax 30% Value added tax (VAT) Capital Gains Taxation Tax rate Capital gains are generally included as income and taxed VAT standard rate is 19% at the normal corporate rate. Reduced Tax Rate Main Allowable Deductions and Tax Credit There is a reduced VAT rate of 2% for certain products and some exemptions (0%) for foodstuffs, urban passenger Deductions are possible for: interest on loans, insurance transport, the international transport of cargo, life assurance premiums, leases of aircraft and ships, maritime freight, and polices, some financial products, books, construction and fees for passing through the Panama channel; depreciation; maintenance of ships. loss; payment of royalties to no domiciled affiliates; some Other Consumption Taxes taxes; start-up costs; employee's retributions and health insurance premiums; vehicle expenses. Peru has established a consumption tax, "Impuesto Selectivo al Consumo", for the sale and import of goods Other Corporate Taxes such as cigarettes (125%), alcoholic drinks (20%); sparkling Municipal authorities tax real estate, social security, and mineral water, luxury items, fuel (fixed sum), gambling transfer of real estate, temporary Tax on net Assets. and betting. India's Total Trade with Peru Export to Peru (2006-07, 2007-08, 2008-09), All Commodities Exporting Country Importing Country Commodity Name US$ Million US$ Million US$ Million Cumulative Cumulative Cumulative 2006-07 2007-08 2008-09 val val val India Peru All Commodities 125.52 287 302.5 Export to Peru (2006-07, 2007-08, 2008-09), All Commodities Exporting Country Importing Country Commodity Name Rs.