Peru - country profile

Peru - country profile

Peru benefits from a wide range of important mineral resources in the mountainous and coastal areas, while its waters provide excellent fishing grounds. However, over-dependence on minerals and metals exports and imported foodstuffs leaves the economy vulnerable to fluctuations in world prices.

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City in Peru

The country’s rapid expansion, coupled with cash transfers and other programs have helped to reduce the national poverty rate by 23 percent since 2002, but inequality still persists. Peru has continued to attract foreign investment, although political activism and protests are hampering development of natural resource extraction.

Key Considerations for Peru

Fiscal and monetary policy

The administration has shown a willingness to introduce more structural reforms than had been expected. Despite increases in funding, public education and healthcare are expected to continue to underperform. The government also plans to increase spending on social programs to reduce poverty levels. Private investment in transport, energy and water infrastructure should remain strong, despite government involvement in the market.

Competition policy

Peru’s constitution bans monopolies, oligopolies and restrictive practices, except in some temporary circumstances. The general oversight body is the National Institute for the Defence of Competition and Protection of Intellectual Property (Indecopi). Indecopi’s scope was extended in July 2013, to try to eliminate bureaucracy that hampers productive development and business growth. Fines can be levied on public sector employees that apply or order the application of illegal or unreasonable bureaucratic barriers. Most price controls have been eliminated.

FDI policy

Peru has an open policy towards foreign investment. The economy was liberalized in the 1990s and successive governments have promoted FDI, with overseas investors subject to the same legal treatment as local investors. An agreement with the Multilateral Investment Guarantee Agency (MIGA) insures private investors against non-commercial risks such as asset expropriation. During 2014–2015, confidence in Peru should remain strong, owing to its network of free trade agreements (FTAs) and other investment protection agreements. A review of mining concession procedures aim to ease tensions between investors and communities, but social conflicts are likely to continue. During 2016–2018, expect to see continued FDI in extractive mega-projects and hydropower. Despite this broadly optimistic outlook, social unrest may discourage investment to some extent.

Foreign trade and exchange controls

Tariffs are levied on imports at either 9 percent or 17 percent, although recent reductions have lowered the average effective tariff to 1.9 percent. Most non-tariff barriers have been eliminated. Peru’s foreign-trade legislation rules out taxes on specific exports, but various traditional products are still subject to levies. There are no restrictions on exchange controls. During 2014–2015, existing FTAs are set to be implemented (with China, South Korea, Japan and the European Union (EU)). FTA with India should progress slowly due to further opposition from local business lobbies. In the years 2016–2018, trade links with regional blocs may deepen, and the government is expected to seek bilateral FTAs with emerging economies. The Pacific Alliance should improve regional integration and speed up the development of ties with countries in the Pacific basin.

Financing policy

The period 2014–2015 should see consolidation and greater competition in banking, while the merger with Colombian and Chilean stock markets provides a platform for expanding the capital markets. As the economy slows, expect banks to impose some restrictions on consumer lending. Between 2016–2018, growth in pension funds should boost local capital markets, while bank lending is predicted to increase as the interest rate spreads narrow.

Taxes

Corporate income tax is 30 percent for distributed earnings and 27 percent for reinvested earnings. Branch profit tax is levied at 30 percent and remittance tax at 10 percent. The 30 percent tax on royalties will probably increase. Any interest earned abroad is taxed at 5 percent. Value-added tax (VAT) was reduced from 19 percent to 18 percent in February 2011. New measures to address tax evasion are to be introduced in 2014–2015, along with reforms to the customs regime to simplify tax procedures. Some investments in the Andes and Amazon regions should enjoy an extension of existing tax exemptions. Despite increased efforts to reduce tax evasion during 2016–2018, the expansion of the tax base should progress at a modest pace.

About kpmg in Peru

In Peru, KPMG has approximately 300 professionals and its office is located in the capital city of Lima. 

KPMG in Peru

 

 

In Peru, KPMG has approximately 300 professionals and its office is located in the capital city of Lima. 

KPMG in Peru

 

 

In Peru, KPMG has approximately 300 professionals and its office is located in the capital city of Lima. 

KPMG in Peru

 

 

In Peru, KPMG has approximately 300 professionals and its office is located in the capital city of Lima. 

KPMG in Peru

 

 

In Peru, KPMG has approximately 300 professionals and its office is located in the capital city of Lima. 

KPMG in Peru

 

 

In Peru, KPMG has approximately 300 professionals and its office is located in the capital city of Lima. 

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