The social and institutional crisis that hit Peru in 2022 has taken a toll on the country’s investment appeal. Then-president Pedro Castillo was ousted by parliament in the midst of heavy social and political turmoil in December 2022, and replaced by vice-president Dina Boluarte in a transition that took months to settle in and stabilise.

In the meantime, billions of dollars in savings and financial capital left the country, while direct investors pressed pause on most new projects in the country — greenfield foreign direct investment fell to the second-lowest level on record in 2022, according to greenfield investment monitor fDi Markets. Foreign trade minister Juan Carlos Mathews sits down with fDi to discuss the government’s current push to reestablish trust with the community of international investors. 

Q: How has the recent volatility affected investment in the country? 

A: In Peru, 80% of total investment is private investment and 20% corresponds to public investment. The former has been very sensitive to the uncertainty, but Peru still has strong fundamentals rooted in two main factors.

The first is macroeconomic stability, with Peru posting an average annual growth between 2001 and 2022 of 4.3% — second only to Panama with 5.5% in Latin America, IMF figures show. Expected gross domestic product (GDP) growth for 2024 is also positive [3% in 2024, up from 2.7% in 2023, according to estimates by the country’s central bank].

The second factor is legal certainty. Peru has 22 free trade agreements and there are investment protection provisions in those agreements, which we respect as a country. Therefore, beyond the political uproar, if the country can guarantee macroeconomic and legal stability, investment projects can still happen.  

Q: Investment projects in Peru are often delayed by red tape and other factors. What are you doing to address the issue? 

A: The state shouldn’t only promote investment, but also simplify it, and the government is spending a lot of effort in simplifying the administration of investment projects. For example, in the mining sector we are planning a single window similar to the foreign trade single window [which would concentrate in one place all the bureaucracy a mining project would need to kick off and operate]. This is also how we are trying to generate trust among investors. 

Q: What are the priorities in terms of investment promotion at the moment? 

A: There are several things. We have a big gap in infrastructure. If we put everything together, including healthcare and education infrastructure, we have a deficit of $160bn, which is about 60% of Peru’s GDP. We also have a deficit in science and technological innovation. Elsewhere, we are promoting projects by Peruvian companies looking for foreign investors to co-invest with them. For example, agrobusiness is a case of success for Peru and we are now looking for partners for the likes of Camposol, the world’s largest exporter of asparagus, to open new markets they are currently not serving.

Q: China has become the country’s biggest foreign partner in recent years, which has caused concerns in Washington. Do you share those concerns? 

A: There are two things there. Firstly, in terms of value, China has become our largest trading partner. However, when you look at what we sell to China, it’s basically commodities: minerals, fish, crops. In the case of the US — which now is our second trade partner but used to be the first — we sell to them manufactured goods, which are more interesting to us.

When it comes to concerns over Chinese investment, why aren’t US or European companies participating instead? Chinese firms are being very aggressive. For example, if we launch a tender for an infrastructure project, they bid for the project very rapidly. They are fast, proactive, looking into all sectors, visiting ministers. Wherever you look, they are there. So when a tender is released, they are the first ones to react. 

This article first appeared in the December 2023/January 2024 print edition of fDi Intelligence

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