Publicado en Milestone GRP Global Investors Guide Peru 2015

1. milestone GRP - Peru has consolidated its political and
economic stability while concurrently achieving excellent
economic development and GDP growth rates. What are the
factors that allowed Peru to obtain these results?
Mr Paulo Pantigoso - From the start of the current millennia up
to 2013, Peru’s GDP has registered an impressive accumulated
growth rate of 113%. This growth was accompanied by an
accumulated inflation of 48% in the same period. These are
the best rates in Latin America. Poverty, measured in monetary
terms, has been reduced by half in recent years, offering better
quality of life and improved future prospects for many Peruvians.
Today, Peru may consider itself a true economic miracle.
After a 20-year history of hyperinflation and terrorism, Peru has
achieved some of the best stability, respect, and investment
promotion conditions in the region. Its economy has grown to
become the 5th largest in South America in terms of purchasing
powerparity;PerutodayranksbehindBrazil,Argentina,Colombia
and Venezuela. The main factors that contributed to this growth
have been the country’s solid macroeconomic foundation; an
adequate monetary policy; suitable fiscal surplus management;
the promotion and diversification of exports; international trade
facilitated by free trade agreements; the promotion of foreign
direct investments; reliability and predictability of policies and
institutions governing the national economy, such as the Ministry
of Economy and Finance and the Peruvian Central Bank; and
the backing of an expansionist trend of the global economy that
was mainly based on the maximization of income resulting from
abundant natural resources.
In the last decade, Peru’s GDP has tripled as a result of its
economic growth; moving towards becoming a medium
to medium-high income economy. Its rapid expansion has
contributed to reducing national poverty rates by almost 18% in
the last 7 years, decreasing to 24.2% of its total population by
2013. The country’s recent economic boost has been influenced
by monetary and fiscal policies that were applied over the last
two decades and that contributed to reduce debt levels (from
32.3% of the GDP in 2006, to 18.1% in 2013, and an estimated
17.2% by 2014) and consecutive fiscal surpluses (of 2.2% of
the GDP in 2012, and with official estimates of 0.6% for 2013
and 0.1% for 2014). Peru has also benefited from other factors
such as the growing size of its market and internal consumption,
as well as its developed financial sector. The growth in these
areas is reflected in the increase of private consumption by
approximately 5.2% in 2013 compared to 2012, and with growth
estimates of 4.8% and 5% for 2014 and 2015, respectively.
Similarly, by December 31st, 2013, international net reserve
levels increased to approximately 31% of that year’s estimated
GDP.
milestone GRP - What challenges will the country face taking
into consideration a recovering global economy and a local
economy with a stable growth rate?
Mr Pantigoso - Peru’s challenge lies with speeding-up the
process of translating its macroeconomic achievements to
the microeconomic environment, and the crucial reduction of
excessive bureaucracy. Therefore, the main challenges and
opportunities that Peru must focus on to maintain growth
rates include: overcoming poverty and extreme poverty; the
favouring of investments in technological innovation; the
improvement of the quality of education; the promotion of
private and infrastructure investments; positioning itself as
an international trade hub in the region by entering strategic
free trade agreements with the world’s largest economies;
maintaining strong internal demand; consolidating itself as
a world reference in gastronomy and tourism; improving the
public health system, internal security, and environmental
management by relying on a renewed, efficient, and committed
public administration; reducing excessive bureaucracy; solving
social conflicts on a timely manner; promoting social inclusion;
and fighting drug trafficking and eliminating the remnants of
terrorism.
In addition to these measures, we still require systemic
and structural changes such as the simplification of
bureaucracy and procedures that slow down investments.
We also need to prioritize the promotion of important job-
creating investments in areas such as infrastructure, mining,
hydrocarbons, and telecommunications. Additionally,
we need tax regime reforms that have already been
announced and that will rekindle economic activity, as well
as the implementation of the Law for the Promotion and
Diversification of Production.
milestone GRP - How do you view the current investment and
tax regimes, and what are the competitive advantages Peru
has over its Latin American counterparts?
Mr Pantigoso - Peru’s current investment regime is simple. 95% of
its export destinations and the countries of origin of its imports are
covered by trade agreements, such as the free trade agreements
signed with the United States, China, and Europe. In other words,
Peru is one of the most open economies in the Americas. Similarly,
Peru’s tax regime is more simple in the practical application of its
taxes, tariffs, and contributions. These are many times lower than
those of our Latin American neighbours.
milestone GRP - How do you view the current investment and
tax regimes, and what are the competitive advantages Peru
has over its Latin American counterparts?
Mr Pantigoso - Peru’s current investment regime is simple. 95% of
its export destinations and the countries of origin of its imports are
covered by trade agreements, such as the free trade agreements
signed with the United States, China, and Europe. In other words,
Peru is one of the most open economies in the Americas. Similarly,
Peru’s tax regime is more simple in the practical application of its
taxes, tariffs, and contributions. These are many times lower than
those of our Latin American neighbours.
milestone GRP - What are the greatest trends in terms of the
nature and direction of investments in Peru in the last years,
and do you believe there will be significant changes in those
trends over the short to medium term?
Mr Pantigoso - In recent years, foreign direct investment in Peru
has ranked as the second highest in Latin America in proportion
to the country’s GDP, being almost twice as high as the regional
average. Even though there has been a slowdown in foreign
direct investments in 2014, both domestically and internationally,
I believe that recent measures that were implemented in the
middle of 2014 aimed at promoting the economy will have a
positive medium-term impact and contribute towards an
estimated GDP growth rate of 5% in 2015. In addition, since
July 2014, Peru became the third country in Latin America, after
Chile and Mexico, to join a select group of countries that have
an “A” investment grade credit rating. As late as 1996, Peru was
still viewed with uncertainty in terms of its ability to comply with
its debt payment obligations. Therefore, in a period of 18 years,
we have evolved from being perceived with uncertainty to being
viewed as capable of meeting our debt repayment obligations
and having a stable economy.
milestone GRP - What are the main questions that are raised
by international investors who want to enter Peru and how
does EY contribute to address any related concerns?
Mr Pantigoso - The main doubts and questions are related
to finding consolidated, useful, and available information that
is accurate and that it is the same information that is being
applied by the market. The greatly scattered information
pertaining to tax, labour, corporate, customs, accounting, and
financial issues, in addition to the high levels of bureaucracy
in combination with slow-paced licensing, permitting, and
concession processes, are all factors that may cause some
foreign investors to withdraw themselves from the Peruvian
market. However, once these obstacles are overcome, the high
rates of return and receptiveness towards new operations make
investments in Peru attractive. In fact, the need for consolidated,
current, reliable, and useful information is the reason why EY has
published “Peru’s Business & Investments Guide” and made it
available to investors for 4 consecutive years.
milestone GRP - EY has been collaborating with institutions
such as the Ministry of Foreign Affairs (MRE) and inPERU
in the promotion of investments. What are the motivations
that led you to enter these partnerships and what are their
objectives?
Mr Pantigoso - EY Perú does not only seek its own growth, but
it is committed to help other to grow as well. We will all benefit if
Peru as a whole grows. That is why we help investors and provide
them with technical and informational publications that provide
them with a consolidated instrument that contains useful and
relevant information that can singlehandedly be applied towards
the development of a preliminary business case. We are proud
to be able to contribute towards attracting investments to Peru,
which is why we are sharing our knowhow with entities such as
the MRE and inPERU, who work to promote Peru’s growth. This
is a medium to long-term effort. The day in which we will have
several success cases of foreign direct investments that were
performed with our help, we will feel satisfied and rewarded for
having made a valuable contribution in benefit of our society
and the future of Peru.
milestone GRP - As the new managing partner for EY in Peru,
a country with excellent medium-term growth projections,
what will be the main challenges of your tenure and what is
the legacy would you like to leave behind?
Mr Pantigoso - Personally, I feel privileged for being able to
lead the best and most complete professional services firm
in Peru. I am privileged to lead our efforts in continuing to
facilitate and expedite Peru’s growth. Given the market’s speed
and direction, working to maintain sustainable growth and
attracting foreign capital through the offering of sophisticated
professional services is one of the main market challenges
we face. In order to continue to offer these services, my main
challenge consists of being able to continuously earn the
trust of the talented collaborators who dedicate their careers
to work for EY Perú, as well as anticipating, innovating, and
creating the space that is necessary to continue to attract
better professionals so that they may develop themselves at
EY Perú, and contribute towards the collective benefit of our
group. In that way, we aim to continue to contribute towards
the growth of Peru and our own firm.
Peru’s challenge lies with
speeding-up the process of
translating its macroeconomic
achievements to the
microeconomic environment,
and the crucial reduction of
excessive bureaucracy.
Paulo Pantigoso is the Country Managing Partner for EY Perú. Mr Pantigoso started his career
at Arthur Andersen in 1993. He was appointed as Head Partner for Consulting and Member of the
company’s Executive Board in 2006, being responsible for EY’s practices in Colombia, Venezuela,
Ecuador and Peru. Mr Pantigoso holds a degree in management and accounting from Universidad
del Pacífico, and an MBA from the Adolfo Ibáñez School of Management.
EY is the global leader in auditing, tax, transaction, consulting, and corporate finance services. The
quality of its services and knowhow lend trust in capital markets and economies around the world.
EY helps companies to adapt and to transcend; to comply with their regulatory requirements; to
grow, maintain and invest capital, promoting transactions that generate economic and social value.
EY Perú
“Peru May Consider Itself a True Economic Miracle”
Interview with Paulo Pantigoso, Country Managing Partner
milestone GRP and Paulo Pantigoso discussed the achievements that have driven growth of the Peruvian economy over the
last 2 decades as well as some of the challenges faced by the country and how those obstacles can be challenged.
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