Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Investment attraction
and innovation policy,
combine to create a
favorable business
climate: some thoughts
about Peru

Mer...
http://www.iadb.org
The Inter-American Development Bank Discussion Papers and Presentations are documents prepared by both...
The World Economy…
In 2010 the world economy expanded
by 5% after falling 0.5% in 2009 (the
most since World War II). The 2010
growth
was
exp...
Recent data show a slowdown in economic activity ... mainly
in the developed economies
Developed Countries: Jan 2007 – Aug...
Developed economies have not yet recovered the levels of
GDP per capita before the crisis
Real per capita GDP
Var % Quarte...
In emerging economies has been removing monetary stimulus
due to inflationary pressures and the risk of bubbles in asset
O...
Economic Growth Forcasts
By the end of 2011, UNCTAD global forecasts are located between 1.3 and
1.5 billion dollars, thes...
LATIN AMERICA …
The impact of the crisis in Latin America was
significant ...

Annual Growth %

GDP Growth in the previous three
years

So...
… But transitory

Var %. Real GDP

Growth Forecast

Source: ECLAC
… The resistance was shown in the
Social Field
… Poverty in Latin America
Trade Channel
determined the crash ...

Percentage of GDP growth in 2009

Collapse in exports and slowdown of GDP in 2009
...
Rebound and Stabilization in the Region

In 2010 Latin America had a
strong rebound with growth of
6.1%.
Peru, Brazil, Chi...
The real GDP growth has moderated, but domestic
demand continues to expand vigorously

Growth of real domestic demand

Lat...
The expansion will be less unequal, with output
gaps closed or closed in much of the region.
Real GDP Growth, 2009-11
(Sim...
Capital flows to the region have recovered rapidly after the
crisis
Latin America: Net inflow of capital, 1980-2010
(Perce...
Continuous poverty and inequality reduction
Extreme poverty in Latin
America (Var % , 2005 2009)

Total poverty in Latin
A...
Expected growth of the middle classes in Latin America over the next 10
years
(Var. %)

2005 -2010
Source: UNCTAD

2010 -2...
Current view of Foreign Direct Investment (FDI)
Foreign Direct Investment (FDI)
(Billions USD)

Global flows of FDI
stagna...
FDI recovery
• The
recovery
of
developed economies.

Income from Foreign Direct Investment in Latin
America
(Billions USD)...
Destination of FDI in Latin America and the Caribbean
(2000 – 2010 )

Mexico, Central America and the Caribbe

South Ameri...
Latin America: Origin of FDI
(2006 – 2010)

United States
Spain

Source: ECLAC

Netherlands
UK

Others
Canada

Japa
n
Chin...
DOING BUSINESS IN LA
Latin America - Aggregate rankings
Mexico

35

Peru

36

Colombia
Chile
Panama
El Salvador
Guatemala
Paraguay
Argentina

N...
Time to Start a business (days)
Mexico

9

Panama

Starting a Business across Regions

9

Colombia

14

Honduras

14

El S...
Registering Property Acoss Regions

Procedures (number)

Time (days)

Cost (% of income
per capita)

Latin America

6.9

4...
Credit Information
Economy
United Kingdom
Portugal
New Zeland
Argentina
Peru
Honduras
El Salvador
Uruguay
Guatemala
Paragu...
Changes to business regulation 2009/2010 in Latin
America

Source: Doing Business Report, 2011
LATIN AMERICA: Property Rights
Index
Chile

85

Uruguay

75

Mexico

50

El Salvador

50

Costa Rica

50

Colombia

50

Br...
LATIN AMERICA:
INVESTMENT POSSIBILITIES
LA Investment needs in infrastructure
Latin American has prove to have a very propitious environment for private
investmen...
Foreign Direct Investment in Natural Resources
The region will need in the short term financing, principally for the execu...
But Latin America is not one entity: there is diversity in the
region
Diversity in the region (GDP and CPI forecast)
• The...
The region has passed a demanding sequence of tests since the
90s
The region made substantial economic and institutional r...
A bright future, if the right road is taken
Latin America Forecast

Source: BBVA Research, 2010
… a positive international image of Peru...
Peru gets the investment grade
The Economist: Peru with the best climate
for Microfinance in the world
Peru is up 5 positions in the competitiviness
index
Peru the best place to invest in South
America
Peru Solid economic fundamentals
good economic indicators, an incentive for private and
public investment…
Investment grade rating
Latin American Compariso...
Continuous poverty reduction...

Poverty Reduction in
Latin America
(2005 – 2009)
60.00%
50.00%

Mexico

54.80%
54.30%
52....
Modern legal and stable framework
Guarantees recognized by the State:
INVESTORS



Legal Stability
Agreements



Stabil...
LEGAL FRAMEWORK FOR PRIVATE
INVESTMENT PROMOTION

STATE POLICIES FOR PRIVATE
INVESTMENT PROMOTION

Political Constitution ...
Peruvian Trade Policy
“Turn Peru into
an exporter of
goods and
services with
higher added
value”
Integration strategy, two instruments

International
Trade
Negotiations

• Improving conditions of market access, forming ...
Preferential access to the most important markets

OMC
EFTA (Noruega
e Islandia)
Canadá

Unión
Europea

EE.UU.

Suiza y
Li...
Institutional Framework
 Policy Continuity, along different governments
 Focus on three pillars: economic growth, social...
Institutional framework
 Contestable funding of science, technology and innovation
projects (FYNCIT)
 Contestable fundin...
Investment attraction and innovation policy, combine to create a favorable business climate: some thoughts about Peru :: M...
Investment attraction and innovation policy, combine to create a favorable business climate: some thoughts about Peru :: M...
Investment attraction and innovation policy, combine to create a favorable business climate: some thoughts about Peru :: M...
Investment attraction and innovation policy, combine to create a favorable business climate: some thoughts about Peru :: M...
Investment attraction and innovation policy, combine to create a favorable business climate: some thoughts about Peru :: M...
Upcoming SlideShare
Loading in …5
×

Investment attraction and innovation policy, combine to create a favorable business climate: some thoughts about Peru :: Mercedes Araoz

627 views

Published on

Published in: Technology, Business
  • Be the first to comment

  • Be the first to like this

Investment attraction and innovation policy, combine to create a favorable business climate: some thoughts about Peru :: Mercedes Araoz

  1. 1. Investment attraction and innovation policy, combine to create a favorable business climate: some thoughts about Peru Mercedes Araoz June 19th, 2012
  2. 2. http://www.iadb.org The Inter-American Development Bank Discussion Papers and Presentations are documents prepared by both Bank and non-Bank personnel as supporting materials for events and are often produced on an expedited publication schedule without formal editing or review. The information and opinions presented in these publications are entirely those of the author(s), and no endorsement by the Inter-American Development Bank, its Board of Executive Directors, or the countries they represent is expressed or implied. This presentation may be freely reproduced.
  3. 3. The World Economy…
  4. 4. In 2010 the world economy expanded by 5% after falling 0.5% in 2009 (the most since World War II). The 2010 growth was explained by the expansion of emerging and developing economies (7.1%) and to a lesser extent by the recovery of advanced economies (3%). World GDP Growth (Annual % change) World Trade Volume World Advanced Economies Emerging Economies World Advanced Economies Emerging Economies World trade grew 15.4% after experienced a decline of 10.9% in 2009 Source: IMF it
  5. 5. Recent data show a slowdown in economic activity ... mainly in the developed economies Developed Countries: Jan 2007 – Aug 2011 Manufacture Index Developed Countries: Jan 2007 – Aug 2011 Service Index Manufacture and Service Global Index: Jan 2007 – Aug 2011 Servic e Source: IMF Manufactur e
  6. 6. Developed economies have not yet recovered the levels of GDP per capita before the crisis Real per capita GDP Var % Quarter II 2011 / Quarter IV 2007 Source: ECLAC
  7. 7. In emerging economies has been removing monetary stimulus due to inflationary pressures and the risk of bubbles in asset Official Interest Rate (Monetary Policy) markets Inflation (%) (% Var. 12 Months) (*) Includes Brazil, Colombia, Chile, Mexico and Peru .(**) includes China, India, Indonesia, Philippines, Malaysia and Thailand. Change in official interest rate from December 2010 Source: CEPAL, IMF
  8. 8. Economic Growth Forcasts By the end of 2011, UNCTAD global forecasts are located between 1.3 and 1.5 billion dollars, these are still far from the 1.77 trillion reached in 2008. It predicts that the increase in business confidence push to higher levels of investment, but the degree of recovery will depend on achieving a sustained economic growth and the behavior of FDI in developing economies. Economic Growth World Economy Latin America and the Caribbean United States Canada European Union Japan Source: IMF, UNCTAD * Forecast 2009 0,6 2010 5,0 2011* 4,4 2012* 4,5 1,8 6,9 4,3 4,1 2,6 2,5 4,1 6,3 2,8 2,9 1,8 4,3 3,0 2,3 1,7 1,6 2,7 2,7 2,6 1,8
  9. 9. LATIN AMERICA …
  10. 10. The impact of the crisis in Latin America was significant ... Annual Growth % GDP Growth in the previous three years Source: ECLAC GDP Growth in 2009
  11. 11. … But transitory Var %. Real GDP Growth Forecast Source: ECLAC
  12. 12. … The resistance was shown in the Social Field … Poverty in Latin America
  13. 13. Trade Channel determined the crash ... Percentage of GDP growth in 2009 Collapse in exports and slowdown of GDP in 2009 Impact of exports on GDP growth in 2009 GDP growth in 2009 “ unexplained" by exports Net purchases by foreign investors and growth "unexplained" GDP ... But the crisis spread through the Financial Channel Domestic bond purchases by foreigners
  14. 14. Rebound and Stabilization in the Region In 2010 Latin America had a strong rebound with growth of 6.1%. Peru, Brazil, Chile and Colombia recorded an increase in its level of economic activity of 8.8%, 7.5%, 5.3% and 4.3% respectively. However, in Mexico, the 2010 growth was not large enough to regain pre-crisis levels and reverse the decline in employment. Thus, Mexico's growth of 5.5% in 2010 could not offset the contraction of 6.1% recorded the previous year. Source: ECLAC, BCRP GDP and Domestic Demand 2010 (% anual Var. ) GDP Domestic Demand
  15. 15. The real GDP growth has moderated, but domestic demand continues to expand vigorously Growth of real domestic demand Latin America: Growth in domestic demand and real GDP, 2010 Real GDP Growth Source: ECLAC
  16. 16. The expansion will be less unequal, with output gaps closed or closed in much of the region. Real GDP Growth, 2009-11 (Simple average, annual percentage change) South America Mexico and Central America Caribe Latin America and the Caribbean: Product Gaps (Percentage of potential GDP, simple average by region) South America Mexico and Central America Caribe Source: ECLAC
  17. 17. Capital flows to the region have recovered rapidly after the crisis Latin America: Net inflow of capital, 1980-2010 (Percent of GDP) Emerging Economies: Periods of strong net capital inflows (Percent of GDP)
  18. 18. Continuous poverty and inequality reduction Extreme poverty in Latin America (Var % , 2005 2009) Total poverty in Latin America (Var % , 2005 2009) Gini coefficient of income distribution from 2002 to 2009 2009 Año más reciente 0,65 2002 0,60 0,55 0,50 Source: CEPAL Guatemala Honduras Colombia Brasil Bolivia Nicaragua Chile Panama México Paraguay Argentina Costa Rica Ecuador Rep.Dominicana ____________________ Perú Uruguay 0,40 El Salvador 0,45
  19. 19. Expected growth of the middle classes in Latin America over the next 10 years (Var. %) 2005 -2010 Source: UNCTAD 2010 -2020
  20. 20. Current view of Foreign Direct Investment (FDI) Foreign Direct Investment (FDI) (Billions USD) Global flows of FDI stagnated in 2010, growing by 1%, following a strong rally in Asia and Latin America and the contraction experienced by the developed economies, with the exception of the United States Source: UNCTAD World Economy Developed Economies Developing Economies Eastern Europe and CIS Latin America and the Caribbean United States European Union 2009 1 114,1 2010 1 122,0 Variation 0,7 % 565,9 526,6 6,9 % 478,3 524,8 9,7 % 69,9 70,5 0,8 % 116,1 129,9 361,9 141,4 186,1 289,8 21,4 % 43,35 % 19,9 %
  21. 21. FDI recovery • The recovery of developed economies. Income from Foreign Direct Investment in Latin America (Billions USD) • The dynamism of certain emerging economies driving growth in some sectors by increases in demand. • The growth of domestic demand in some countries. • Increased outsourcing by foreign firms in response to the crisis. Source: ECLAC South America Mexico, Central America and the Caribbean Total
  22. 22. Destination of FDI in Latin America and the Caribbean (2000 – 2010 ) Mexico, Central America and the Caribbe South America 100% 100% 5 9 90% 90% 33 80% 43 35 70% 70% 60% 50% 80% 54 60% 29 50% 27 40% 40% 30% 30% 20% 38 56 41 20% 30 10% 10% 0% 0% 2005 - 2009 Series1 Services 2010 Manufacture Series2 Natural Series3 Resources Source: ECLAC 2005 - 2009 Services Series1 2010* Manufacture Series2 Natural Resources Series3
  23. 23. Latin America: Origin of FDI (2006 – 2010) United States Spain Source: ECLAC Netherlands UK Others Canada Japa n Chin a Caribbean Financial Centers Latin America
  24. 24. DOING BUSINESS IN LA
  25. 25. Latin America - Aggregate rankings Mexico 35 Peru 36 Colombia Chile Panama El Salvador Guatemala Paraguay Argentina Nicaragua 39 43 72 86 101 106 115 117 Uruguay 124 Costa Rica 125 Brazil 127 Ecuador 130 Honduras 131 Bolivia Venezuela Source: Doing Business Report, 2011 149 172
  26. 26. Time to Start a business (days) Mexico 9 Panama Starting a Business across Regions 9 Colombia 14 Honduras 14 El Salvador Chile Latin America Bolivia Ecuador Costa Rica Uruguay 35.9 3.8 Caribbean States East Asia & Pacific (EAP) European Union (EU) Organization for Economic Co Operation and Development (OECD) South Asia 27 Nicaragua 43.6 7.9 71.6 36.5 5.6 7.8 39 27.1 50.6 5.9 14.6 5.7 18.4 5.6 13.8 5.3 15.3 7.1 24.6 24.5 24.1 22 Peru Guatemala 10.5 Region 26 Paraguay Time (days) 17 Argentina Cost Paid in (% of Minimun income per Capital capita) (% of Income) Procedures (number) 35 37 39 50 56 60 65 Brazil Venezuela Source: Doing Business Report, 2011 120 141
  27. 27. Registering Property Acoss Regions Procedures (number) Time (days) Cost (% of income per capita) Latin America 6.9 43.9 3.7 Caribbean States 6.7 96.5 8.4 East Asia & Pacific (EAP) 4.7 82.6 3.9 5 35.2 4.8 Organization for Economic Co - Operation and Development (OECD) 4.8 32.7 4.4 South Asia 6.3 99.8 6.9 Region European Union (EU) Source: Doing Business Report, 2011
  28. 28. Credit Information Economy United Kingdom Portugal New Zeland Argentina Peru Honduras El Salvador Uruguay Guatemala Paraguay Bolivia Mexico Panama Ecuador Chile Brazil Costa Rica Nicaragua Colombia Venezuela Source: Doing Business Report, 2011 Depth of credit information index (0-6) 6 5 5 6 6 6 6 6 6 6 6 6 6 5 5 5 5 5 5 0 Public registry coverage (% of adults) 0 67.1 0 30.8 25.5 22.7 21.8 19.4 16.4 13.9 11.3 0 0 36.5 30.9 26.9 23.3 14 0 0 Private bureau coverage (% of adults 100 16.3 100 100 33.3 100 95 100 8.8 0 31.4 71.6 31.9 45 22.9 53.5 64.8 21.4 63.1 0
  29. 29. Changes to business regulation 2009/2010 in Latin America Source: Doing Business Report, 2011
  30. 30. LATIN AMERICA: Property Rights Index Chile 85 Uruguay 75 Mexico 50 El Salvador 50 Costa Rica 50 Colombia 50 Brazil 50 Suriname 40 Peru 40 Panama 40 Guyana 35 Guatemala 35 Paraguay 30 Honduras 30 Nicaragua 25 Ecuador 20 Argentina 20 Bolivia Venezuela Source: Global Property Guide 10 0
  31. 31. LATIN AMERICA: INVESTMENT POSSIBILITIES
  32. 32. LA Investment needs in infrastructure Latin American has prove to have a very propitious environment for private investment in infrastructure, their challenge is execution and innovation to deal with the specific complexities that each country faces. The infrastructure Quality Gap Index* (IQGI) Source: World Economic Forum. The infrastructure private investment attractiveness index (IPIAI) **
  33. 33. Foreign Direct Investment in Natural Resources The region will need in the short term financing, principally for the execution of projects based on natural resources Foreign Direct Investment US$ bn (accumulated stock since 2005). Source: World Economic Forum. Financing need of Top ten investment projects
  34. 34. But Latin America is not one entity: there is diversity in the region Diversity in the region (GDP and CPI forecast) • The “two (BRA, MEX) giants” • Medium Size Emerging South America: medium size countries combine good performance both in inflation and growth (CHL, COL, PER) • The “heterodox” countries: most countries have achieved low inflation, but it remains a problem in ARG and VEN Source: World Economic Forum.
  35. 35. The region has passed a demanding sequence of tests since the 90s The region made substantial economic and institutional reforms, but also enjoyed a benign favorable environment in the second half of the 00s But the region also confronted – and passed -severe tests, including the global financial crisis of 08 4 3 2 1
  36. 36. A bright future, if the right road is taken Latin America Forecast Source: BBVA Research, 2010
  37. 37. … a positive international image of Peru...
  38. 38. Peru gets the investment grade
  39. 39. The Economist: Peru with the best climate for Microfinance in the world
  40. 40. Peru is up 5 positions in the competitiviness index
  41. 41. Peru the best place to invest in South America
  42. 42. Peru Solid economic fundamentals
  43. 43. good economic indicators, an incentive for private and public investment… Investment grade rating Latin American Comparison País Continual improvement of business climate S&P Fitch Chile A+ A A1 México BBB BBB Baa1 Perú BBB- BBB- Baa3 Brasil BBB- BBB- Baa3 Colombia BB+ BB+ Ba1 Venezuela BB- BB+ B2 Argentina B- RD B3 Bolivia B- B 36 Moody´s B2 Ecuador CCC+ CCC 46 65 2007 58 62 2008 2009 2010 2011 Source : Doing Business 2011 - IFC Evolution of the investment project announcements: 2011 14.7 (US$ Billion ) 13.7 12.6 12.1 10.2 Caa3 9.7 12.1 10.3 Fuente: Standard & Poor`s, Fitch Ratings y Moody s Private and Public Investment Jun.09 Sept.09 Dic.09 Mar.10 Jun.10 Sept.10 Dic.10 Mar.11 (% GDP) 4.2 5.3 6.5 6.5 6.4 6.3 Investment project announcements with High Probability (US$ Million ) 2.9 21.5 16.0 Prom 2003-072008 17.7 18.7 19.4 20.6 22.2 2009 2010 2011 Public 2012 2013 Private Inversión Privada Inversión Pública Investment Investment Mining Oil Electricity Industrial Infrastructure Other sectors Total 2011 5834 2406 1797 1559 1296 1816 14708 2012 8128 2468 2306 1358 846 898 16004 2011-2012 13962 4874 4103 2917 2142 2715 30712
  44. 44. Continuous poverty reduction... Poverty Reduction in Latin America (2005 – 2009) 60.00% 50.00% Mexico 54.80% 54.30% 52.30% 48.60% 48.70% Costa Rica 44.50% 40.00% 30.00% Colombia 39.30% 36.20% 34.80% 24.40% 23.90% 21.20% 20.00% Paraguay Panama 31.30% Guatemala 17.10% 17.40% 16.10% 13.70% 12.60% 11.50% 10.00% Honduras Rep. Dominicana 9.80% 0.00% 2001 2002 América Latina 2003 2004 2005 2006 % % Total Total Pobreza Chile 2007 2008 2009 2010 % Pobreza Extrema % Extreme poverty Ecuador Brasil poverty Perú -15 Source: INEI -10 -5 0
  45. 45. Modern legal and stable framework Guarantees recognized by the State: INVESTORS   Legal Stability Agreements  Stability of the right to non discrimination. Stability of the Income Tax System, applicable to investors, in force when the agreement is concluded. Stability of the system of free availability of foreign currency and remittance of profits, dividends and royalties. RECEIVING COMPANY    Stability of the systems of labor engagement in force when the agreement is concluded. Stability of the system of export promotion applicable when the agreement is concluded. Stability of the Income Tax System Requirement: Minimum investment of US$ 5 MM in any economic sectors. US$ 10 MM for hydrocarbon and mining sectors. Validity: 10 years. Concessions: Term according to the contract’s life (Max. 60 years). Source: Proinversión
  46. 46. LEGAL FRAMEWORK FOR PRIVATE INVESTMENT PROMOTION STATE POLICIES FOR PRIVATE INVESTMENT PROMOTION Political Constitution of Peru. ECONOMIC FOUNDATIONS: Law on Legal Stability of Foreign Investments. Law for the Promotion of Private Investment in State-owned Companies Framework Law for Private Investment Growth. Framework Law on Public-Private Partnerships Law on Works for Taxes. FAVORABLE CONDITIONS FOR PRIVATE INVESTMENT PROMOTION Non discrimination: The foreign REGIME investor receives the same treatment as national investors. Social market economy. Non-restricted access Freedom for private initiative. Guarantee to private property. Freedom of contracts and law contracts Equality for national or foreign investment. Free transfer of factors and capitals Subsidiary role of the State. Legal Stability Agreements Special Regimen of VAT anticipated recovery (19%). Settlement of disputes and conflicts: Member of ICSID and MIGA. Member of the Investment Committee of the Organization for Economic Co-operation and Development (OECD).
  47. 47. Peruvian Trade Policy “Turn Peru into an exporter of goods and services with higher added value”
  48. 48. Integration strategy, two instruments International Trade Negotiations • Improving conditions of market access, forming expanded markets. (increase of exports) • Provide clear and predictable rules for trade. • Achieving certainty and an attractive regulatory framework to private investment. (Increased investment) • 3 negotiating fronts: multilateral, regional, bilateral National Export Strategic Plan (PENX) Trade Development • Export supply: Identification of export supply and its development (improvement programs for quality and competitiveness agenda); • Markets: trade promotion, market research; • Trade facilitation: infrastructure, finance, customs; • Export culture: training in export and development of human capital.
  49. 49. Preferential access to the most important markets OMC EFTA (Noruega e Islandia) Canadá Unión Europea EE.UU. Suiza y Liechtenstein Corea China Marruecos Japón India México: ACE 8 América Central Costa Rica y Panamá Vietnam Venezuela Extensión de Preferencias APEC Tailandia Brunei CAN Singapur Malasia ALADI MERCOSUR ACE 58 Chile Australia Sudáfrica Acuerdos en vigencia Acuerdos que entrarán en vigencia Acuerdos en negociación Negociaciones futuras Nueva Zelanda 53
  50. 50. Institutional Framework  Policy Continuity, along different governments  Focus on three pillars: economic growth, social inclusion and democratic institution  National Competitiveness plan or agenda into place, shared by all shareholders (private and public sector), with political will to implement it.  Focus on entrepreneurial promotion and competition, regulation of non tradable good and services where there is some monopolistic market structure.  Some external locks, vg. FTAs, opening markets  Financial provision (having the best environment for microfinance; good regulation )  Infrastructure, private public partnership
  51. 51. Institutional framework  Contestable funding of science, technology and innovation projects (FYNCIT)  Contestable funding fo technology transfer and development for small and medium size business  OECD and UNCTAD evaluation and base line on Science and Technology policy  Changes in the National Investment System in order to include the spillover effects of Investment in technology and innovation.  Educational reform, evaluating students and teachers  New SME promotion legislation  Working in the factors for improve our position in the doing business index and in the competitiviness index, changing laws and facilitanting trade and investment.

×