PERU « AU CENTRE DE LA SCENE »

15.12.2014 By: Transfer LBC

“Since recent years, thanks to the dynamism and strengthening of its economy, Peru has attracted attention worldwide because of its efficient economic management, even in times of crisis, which has been recognized by international agencies, both governmental and private, and mainly by an increasing presence of foreign investors.” Ollanta Humala Tasso, president of the Republic of Peru.

Peru’s economy is one of the most dynamic economies with one of the highest growth rates in Latin America, an average GDP growth of 5, 8% in 2013 according to the World Bank. European investors are regularly being more present in Peruvian economic activities, as it is for instance noticeable in the "Forum of Latin American Cities", celebrated in Lima in December 2013, which gave Spanish investors the chance to better conceive the country’s economic situation, as well as to examine the investment opportunities it currently offers.

In the French environment, regular meetings between Mr. François Hollande and Mr. Ollanta Humala Tasso are frequently held. On the first of July 2014, both countries’ leaders met for the second time within two years in order to discuss bilateral relations through cooperation in health, defense and education. In these discussions, both leaders pronounced a mutual interest to further strengthen their economic relations. In fact, these joint concerns makes Peru one of France’s partners in Latin America, which strongly facilitates the process of French investment.

Increasingly, Peru offers a large range of investment opportunities designed for European investors due to two main reasons. On the one hand, thanks to a regular development of certain emerging sectors, and on the other hand, because of Peru’s geographical competitive advantage of natural resources and a good climate for energy production.

Mining
The mining industry in Peru has been a significant part of Peru’s economy since the prehistoric era and still is of crucial importance for Peru. In fact, the industries have been a job generator as well as a source of fiscal revenues, counting for 5% of Peru’s GDP in 2012. One of the reasons is that the variety of its minerals is one of the greatest in the world. Peru is indeed the third world producer of copper, tin, zinc and copper.
The country is a significant exporter to Latin American economies, especially Brazil, as well as to other countries such as the United States, Australia and China. Currently, mining exports have raised to the point that they represent 65% of the total exports of the country. In fact, multinational mining industries such as Xtrata, Newmont or Rio Tinto have important activities in the country.

With 5 % of world investments in mining, Peru has adopted the fourth place of these investments in the world, placed after Canada, Australia, the United States and Mexico. The country is an attractive place for investors, since it offers major business advantages and great freedom for them to import equipment and machinery to perform their activities at a lower cost with low bureaucratic prerequisites.

An interesting project in this field is the Extractive Industries Transparency Initiative EITI, which is formed by government agencies, mining companies, international and civil society organizations, which attempt to provide transparency criteria within the revenues of natural resources. With this, it does not only ensure transparency at an international level, but it also guarantees sustainable development for the Peruvian population.

Nonetheless, according to the Peruvian Ministry of External Relations, only 0, 28% of the mining resources within the total surface of the country’s territory has been exploited until now. As mentioned, the mining sector has favored the domestic market, yet it also has gained a privileged place in the external market. Thus, investment opportunities in Peru continue growing.

Agro-food
In 2013, agro-food represented 6, 2% of Peru’s GDP and it employed less than 1% of the working population (23% labor force in agriculture). The agricultural sector experienced a growth in 2013, especially due to tangerine and cranberry quinoa, which experienced the highest evolution, according to a study conducted by the Centre for Foreign Trade (CCEX) of the Chamber of Commerce of Lima. These two products have a strong demand in European markets. Percentages in the export of avocado (+ 35%), frozen mango (+ 33%), fresh asparagus (+ 19%), cocoa bean (+ 18%), banana cavendish (+ 11%) and grapes (+ 10%) have grown in the past year as well.

One of the reasons why the Peruvian agro-food sector is developing is due to its innovative processes within the food supply chain Peru exports fresh products with a high added value to the Europeans consumers. Furthermore, the improvement of healthy consumption habits in North American and European countries stimulates Peru’s exports of fruits and vegetables exportation. In fact, Peruvian producers continue improving some of their local products through a different distribution channel, the biological food and the fair-trade agreements, which enriches their quality and consequently attracts foreign investors.
Nevertheless, irrigation in Peru is vital in for stimulating the economy, reducing poverty and increasing food security. Hence in order for families in rural areas to engage in agriculture and overtake the poverty line – where more than half of the population lives in poverty –, one of the main objectives of the Peruvian government is the encouragement of a sustainable use of water.

Renewable energies

Peru possesses 55% of renewable energies, from which 45% derive from fossil fuels. In 2012, wind energy accounted for 0,004%, biomass for 3, 4%, and hydraulic energy for 96. 6%. The latter is one of Peru’s most substantial forms of energy, considering future plans of the construction of hydroelectric plants. For instance, in 2016, 15 new hydroelectric plants will be built with a total power of 2.300MW. Biomass is also a reasonably developed renewable energy source with 784 GWh in 2012.

With regard to solar energy, Peru has here a geographical competitive advantage: in the south of Peru, the quantity annual sunshine can exceed 2.300kWh/m², a situation that provides benefits in terms of building photovoltaic plants. Currently, 4 solar photovoltaic parks are being constructed in the area with 80MW combined capacity.
It is certain that Peru will increase its national potential in renewable energies and, in a few years, it will start to gradually export natural energies such as natural gas or clean petroleum for cars. With the importance of Peruvian rivers and the Amazon, Peru plans to export also the surplus of electricity to its neighbors. Nevertheless, the challenge still lies in the need to increase the share in fossil fuels to answer to the demand of the Peruvians, since fossil energy is needed due to the national growth and the expansion of the middle class.

Water
Currently, 5.3 million Peruvians do not have access to safe water and 9.2 million do not have access to improved sanitation services and thus they need to access a private tanker truck who delivers water. In Lima, out of a total of 9m people, almost 1.9m residents lack access to water.

Nonetheless, the mindset of health consciousness to drink safer is gradually being established and low cost solutions are taking place to provide clean water for disadvantaged Peruvians. The government of Peru recently announced the investment of $3, 3bn in the next three years, in order to expand water supplies throughout metropolitan Lima and outlying neighborhoods. In addition, bottled water is expected to continue spreading in the forecast period, encouraged by the prominent healthy trend in the country and by the empowerment of the economy. This health trend will continue pushing consumers to look for healthier alternatives and water is a winner in this arena.

With regard to water plants, the Planta de Tratamiento de Aguas Residuales (PTAR), Treatment Plant for Sewage Water, of Taboada in Lima, has been recognized as the best water plant of the year in the 2014 Global Water Awards, last April 7th in Paris. These awards are the most prestigious ones in the world, published annually by the magazine Global Water Intelligence (GWI). According to the principles of these prestigious awards, the award is given to "... the best treatment plant of sewage water opened in 2013, showing the greatest innovation in terms of efficiency, optimization and environmental sustainability."
The plant, built by Tedagua in 2013, competed with three other “finalists” for the award, The New Plant for Sewage Water in Cairo (Egypt), the Sewage Plant in Tubli (Bahrein), and the Sewage Treatment system of Warsaw (Poland). With an average flow of 14 m3/s and maximum of 20.3 m3/s, the PTAR currently serves more than 4.3 million inhabitants, which equals more than half of the population of Lima and Callao (56%). In fact, until the PTAR project came into being, Lima generated 16% sewage water in the capital, yet currently the plant covers 72% of sewage water for both Lima and Callao, and it is the largest water plant built in Latin America.

In accordance to Jorge Medina Mendez, Country Managing Partner of EY Peru, a world where globalization is a hallmark of our time and where world markets fuse, crucial opportunities appear for emerging countries like Peru, a country that is having success in its efforts to consolidate the development of sustainable investment. In this line, the advantage of investment and a consequent cooperation with foreign countries suggests indeed a win-win situation for both parties. In the Peruvian environment, there is a wide range of investment opportunities in Peru that can lie on the four mentioned sectors, among others.

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