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Doing business in Peru

by: Valeria Rordiguez Brondo, Hofstede Insights Associate Partner

 

The famous writer Mario Vargas Llosa defines Peru as a country of multiple identities, open to all cultural winds, in which five continents are reproduced.

In Peru, we can observe the richness of the multiple pre-Columbian societies, the overlapping of Spanish and Western culture, with Afro-descendants, and the subsequent opening in the 19th century to the very important Chinese and Japanese immigration. Peruvians are very proud of their gastronomic and archaeological heritage, such as Machu Picchu, the Nazca lines and Cuzco.  

 

Three most important things for doing business in Peru:

  1. Hierarchy/Decision Making – In Perú, it is really important to be sure that the person talking to you is a decision maker. Decisions are made at the upper end of the hierarchy and the fellows tend to execute them as suggested.
  2. Be patient with the times and the fulfilment of the objectives – There is the "normal" time and the "Peruvian time", which means that they can arrive, even 2 or 3 hours after the scheduled commitment. At work, meetings never start on time and are often planned before the scheduled time to lessen the impact of this delay.
  3. Read “the air” – keep in mind that Peruvians are reluctant to say "no", but they show their denial through indirect communication.

 

What to look for in a good partner

As it is a collectivist society, it is very important to choose a local partner with good connections. Also, find a partner who understands how to handle local politics.

On the other hand, it is desirable that on a cultural level, your partner understands that in general European societies have a more direct communication style. This will save future misunderstandings.

 

Conduct meetings

In meetings, if you need to solve something important or make decisions, you must ensure that the decision maker (the boss) is present. Otherwise, you can have numerous meetings without them being resolved the way you need.

Also, keep in mind that being a collectivist society, their way of communicating is indirect.  The difference between direct and indirect communication is that when the context is high (indirect), most of the information is in the physical or internalized context of the person, and when the context is low (direct), the information is explicit in the message. Being too direct can annoy those who attend the meeting, even to the point of appearing rude.

Peruvians are reluctant to say "no", but they show their denial through indirect communication. For example, they do not return your calls, they do not show interest, it is impossible to reach them, etc.

In that sense, you should avoid asking questions that are answered with a "yes" or a "no" for example: instead of asking "is this task going to be ready for tomorrow?" ask "when do you think this task will be ready?" Also, remember the reference of "Peruvian time", and in that sense, be patient if the date is not met according to your expectations.

On the other hand, meetings usually have several breaks and it is very important to take time to observe quietly. Many important conversations are likely to take place in coffee break settings, as it is easier to engage in one-on-one communication than ask people to expose themselves in the group.

Finally, you must be patient until you have the results you are looking for, in the time you are looking for them. As we said, there is "Peruvian time" and it is something that is repeated in most collectivist societies. There is a direct relationship between individualistic societies and monochronic time and collectivist societies with polychronic times.

Polychronic time is characterized by several events that occur simultaneously. Interpersonal relationships are highly valued in polychronic cultures. Time is less tangible and the emphasis is on engaging people and conducting transactions rather than schedules. Multitasking is valued. Their perception of time is considered to be more related to "natural rhythms" and to "the earth" and "the seasons."

 

Behavior

During meetings, treatment is formal and the dress code is also formal, although a tie is not always necessary. Be careful in the way you address people, try not to put them in situations in which they must give their opinion or make a value judgment, especially if a boss is present.

While you are waving with your right hand, it is common practice to touch the other person's arm with your left hand, especially among men. Or, when introducing a man and a woman, it is a common practice for them to kiss once on the cheek. This practice is common among urban people, but not among Andean people who prefer a handshake and a hug. In conversations, relationships can be affected by the volume and tone of voice: Peruvians generally speak quietly, as speaking loudly is considered disrespectful.

Although not recommended, when talking about politics, never participate in an ideological discussion. Any conversation about local or international politics should remain very superficial, avoiding the personal point of view.

 

Meals

Due to the social division, the elements of union are highly valued and important. An element of social union is food, Peru is recognized worldwide for its incredible fusion dishes. Inviting people to eat at business, especially at lunch, is a great sign of commitment and pleasure. At lunch, the famous ceviche is usually served, it is a dish consisting of marinated fish, seafood or both,  in citrus dressings. The best thing that can happen to you in a meeting is to be invited to lunch. Lunch is above dinner (since the ceviche is served fresh).

Importance of food as a sign of appreciation and respect

On a trip by international officials to the Peruvian jungle, they were invited by local communities to drink the typical drink of the place, Masato.

The issue is that, for some very western mentalities, it can be somewhat difficult, and this was the case of the officials, since Masato is a yucca-based drink, which is previously chewed and spit into a container. Then, the yucca with the saliva generates a ferment that gives rise to the famous drink. Sharing this drink is a symbol of goodwill and welcome, so you should drink it.

Now you know, if they invite you to drink "yuca beer"(Masato), don't say no!

 

How to manage people and build trust?

When you are a manager, people will expect you to have all the answers to their questions. Also, you should be like a "benevolent father" when it comes to managing. If you do not have clear answers, try to give one, even if it is not the most precise and then you will give follow up with more details. Experience is respected, so if you are young and in a management position, remember to present plenty of credentials. Titles are equally important when introducing yourself. People often call you by your title: "engineer" "accountant" "lawyer" or "doctor".

For doing business it is important to develop a relationship. Trust is earned over time, although being a foreigner will give you greater credentials of trust.

Peru is characterized by being a macho society, where there are several "rituals" between men to gain trust in the business world. These rituals include going out to drink, eat, play soccer, and talk about women.

 

Short case study

Foreigner in Lima

Foreigners are well perceived by Peruvian society and if they are whites of European origin, even more so. In a meeting with a renowned transport company, the CEO presented his team as follows: "In this organization, we have excellent professionals and also a foreigner!!"  The audience was very happy to know that they had that "privilege".

A road in the Peruvian jungle

At a meeting of a large construction company to build a road in the Peruvian jungle, a company whose partners were Peruvian and Dutch presented themselves as bidders.

They were received at the meeting by the head of the infrastructure, who apologized for the absence of the area manager.

The Dutchman made the presentation and the Peruvian contributed; the head of the infrastructure of the construction company was delighted! He told them that they were surely going to work together and that he would call him the next day.

The Dutchman left happy thinking the meeting had gone great and was upset to see his Peruvian partner somewhat disappointed by the outcome of it.

The next day, he had no news but he thought the boss was busy and let time pass. After 3 days, the Dutchman called and had no answer, until finally, the secretary of the infrastructure chief informed him that the work had already been awarded to another company.

Turns out, the Peruvian partner knew that the manager of the other company was the son-in-law of the area manager of the construction company.

What does this case leave us as learning? Is it something we could have foreseen? 

If we look at Peru through the "lenses" of Hofstede's 6-dimensional model, we can see that it is an extremely collectivist society.

This implies that relationships are above individuals. In that sense, at work, is it desirable to have close people whom we trust, and who is better than a family member for this?

In our case, we see that they prefer to hire the company in which the manager's son-in-law works. This is a common and well-regarded practice, as it perpetuates the relationship of trust and loyalty. Although for European / Western mentalities, it can even be considered an act of corruption.

As a learning, we must bear in mind that it is important that our partners in Peru are connected and influential people.

 

Be especially careful with….

Bureaucracy

Starting a business in Peru is a bureaucratic process that ranks the country #114 in the world1. It takes about 27 days and seven procedures to establish a business.

Also, dealing with building permits takes 15 procedures and an incredible 188 days! Other records include obtaining a construction license from the Municipality (building license for new buildings), which takes 45 days, and the installation of the potable water service, which takes 50 days. Registering a property is much easier, with only five procedures and takes eight days.

 

Corruption

Keeping business practices open, honest and compliant is important in a country where corruption continues to be a big problem. There was a case in 2016 involving a large Brazilian construction company, which admitted to paying bribes in more than half of the countries in Latin America, including Peru. This not only caused a change in the legislation, but also had a great impact on the local economy. Peruvian law now recognizes corporate criminal liability applicable to bribery, so companies must maintain legal and transparent business practices that are fully compliant with the law.

 

Words

The spoken commitment and also the agreements in meetings not necessarily have the meaning that you expect. That is, someone can say yes, but it means no, so do not assume that a business is closed simply because you have seen a "commitment" in the word of the interlocutor. The person may have said "yes" simply out of courtesy.

 

Forms

In Peru, forms are very important, sometimes even more than content. Be extremely careful, if you are going to run for tenders or calls or must present documentation and / or filling out paperwork for a concession or work.

 

The altitude

If you must go to do business in Peru, remember that it has high altitude areas such as for example on Lake Titicaca. Be aware that you can feel very tired, dizzy, and even very ill.

"Go slowly, eat little and sleep alone" are the recommendations, in addition to drinking coca tea.

 

Racism

The history of the country, marks its structure deep social division, with vestiges of racism. The social division can be perceived even in the language, where "cholear" or be treated as "cholo"2 is a derogatory comment that results in the discrimination of people based on skin color and other physical features. This form of racism/discrimination dates back to the collonization of the indigenous people and the introduction of black slaves to the country. Please stay away from this situation and do not make judgmental comments about it.

 

 

References and interesting links

Edward T. Hall “Beyond culture”, Garden City, N.Y.: Anchor Press, 1976.

Hofstede Insights “Compare countries” https://www.hofstede-insights.com/country/peru/

World Bank “Doing business in Peru”, June 2020 https://www.doingbusiness.org/en/reports/subnational-reports/peru

TMF Groupe “How to do business in Peru” https://www.tmf-group.com/es-co/search-results/?term=peru

 


1 114th ranking in World Bank's Ease of Doing Business Survey, available in https://data.worldbank.org/indicator/IC.BUS.EASE.XQ

That he/she is mestizo of white and indigenous races and in which, generally, indigenous ethnic traits prevail.