1

Foreign Trade and Investment:

Challenges of the new

Government of Peru

Eduardo Ferreyros Minister of Foreign Trade and Tourism

Republic of Peru

October 2016

2

Economic Performance

Source: Central Reserve Bank of Peru , International Monetary Fund

* Estimated figures of BCRP (Inflation report as of June 2016), IMF (World Economic Outlook Database – April 2016)

3

Macroeconomic Soundness

Real GDP, 2006 – 2020 (% Variation)

4.0 3.9

1.5

-2.0

4.1

3.0 2.5 2.4

2.7 2.4 2.5 2.9 3.0 3.1 3.1

7.5

8.5

9.1

1.0

8.5

6.5 6.0 5.9

2.4

3.3 3.7

4.1 3.6 3.5 3.5

-4

-2

0

2

4

6

8

10

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017* 2018* 2019* 2020*

GD

P (

Pe

rce

nt

Ch

ange

)

World Peru

Macroeconomic Soundness

Peru continues leading regional growth

Real GDP – Forecasts for Latin America 2016 – 2017

(Annual Average Variation %)

-4.5

0.0

2.1

2.6

2.8

3.0

4.1

-5 -4 -3 -2 -1 0 1 2 3 4 5

Venezuela

Brazil

Chile

Mexico

Argentina

Colombia

Peru

Source: IMF / CENTRAL BANK OF PERU

4

Peru leads economic growth in the region

Source: IMF WEO April 2016.

Structural changes support the outstanding performance of the Peruvian economy

5

0.2

2.22.0

3.6

2.8

4.4

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Peru World LAC World LAC Peru

1961-1990 1990-2021

GDP (Average annual % change)

6

Peru’s Trade Performance

Global integration fosters trade and investment

1/ Not including Mexico.

Source: BCRP, MEF, MINCETUR.

Free Trade Agreements (FTA) with People’s Republic of China, United States, European Union, among others. (18 FTAs

with 52 countries).

We have preferential tariff access to 73% of the world GDP (92% of world trade).

Member of the Pacific Alliance.

Access process to the OECD.

Recently, subscribed the Trans-Pacific Partnership (still to be ratified by the Congress of each of the 12 partners).

Peru: Total Exports

7

US$ 8.0 billion

North America1

(21.9%)

US$ 6.1 billion

LAC

(18.8%)

US$ 8.3 billion

Europe

(24.6%)

US$ 0.3 billion

Africa

(0.9%) US$ 0.1 billion

Oceania

(0.5%)

US$ 11.1 billion

Asia

(33.3%)

Exports, 2015 (US$ 33,9 Billion)

Entered into force

Cuba

Canada

Chile Thailand

Venezuela

Costa Rica

European

Union

Mexico

United States

Andean

Community

Panama

Singapore

China

Korea

Japan

Trade Agreements Network

Honduras

Guatemala

Pacific Alliance

Chile

Brunei

New Zealand

Australia

Mexico

Viet Nam

Canada

Malaysia

Singapore United States

Japan

Peru

El

Salvador

Turquía

Tailandia

Brazil India

Indonesia

Negotiating Feasibility

study

In 2025 Peru

will have 27

FTAs into

force which

means 72

trade

partners

Source: http://www.acuerdoscomerciales.gob.pe

Signed

TPP WTO

These countries stand for enlarged market of 3,3 billion people (45% of global

population) with a joint GDP over US$ 60 trillion

91% of Peruvian exports

89% of Peruvian imports 8

Open Trade and Market Access Policy

Main Goal: Double exports by 2021, including non traditional exports

4,829 4,761 5,396 6,401 9,229

12,988

18,514 21,767 23,159

20,864

28,091

36,130 35,153

31,490 26,915

22,757

2,054 2,195 2,270 2,594

3,488

4,286

5,286

6,318 7,469

6,209

7,715

10,190 11,206

11,076

11,726

11,225

6,883 6,956 7,665 8,995

12,716

17,273

23,800

28,084 30,628

27,073

35,806

46,319 46,359

42,567

38,641

33,982

-

10,000

20,000

30,000

40,000

50,000

60,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Tradicionales No Tradicionales Totales

Trade Evolution (US$ FOB Million)

Fuente: SUNAT Elaboración: MINCETUR

67,964

33,244

36,696

9

Traditional Non Traditional Total

EU is Peru’s second main market

Exports from Peru to the world 2015 (%)

Source: CUSTOMS - SUNAT

More dynamic products

US$ 33 982 Millones

European Union

Fresh mangoes (US$ 125 million) 50,6%

(Var.% 2015/2014)

Cacao (US$ 154 million) 33,1%

Fresh avocados (US$ 201 million) 21,8%

China 22%

United States [PORCENTAJE]

Switzerland [PORCENTAJE]

Canada [PORCENTAJE]

Colombia 4%

Japan [PORCENTAJE]

European Union

16% Korea [PORCENTAJE]

Chile 3%

Rest of the World 19%

10

Peru – EU Trade in 2015

US$ 33,9

Billion

11

Country 2015

Total 4,463.1

1 Germany 1,109.4

2 Spain 705.0

3 Italy 638.0

4 France 362.0

5 UK 304.2

Bilateral Trade Peru – UE (by country)

Country 2015

Total 5,481.2

1 Spain 1,092.0

2 Germany 927.0

3 The Netherlands 878.0

4 UK 604.0

5 Italy 561.0

Exports to:

Imports from:

Copper, Zinc & Lead

Mixtures of vegetables

preserved

Organic cocoa

Precooked Giant Squid

Organic Bananas

Preserved asparagus

Fresh Brazil nuts

Fine animal hair, carded

Canned anchovies

Fishmeals

Fresh asparagus

Fats and oil of fish

Organic Coffee

Quinoa

Maca poder

Silver & concetrates

Natural calcium phospates

Fresh avocados

Fresh mangoes

Evaporated milk

Dried paprika

Fresh grapes

Frozen Giant Squid

Frozen fruit & nuts

Frozen scallops

Canned artichokes

Preserved olives

Paprika, crushed or

ground

Peru’s the world leading exporter of different products

Source: CUSTOMS – SUNAT

12

13

Bilateral Relation Peru – UK

UK investment in Peru

Source: CUSTOMS – SUNAT

United Kingdom is our second largest investor since 2006

Main investment sectors: Mining (US$ 2 314 Million), Finance (US$ 753 Million), Telecomunications (US$ 327 Million), Energy

(US$ 292 Million), Industry (US$ 180 Million), Trade (US$ 129 Million) & Services (US$ 121 Million)

2,849 2,961

3,452 3,750

3,944 4,299 4,315 4,315 4,336 4,336

30.6%

3.9%

16.6%

8.7%

5.2%

9.0%

0.4% 0.5% 0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*

US

$ M

illio

n

14

UK: 4th market destination of Peruvian exports

Peru exports to United Kingdom 2010 - 2016

Source: CUSTOMS – SUNAT

Traditional Exports

2015: US$ 314 Million Jan – Aug 16’: US$ 166 Million

Minerals: 93% of total

Coffee: 5% of total

NonTraditional Exports

2015: US$ 291 Million Jan – Aug 16’: US$ 188 Million

Main Subsectors:

Agribusiness: US$ 237 Million

Chemical: US$ 21 Million

Textile: US$ 20 Million

Fishing: US$ 7 Million

Iron & Steel: US$ 2 Million

Main Products:

Fresh grapes (US$ 46 Million)

Fresh asparagus (US$ 45 Million)

Fresh avocados (US$ 42 Million)

Fresh mangoes (US$ 20 Million)

Mandarins & tangerines (US$ 18 Million)

Fresh cranberries (US$ 12 Million)

145 172 178 233 255

291

179 188

159

254

432 379 351

314

210 166

304

425

610 612 607 604

389 354

0

100

200

300

400

500

600

700

2010 2011 2012 2013 2014 2015 Jan - Aug2015

Jan - Aug2016

US$

Mill

ion

Non Traditional Traditional Total

15

UK: 5th market providing goods to Peru

Peru imports from UK 2010 - 2016

Source: CUSTOMS – SUNAT

Imports

2015: US$ 304 Million Jan – Aug 16’: US$ 172 Million

16

15th

192.3

265.1

319.6 341.1 329.3

304.2

189.4 172.4

2010 2011 2012 2013 2014 2015 2015Jan-Aug

2016Jan-Aug

17

Why Invest in Peru?

Based on the “national treatment” principle.

Trade Policy consistency for the last 15 years.

Unrestrictive access to most economic sectors.

Free movement of capital.

Free competition.

Guarantee for private property.

Special Regimes: Legal Stability Agreements and VAT Anticipated Recovery.

Investment Chapter in FTAs and member of ICSID and MIGA.

Peru participates in the OECD Investment Committee and has initiated the process for its future incorporation as a member economy.

Peru offers a favorable legal framework for foreign investment

Friendly Investment Environment

18

Near- and medium-term reforms will be implemented in

order to increase the country’s growth potential

Near-term measures Medium-term measures

Promoting Investment

Promote (i.e. addressing delays, sourcing pending approvals of) both public and public-private partnership (PPP) investment projects

Redesign of processes for the granting

and monitoring of public and public-

private partnership (PPP) investment

projects

Boosting Business Productivity

(and increasing formality)

Seek a tax framework that promotes a better business environment and the expansion of the tax base: • Commitment to lower taxes (valued-

added tax - VAT) • Increase in the taxpayer base • Greater tax equity • Lower avoidance and evasion • Maximize the flow of resources to

regional and local governments

Strengthen multi sectoral efforts to reduce informality: • National Council of Competitiveness

and Formality • Reform of the tax authority • Red tape removal • Entrepreneurial training for small

businesses • Access to credit and financial

inclusion

Enhancing Fiscal

Responsibility

Promote an institutional framework that improves fiscal transparency and makes fiscal rules more enforceable.

Improve financial programming (e.g. systems, protocols, controls) in regional and local governments

19

20

Pacific Alliance (PA) Financial Integration Process

Capital markets integration

Mutual recognition of issuers and expansion of instruments and trade mechanisms within the

Latin American Integrated Market

Pacific Alliance’s members coordinate measures to foster and expedite the integration process.

Pension funds investments

Easing the pension funds investment schemes among PA members

Tax regimes alignment

Level the playing field to

reduce disadvantages vis-á-vis PA countries' foreign investment tax regimes

Pacific Alliance’s objectives

Source: INEI, ENAHO, Investment announcements gathered by APOYO Consultoría.

Increasing Middle Class

Sector Number of

announcements Investment

(US$ million)

Retail 65 2,338

Real Estate 52 2,129

Tourism 36 1,489

Services 21 1,041

Industrial 40 971

Massive

consumption 23 872

Logistics 11 506

Education 34 446

Health 11 291

Agriculture 12 240

Vehicle sales 13 127

Total 318 10,450

Main private investment announcements

(

Households: 4.5 mm

Households : 6.3 mm

2005 2015

1.5%

46.0%

18.3%

34.3%

19.7%

0.5%

37.6%

42.3%

Middle Class

Emerging lower class

3.0%

52.0%

14.0%

31.0%

2021

Households : 7.7 mm

Middle Class

Emerging lower class

B + C D E A

Urban Peru: Socioeconomic levels

(% de households)

21

Attractive Sectors to Invest

Add Value / connections/ Diversification

22

Food Industry Petrochemical

and Gas Industry

Construction Industry

Metal-mechanics Industry

Foods

Agri-business

Fishing Aquaculture

Forest

Forest Certification

Afforestation and

reforestation

Energy

Hydric Resources

Natural Gas

Hydrocarbons

Natural gas

Petroleum

Mining

Metallic

Non-metallic

Add Value / connections/ Diversification

US$ 159,5 billion

To reduce the long – term infrastructure gap (2016 -2025)*

* Source: Asociación para el fomento de la infraestructura nacional

Infrastructure Gap

Sector Mid-term

2016-2020

Gap

2021-2025

Long term

2016-2025

Water and

sanitation 6,970 5,282 12,252

Telecom 12,603 14,432 27,036

Transportation 21,253 36,246 57,499

Energy 11,388 19,387 30,775

Health 9,472 9,472 18,944

Education 2,592 1,976 4,568

Hydraulic 4,537 3,940 8,477

TOTAL 68,815 90,735 159,551

Infrastructure gap medium and long term (Million US$)

23

Water and sanitation

12,252 (8%)

Telecom 27,036 (17%)

Transportation 57,499

(36%)

Energy 30,775 (19%)

[NOMBRE DE

CATEGORÍA] [VALOR]

(12%)

Education 4,568 (3%)

Hydraulic 8,477 (5%)

Peru: A Growing and Solid Partner for Business

• Peruvian Network of FTAs, its geographic location, economic and policy stability, among

others, give Peru the conditions to consolidate itself as a HUB, offering clear and predictable

rules for trade and investment.

• Peruvian Real GDP Average of the last 10 years is 5,8%.

• Peru is the fourth most populated country in South America, but we are not a market of 30

million. Because of our FTAS we have Access to 3,3 billion people/market around the world.

Ranking on the Ease of Doing Business (2015):

• Opportunity for foreign investors to make business in Peru, importing capital goods and industrial machinery and exporting products or services, under the benefits of Peruvian FTAs Network.

• Attractive business environment: Peru is the second country in South America rank at Doing Business 2015.

Rank Country

1 Chile

2 Peru

3 Colombia

4 Uruguay

5 Paraguay

24

25

Investment Opportunities

Sector Projects

Estimated

investment

(USD million)

Estimated Award

Date

TRANSPORT INFRAESTRUCTURE

LONGITUDINAL DE LA SIERRA HIGHWAY, SECTION 4 446 Q IV 2016

HUANCAYO - HUANCAVELICA RAILWAY 204 Q IV 2016

THE AMAZON WATERWAY 70 Q I 2017

PANAMERICANA SUR HIGHWAY: ICA- DV. QUILCA SECTION Under evaluation 2017

LONGITUDINAL DE LA SIERRA HIGHWAY, SECTION 5 Under evaluation 2017

PORT TERMINALS (Ilo and Salaverry) Under evaluation 2017

LINES 3 AND 4 OF THE METRO OF LIMA AND CALLAO Under evaluation To be defined

PERIPHERAL RING ROAD FOR METROPOLITAN LIMA Under evaluation To be defined

LURÍN – CHINCHA COMMUTER TRAIN Under evaluation To be defined

THIRD GROUP OF AIRPORTS Jauja, Jaén, and Huánuco Airport Under evaluation To be defined

REAL STATE ANCÓN INDUSTRIAL PARK (AIP) Under evaluation 2017

AGRICULTURE AUCTION OF AGRICULTURAL LANDS - CHAVIMOCHIC PROJECT 5000 /ha 2017

Project Porfolio

26

Sector Projects

Estimated

investment

(USD million)

Estimated Award

Date

ENERGY

AGUAYTÍA – PUCALLPA 138 KV ELECTRIC TRANSMISSION LINE 20.3 Q IV 2016

NEW POWER SUBSTATION: LA PLANICIE 500/200 kV 20.1 Q III 2017

500 KV MANTARO – NUEVA YANANGO – CARAPONGO & ASSOCIATED SUBSTATIONS LINK

276.5 Q IV 2017

500 KV NUEVA YANANGO – NUEVA HUÁNUCO & ASSOCIATED SUBSTATIONS LINK

232.5 Q IV 2017

REACTIVE POWER COMPENSATOR (SVC o similar) +400/-100 MCAR in 220 kV LA PLANICIE S.S.

24.8 Q IV 2017

QUILLABAMBA THERMAL POWER PLANT 180 2017

220 kV TINTAYA –AZÁNGARO TRANSMISSION LINE (1 circuit) 58.9 Q I 2018

REPOWERING TO 1000 MVA OF THE 500 Kv CARABAYLLO – CHIMBOTE – TRUJILLO TRANSMISSION LINE

32.6 Q I 2018

REACTIVE POWER COMPENSATOR (SVC or similar) +400/-150 MVAR AT 500 kV TRUJILLO S.S.

31.8 Q I 2018

220 kV NEW CARHUAQUERO S.S. 9.5 Q I 2018

MASS USE OF NATURAL GAS FOR THE CENTER AND SOUTH OF PERU

300 To be defined

Project Porfolio

27

Sector Projects

Estimated

investment

(USD million)

Estimated Award

Date

SANITATION AND HEALTH

MAIN WORKS AND CONDUCTION OF DRINKING WATER SUPPLY FOR LIMA

600 2017

WASTE WATER TREATMENT SYSTEM OF TITICACA LAKE Under evaluation 2017

SOLID WASTE MANAGEMENT IN HEALTH FACILITIES UNDER THE MINISTRY OF HEALTH IN METROPOLITAN LIMA

Under evaluation

2017

UPGRADING AND EXPANSION OF SEWAGE NETWORK AND WASTEWATER TREATMENT PLANT OF THE TOWNS OF HUANCAYO, EL TAMBO, AND CHILCA

Under evaluation

2017

THREE NEW HIGH-COMPLEXITY HOSPITALS 400 To be defined

MINING

MICHIQUILLAY Under evaluation 2017

JALAOCA (EXPLORATION PROJECT) Under evaluation 2017

COLCA (EXPLORATION PROJECT) Under evaluation To be defined

ANTABAMBA (EXPLORATION PROJECT) Under evaluation To be defined

PAMPA GRANDE (EXPLORATION PROJECT) Under evaluation To be defined

Project Porfolio

28

Agribusiness Sector

Natural greenhouse.

High agricultural yields: Sugarcane (2nd), Asparagus, Olives (3rd), Artichokes (4th), Grapes (6th) and Avocado (11th).

Seasonal windows in major markets for agricultural exports.

The 100,000 hectare of land currently devoted to agricultural exports are expected to double as a result of large agricultural irrigation and expansion existing projects.

More than US$ 5.000 billion in exports of fresh and processed products to more than 150 countries.

Organic and Natural Products with high export potential.

29

Agricultural exports according to Target Market – 2015

Source: CUSTOMS

1,122 1,338

1,757 1,971

2,555 2,425

3,177

4,519

4,177 4,231

5,096

5,121

0

1,000

2,000

3,000

4,000

5,000

6,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Agro Exports (millions of US$ FOB)

TOTAL TRADITIONAL

TOTAL NON TRADITIONAL

TOTAL

UNITED STATES 32%

NETHERLANDS 13%

GERMANY 6%

SPAIN 5%

UNITED KINGDOM 5%

ECUADOR 4%

CANADA 3%

CHINA 3%

CHILE 2%

OTHER 27%

30

Agribusiness Sector

Important cultural destination for archaeological sites of the Inca and pre-Inca cultures.

• Machu Picchu was voted one of the New 7 Wonders of the World.

Diversity of natural settings. Destination for bird and orchid watchers.

Important investment by internationally renowned hotel chains.

The conventions and gastronomic tourism has gained a significant boost, Lima is considered as one of the main venues for international meetings and we are the gastronomic capital of Latin America.

Increased connectivity of the Peruvian air market with increased weekly frequencies in international flights to allow more connections and destinations, with more and better travel options.

Investment Opportunities in the 8 priority destinations: Northern Beaches, Amazon River, Amazonas, Kuelap, Moche Route, Lima, Nazca, Paracas, Colca Valley and Puno-Lake Titicaca.

Due to its tourist attraction and services of quality Peru will be the venue of important sports events and international forum such as: APEC 2016 and the 2019 Pan American games.

31

Tourism Sector