Peru d&b december 2011


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Informe del entorno comercial de Perú

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Peru d&b december 2011

  1. 1. D&B Country Report Peru DB4a (Moderate Risk)Commercial Environment OverviewBusiness has Peru’s business environment has benefited from an open approach to investment, whichbenefited from a encourages foreign investment into almost all economic sectors, a benign taxliberal policy environment, a healthy financial sector and a liberal trade regime. However, it is unclearenvironment to what extent these policies will remain in place given the election of a left-wing president in 2011 (see Domestic Politics, p6). Elsewhere, several major constraints exist, notably rigid labour regulations (see Industrial Relations, p31), weak institutions, particularly the judiciary (see Political Environment, p24), high levels of corruption (which reach to the highest levels of government; see Corruption, p39), an inadequate infrastructure for a rapidly developing country (see Infrastructure, p37) and poor standards of higher education. As a result, Peru’s overall competitiveness score lags behind many other countries in the region, despite a sound macroeconomic structure and impressive economic growth in recent years. The World Economic Forum (WEF) gives Peru a low score of 4.21 in their Global Competitiveness Index 2011/12 (where 0.0 is the least and 10.0 the most competitive) although this is a moderate improvement on the score of 4.11 in the previous year’s report. Meanwhile, the country is ranked 67 out of 139 countries, also an improvement on its previous rank of 73 out of 139 in 2010/11, while the Heritage Foundation’s Index of Economic Freedom 2011 ranks Peru 41 from 179 jurisdictions surveyed, a reflection of the pro-business legacy left by previous presidents. Relative Competitiveness, 2011/12 Venezuela 3.51 Argentina 3.99 Peru 4.21 Brazil 4.32 Panama 4.35 Chile 4.70 Canada 5.33 US 5.43 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 0.00=least competitive 7.00=most competitive Source: World Economic Forum, Global Competitiveness Index Physical Environment Natural EnvironmentPeru is well Peru is well endowed with natural resources, having some of the world’s largest copperendowed with deposits, which have allowed the country to become the world’s second-largest coppernatural resources exporter after Chile. In terms of minerals, Peru also has large deposits of gold, zinc, lead, tin and silver, while there are also sizeable oil reserves. In terms of terrain, the country has a narrow strip of arid plains along the Pacific coast, giving way to the Andes mountain range, which runs the length of Peru and acts as a formidable natural barrier to communications with the countries hinterland. Beyond the Andes lies the Amazon jungle. Peru’s location in one of the world’s most seismically active regions leaves it extremely vulnerable to earthquakes. Positively, the country’s Andean and Amazonian landscapes, impressive biodiversity, and cultural heritage provide the country with a large tourism industry.2011/12 36 © Dun & Bradstreet Limited
  2. 2. D&B Country Report Peru DB4a (Moderate Risk) InfrastructureInfrastructure is Peru’s infrastructure is underdeveloped and acts as a major obstacle in terms of doinginadequate for a business in the country. The poor infrastructure is partly a result of the country’srapidly developing extreme geography, which acts as a natural obstacle to transport and communicationeconomy between the populated coastal areas and the country’s hinterland. However, under- investment and corruption are also to blame. The road network is limited, with the best roads being located along the coastal plain and around the larger cities. In the Andes and jungle areas, roads are often unpaved and of poor quality. The country has a relatively extensive rail network by regional standards, although it is in urgent need of investment, and services are slow and unreliable. Air travel remains the most convenient mode of transport outside the major urban areas. Although the government is planning considerable investment into infrastructure, and increased private sector involvement in infrastructure management, the benefits of these policies are unlikely to be felt over the 2011-12 outlook period. The telecommunications infrastructure is expanding rapidly, with mobile telecoms penetration of 82.6% in 2008 (up from 63.4% in 2007). However, broadband coverage is extremely poor, even by regional standards, with only 2.5 in every 100 households having a broadband subscription (compared to 4.3% in Colombia, a country at a similar stage of development). Legal and Regulatory EnvironmentLegal and Peru’s legal and regulatory environment is poor given its investment grade status and isregulatory risk is a a key obstacle to doing business in the country. The judicial system is both inefficientconcern and corrupt, while corporate governance is also considered to be weak. Judicial EnvironmentThe judiciary is The Civil Code of 1984 replaced one of 1936, which in turn had replaced the first civilsubject to political code of 1852. The functioning of the legal system is considered a point of weakness forinfluence and Peru. Despite some improvements in recent years (following the establishment of acorruption reform commission in 2004), the judiciary is still subject to political influence and corruption. Indeed, the International Property Rights Index 2011 ranks the Peruvian judiciary 109 from 129 countries surveyed in terms of their independence. Litigation is costly and time consuming, and the risk associated with enforcing contracts can discourage businesses from contracting with counter-parties with which they have no previous experience. The Law of Conciliation, which came into force on 1 January 2000, means that disputants will have to consider alternative forms of dispute resolution before a judge will accept that a dispute can be litigated (this applies to both civil and commercial cases), meaning that the chances of being subjected to Peru’s court system are at least minimised. The World Bank’s Doing Business Survey 2012 ranked Peru 111 from 183 countries surveyed in terms of the ease of enforcing a contract. Foreign parties to a contract should be aware of potential contractual difficulties and stipulate that contracts are governed by international arbitration. Bilateral investment treaties allow for an alternative dispute resolution mechanism whereby the aggrieved party resident in one of the signatory states has recourse to international arbitration, often under the auspices of the International Centre for Settlement of Investment Disputes. Positively, Peru has bilateral investment treaties with 32 other countries, including most of the major European economies. In addition, the bilateral free-trade agreement (FTA) with the US allows for alternative dispute resolution. However, Peru has not yet accepted the jurisdiction of the International Court of Justice (ICJ).2011/12 37 © Dun & Bradstreet Limited
  3. 3. D&B Country Report Peru DB4a (Moderate Risk) Property Rights Peru is regarded as providing adequate protection for physical property rights. The International Property Rights Index 2011 ranked Peru 3 from the 22 countries in the region in terms of the legal protection of property rights, although only 48 from 129 countries surveyed globally. Notably, there is a sharp distinction between the ease of registering a property (22) and that of protecting it (87), reflecting risks related to social protests, as well as insurgent activity (see Security, p28). Rule of Law, 2009 Venezuela -1.6 Peru -0.6 Argentina -0.6 Panama -0.1 Brazil 0.0 Chile 1.3 US 1.6 Canada 1.8 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 -2.50=lowest quality +2.50=highest quality Note: The World Bank’s Worldwide Governance Indicators are derived from annual surveys of businesses, citizens and experts in nearly 200 countries on six governance indicators: voice and accountability; political stability; government effectiveness; regulatory quality; rule of law; and control of corruption. Source: World Bank, Worldwide Governance Indicators Intellectual Property RightsIntellectual property Peru has accepted the obligations of the trade-related aspects of intellectual propertyrights infringements rights (TRIPS) agreement under the WTO. It is a member of World Intellectualare common Property Organisation (WIPO) and a signatory of the Rome, Berne and Paris Conventions. Although Peru has been removed from the United States Trade Representative (USTR) IP Priority Watch List, it remains on the lower priority watch list owing to abuses of intellectual property rights. These are particularly problematic in respect of computer software and entertainment media. However, following the implementation of the FTA with the US in February 2009, it is likely that intellectual property rights will be more stringently enforced. Nonetheless, at present this is not the case: the International Property Rights Index 2011 ranks the Peru 109 from 129 countries surveyed in terms of its protection of intellectual property rights, although only 62 from 129 in terms of patent protection. Bankruptcy Bankruptcy is governed by the general law of the bankruptcy system and guidelines issued by INDECOPI, a government agency (; INDECOPI has shown itself to be quite forceful in pursuing cases, as with the 2010 bankruptcy of zinc smelter Doe Run Peru. Overall, Peruvian bankruptcy procedures are slow, but not costly. The World Bank’s Doing Business 2012 report ranks Peru 100 from 183 countries surveyed due to the fact that a successful claim takes an average of 3.1 years (against 3.3 years in the rest of the region and 1.7 years in the OECD). However, the cost of the claim is only 7.0% of the estate in Peru against 15.0% regionally and 9.0% in the OECD.2011/12 38 © Dun & Bradstreet Limited
  4. 4. D&B Country Report Peru DB4a (Moderate Risk) Corporate GovernanceSetting up a Corporate governance standards are high. Peru ranked 17 from 183 countries in thebusiness can be World Bank’s Doing Business 2012 report, with some sub-indicators above the OECDproblematic average. However, there can be considerable bureaucracy involved in setting up a company, albeit significantly lower than in recent years; according to the Doing Business 2012 report, both the average number of procedures for opening a business (5) and the average time taken to open a business (26 days) are below the regional averages, but the latter is still well above OECD average. Although the cost of starting a business is lower than the regional average at 11.9% (against 37.3% in the Latin American region as a whole), it also remains well above the OECD average of 4.9%. Corporations and branches of foreign companies are the most common forms of business organisation used in Peru, although franchising has become more popular. Business can be conducted under the following entities, which are similar to those found in other countries: • a corporation (Sociedad Anonima, SA); • a limited liability company, including general partnership (Sociedad colectiva, SC); • a limited partnership (Sociedad comercial de responsabilidad limitada, S.R.Ltda); and • a branch of a foreign corporation (Sucursal). CorruptionCorruption, though In Transparency International’s Corruption Perceptions Index for 2010 Peru ranked 78improving, remains out of 178 countries, a moderate deterioration from its ranking of 72 out of 179 in 2008.a downside risk Peru’s score deteriorated to 3.5 ( from 3.7 in 2009) on a scale where 0.0 indicates the highest level of perceived corruption and 10.0 the lowest. While this indicates that corruption is still a problem in Peru, the country occupies an above mid-table position compared with other South American countries. The ousting of President Alberto Fujimori in November 2000 and the detention of his national security adviser, Vladimiro Montesinos, helped to uncover institutional corruption at the highest level of government. However, the successor administration of President Alejandro Toledo achieved little in reducing graft (contrary to his electoral promises). Indeed, senior figures in the Toledo government were implicated in cases of corruption, political favouritism and nepotism. The presidency of Alan Garcia also made little headway on eradicating corruption; indeed, in March 2007 his interior minister, Pilar Mazzetti (who had an additional, specific responsibility for fighting corruption) was forced to resign following the unveiling of large scale police corruption related to the procurement of squad cars. Further, within weeks of assuming office, new President Ollanta Humala was forced to remove his brother from his role in the ruling party due to his inappropriate links to the Russian gas giant, Gazprom. There is also a continuing prevalence of corrupt practices within the judiciary, the police, the financial system and industry. Indeed, the judiciary and the police are perceived as the most corrupt institutions by Peruvians. Although the conviction of former President Alberto Fujimori on corruption charges in July 2009 goes some way towards addressing corruption, it remains an issue when doing business in Peru.2011/12 39 © Dun & Bradstreet Limited
  5. 5. D&B Country Report Peru DB4a (Moderate Risk) Corruption Perceptions, 2010 Venezuela 2.0 Argentina 2.9 Peru 3.5 Panama 3.6 Brazil 3.7 US 7.1 Chile 7.2 Canada 8.9 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 0.0=most corrupt 10.0=least corrupt Source: Transparency International, Corruption Perceptions Index TaxationCorporate tax rates The tax system was greatly simplified in the 1990s. Resident corporations are subject tocompare favourably taxation in Peru on a worldwide basis, whereas branches are taxed on Peruvian sourcedwith the rest of the income only. The standard corporate tax rate currently stands at 30%, which comparesregion favourably with most other countries in the region. All dividends are subject to a 4.1% withholding tax, as are profits remitted by a branch to a foreign parent company. A new capital gains tax of 5% was implemented in January 2010, with a tax of 30% on investments in US dollar futures contracts maturing within 60 days or less (see Economic Policy, p13). Manufacturing and agro-industry companies must pay an additional 2% tax towards research and development, while mining companies are also subject to a charge on territorial rights at an annual USD4 per hectare. Notably, president Humala has increased the tax levy on miners as one his first acts in office (see Domestic Politics, p6). The three most important elements of the new tax framework are: one creates a new royalty system whereby companies will contribute between 2-12% of their operating profits, depending on the size of their margins. The second creates a mining tax of between 2-8.4% on operating profits, again depending on the size of margins. A third piece of legislation applies to companies which previously had tax stabilisation agreements with the government; such companies will make an additional contribution of between 4 to 13.2% of profits. Elsewhere, individuals are subject to personal income tax in three brackets; the rates applied are 15%, 21% and 30%. Foreign nationals who have resided in Peru for less than two years are taxed only on Peruvian source income, whereas Peruvian citizens (as well as foreigners having resided in Peru for over two years) are taxed on worldwide income. Peru has tax treaties with the Andean Community countries; income earned in any of these countries is excluded from income taxation in Peru to avoid double taxation. Tax treaties have also been signed with Brazil, Canada and Chile. VAT is levied at 19% (including a 2% municipal promotion tax). All goods and services rendered in Peru are subject to VAT, with some exceptions for foodstuffs. Excise tax at varying levels is levied on luxury goods, including tobacco products, alcoholic beverages and fuels (see Trade Environment, p41).2011/12 40 © Dun & Bradstreet Limited
  6. 6. D&B Country Report Peru DB4a (Moderate Risk) Headline Corporate Tax Rates, 2010 Chile 17.0 Panama 27.5 Peru 30.0 Canada 31.0 Venezuela 34.0 Brazil 34.0 Argentina 35.0 US 40.0 % 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 Source: KPMG, Corporate and Indirect Tax Rate Survey Trade Environment Current Account Exchange RegulationsThe trade There are no restrictions on exchange transactions, including holding, using, purchasingenvironment has or selling FX. Peru accepted the obligations of Article VIII, Sections 2, 3 and 4 of thebeen liberalised IMF’s Articles of Agreement in 1961. IMF members accepting these obligations agree to refrain from imposing restrictions on making payments and transfers for current international transactions, or from discriminatory currency arrangements or multiple currency practices without IMF approval. Trade Regulations The trade environment was radically liberalised in the 1990s, and the average tariff level has fallen to 8.7% (from over 60% in the late 1980s). The current administration is committed to further opening up to foreign trade and investment and has signed a number of free-trade agreements with key trade partners including Canada, China, Chile and the US. Peru is a member of the WTO and of a number of regional trade groupings. It used to participate in the developing country Group of 20 (G20) within the WTO, which contributed to the failure of the Cancun conference in 2003. However, it withdrew from the G20 in October 2003, preferring a potential bilateral trade deal with the US (which refuses to negotiate with G20 member countries). Trade Relations with the US The implementation of the bilateral FTA with the US in February 2009 marked a major turning point in terms of the liberalisation of Peru’s trade environment owing to the US’ status as Peru’s largest export market and principal source of imports. The FTA, named the Peru Trade Promotion Agreement (PTPA), immediately eliminated most of its tariffs on US exports, with all remaining tariffs phased out over defined time periods. The PTPA also includes important disciplines relating to: customs administration and trade facilitation; technical barriers to trade; government procurement; services; investment; telecommunications; electronic commerce; intellectual property rights; and labour and environmental protection. However, several key pieces of legislation (notably environmental and labour laws) were expedited without adequate consultation in order to push the FTA through Peru’s Congress, so there is a possibility that this legislation may be revisited.2011/12 41 © Dun & Bradstreet Limited
  7. 7. D&B Country Report Peru DB4a (Moderate Risk) Trade Relations with Other Countries Peru’s trade relations with its Andean neighbours are governed by the Community of Andean Nations (CAN), which replaced the Andean Pact in 1996. Members of CAN include Bolivia, Colombia, Ecuador and Peru. CAN operates a harmonised tariff system for members. However, CAN has been weakened by the departure of Venezuela in July 2006 to join Mercosur. Furthermore, Ecuador is currently embroiled in a dispute with CAN, which is challenging Ecuador’s move to suspend trade rights that fellow CAN members formerly enjoyed, in addition to applying import-suppressing measures. Peru is expanding its network of FTAs; agreements have been signed with Canada, Chile, China, Japan, Singapore and Thailand. In addition, Peru is seeking an FTA with South Korea and the EU (having signed an FTA with the European Free Trade Area in 2011). Peru has also become a member of the Asia Pacific Economic Co-operation regional trade grouping (APEC). Meanwhile, October 2011 saw the agreement of an FTA with Guatemala that had begun under the previous administration. TariffsTariffs have been In 2007, Peru reduced tariff rates on over 56% of its tariff classifications and nowgreatly reduced maintains a four-tier tariff rate structure of 0%, 9%, 17% and 20%. Peru applies a tariff surcharge of 5% to 392 ten-digit tariff lines. Trade with countries with which Peru has a bilateral FTA are subject to those agreements, with tariffs being phased out across most product classes. Concessionary treatment is also afforded to countries belonging to the Latin American Integration Association (LAIA). Surtaxes are applied to the carriage, insurance, freight (c.i.f.) value of imports. Goods imported under the preferential agreements signed by Peru are also subject to surtaxes. Under these agreements, the preferential margins are applied to the sum of the basic rates and the additional surtax rates. The selective consumption tax (ISC) is levied on the sale in Peru at producer level and on the importation of fuels derived from petroleum, Pisco (local liquor), beer, and cigarettes made from dark and light tobacco. It is also levied on the sale in Peru by the producer or importer of vehicles, water and other non-alcoholic beverages, wine, vermouth, cider and other fermented beverages, and tobacco products. Most imports are also subject to a 19% VAT, which is assessed on c.i.f. value plus duty. There is a series of products that are exempt from this tax: principally raw agricultural products. In July 2001 surcharges on agricultural products were replaced by a variable levy price band system (similar to the Andean Community price band), which assures that the import price of the specified goods will equal a predetermined minimum import price after payment of the levy. The surcharges, which are imposed on certain sensitive agricultural products such as corn, rice, sugar and powdered milk, are expressed in US dollars per tonne. Quotas and Licences Peru has abolished import licence requirements for the vast majority of products. The only remaining products requiring licences are: firearms, munitions and explosives imported by private persons; chemical precursors (used in illegal narcotics production) and ammonium nitrate fertiliser. Animals and plants require a permit from the National Sanitary Service for Agriculture (SENASA). Imports of certain goods are prohibited from all sources for social, health or security reasons. Among these are: fireworks; certain insecticides; used clothing and shoes; toxic and radioactive waste; used tyres; cars over five years old; and trucks and passenger vehicles over eight years old with a capacity of more than 24 passengers.2011/12 42 © Dun & Bradstreet Limited
  8. 8. D&B Country Report Peru DB4a (Moderate Risk) Anti-Dumping and Countervailing Duties The executive is empowered to raise import duties, or to detain or order the return of such merchandise to its port of origin, in order to protect the domestic industry from dumping competition merchandise imported at artificially low prices. Non-Tariff BarriersThere are few non- The World Bank’s Doing Business 2011 report shows that the number of documentstariff barriers to required for trading (both exporting and importing) is just slightly greater than thetrade regional average. Meanwhile, the time taken to export and import goods is now less than the regional average, having fallen significantly in recent years as Peru has streamlined its trade procedures in line with newly implemented FTAs; it now takes 12 days to process exports (against a regional average of 18.0 days) and 17 days for imports (against a regional averages of 20.1 days). Moreover, the cost involved is well below the average for the region and the OECD in terms of both exports and imports. It costs on average around USD860 to import one container of goods into the country, and costs on average USD880 to export a container of goods. D&B is confident that efficiencies should increase considerably. Non-Tariff Trade Barriers Peru Region OECD Average Average Documents required for export (number) 6 6.6 4.4 Time required for export (days) 12 18.0 10.9 Cost to export (USD per container) 860 1,228 1,059 Documents required for import (number) 8 7.1 4.9 Time required for import (days) 17 20.1 11.4 Cost to import (USD per container) 880 1,488 1,106 Source: World Bank, Doing Business 2011 Trade Documentation The following documents are required for export: • Bill of lading • Certificate of origin • Commercial invoice • Customs export declaration • Packing list • Technical standard/health certificate • Terminal handling receipts The following documents are required for import: • Bill of lading • Cargo release order • Certificate of origin • Collection order • Commercial invoice • Customs import declaration • Packing list • Terminal handling receipts2011/12 43 © Dun & Bradstreet Limited
  9. 9. D&B Country Report Peru DB4a (Moderate Risk) Investment Environment The principles of free enterprise and private ownership are respected in Peru. The foreign investment environment was liberalised in the 1990s, while privatisation provided new opportunities for foreign investors. In October 1998, the US and the (then) five members of the Andean Community (Bolivia, Colombia, Ecuador, Peru and Venezuela) signed an agreement establishing a US-Andean Community Trade and Investment Council. Peru has also signed bilateral investment treaties with a number of key trade and investor partners, including the US, Canada, China, Chile and Japan. An Overseas Private Investment Corporation agreement was signed with the US in 1992, providing insurance against expropriation, war and inconvertibility for US investors. Peru is also a member of the Multilateral Investment Guarantee Agency. Capital Account Exchange Regulations There are no restrictions on exchange transactions, including holding, using, purchasing or selling FX. Investment Incentives The 1993 constitution legislates that foreign investment is accorded equal rights with local investment, and almost all sectors are open to foreign investment. However, foreign investors must register with the national investment agency, ProInversion. Investors who commit to invest at least USD5m over two years (USD10m in the extractive industries), or who acquire at least 50% of a company that is being privatised, are eligible for a guarantee of legal stability concerning the corporate tax regime, and capital, profit and royalty repatriation, for up to 15 years. A government concession is needed for company operations in the mining sector (exploration, production, refining and transport of minerals); oil and gas exploration and production requires either a licence (whereby the investor pays a royalty to the government) or a service contract, whereby the government pays the investor remuneration. Both royalties and contractors’ remuneration are dependent on output.2011/12 44 © Dun & Bradstreet Limited