Peru Innovation Opportunities

by: Tatjana Guznajeva - Technopolis Group

Why should I read this document?

When confronted with the differences between your own market and the market of Peru you will likely feel that you have to adapt your product/service significantly to make it fit the preferences and expendable income of local people. While many may see this as a challenge this can also proof to be a great opportunity for your company! Adapting to a new market, like Peru, will allow your company to innovate. Not only will operating in Peru lead to new insights to be more successful in Peru, you will most likely also pick up on ideas to be more successful in your home market.

This document provides a short overview of innovation aspects, business opportunities and challenges in Peru. It will also give advice on best practices for starting and developing an innovative business venture, considering the Peruvian country context. May it help you to explore Peru and lead you to innovation and success.

Opportunities and tips for innovation and doing business in Peru

Peru’s economy has experienced a boom, growing at an average rate of 5% per year since 2000, well above the Latin American average of 3.2% per year. The country’s economy is undergoing diversification, while the FDI flows are growing due to favourable investment conditions.
Peru holds large natural resources (eg., copper, silver, gold, petroleum) and has an export-oriented mining sector. The government tries to make the extraction of natural resources more efficient, however, there is a lack of innovative technologies.
Peru’s population is young (median age is 27.5 years), rapidly growing and is increasingly attracted to cities. The middle class has grown to over a third of the population, and inequality gradually diminishes. Urbanisation and growing incomes result in high demand in housing. Consider doing business in real estate and construction sectors.
Due to rising incomes, Peruvian consumers become more brand-conscious and are more likely to buy goods/services online. E-commerce shows positive signs of growth annually.
Cusco, Ayacucho and Ica regions, as well as, economic centres Lima and Arequipa are rapidly developing. These areas have a high demand in smart city solutions. The government is increasingly outsourcing IT activities to the private sector, which provides opportunities for companies in the ICT sector.
Products within agricultural and metal-processing industries are better integrated into the global value chain than other products and services. In addition, the production costs of such products are relatively low in Peru, therefore consider partnership with local companies.
Agriculture is the biggest economic sector in several regions of Peru. The country is the largest producer and exporter of fish, fishmeal and fish oil in the world. Peru offers good conditions for establishing fishery or aquaculture businesses; in 2016, Peru developed several aquatic plants to further stimulate sustainable aquaculture.
The government of Peru tries to attract investments in infrastructural development (particularly, in roads, access to water and electrification). Explore investment opportunities through the platform ProInversion. The health and education sectors are gaining intensive attention of the government, therefore several incentives are offered through the ‘Public Works for Taxes programme’.
The tourism sector is already well-developed in Peru, however, the country aims to modernise famous touristic destinations. Business advisors, tourism experts and innovative products/services are in high demand in Peru.

On Level 2 you can find information about innovation climate in Peru, while Level 3 will tell you more about business activities in Peru.

This page will tell you about innovation ecosystem, major technology sectors, innovation and business practices in Peru.

Innovation ecosystem

Innovation has not been perceived as a driver of growth nor as a source of solutions in addressing challenges. Therefore the government of Peru did not allocate sufficient funds for innovation and did not encourage companies to focus on technological development. Despite that the R&D expenditure in the country is still low (in 2015, 0.12% of GDP), in the last decade the government has changed its strategy on science, technology and innovation (STI), and investments in the STI sector increased. Among the most prominent organisations in the country that stimulate innovation and technological development is the National Council for Science, Technology and Innovation (CONCYTEC). It implements governmental policies, allocates funds and stimulates the STI sector.

The major barrier for development of the country’s innovation capacity is the lack of human resources. The quality of education in Peru is significantly lower than in other countries in the region. In response to this challenge, the government of Peru has started various youth skills and entrepreneurship programmes, focusing on the biggest skills gaps and market needs. Among the largest existing programmes is Jovenes Productivos , which develops skills for generating business, provides free job training and facilitates access to the labor market for young people. The quality of business training in the country is still relatively low; this slows down development of the private sector.

Among other challenges for development of innovative products and services are market monopolisation or domination by a few mature companies that prevent market access for startups. Inadequate infrastructure together with low rates of broadband subscription in the country hamper R&D in private companies.

The output of research organisations is not of the highest quality, due to lack of research funding and brain drain (educated people leaving the country ). The collaboration between the research and industrial sectors in the country is relatively weak. However, due to promotion of technology transfers by the government, a greater number of enterprises, universities and technology parks start to form linkages. In 2015, the Ministry of Production started to assist industrial clusters with high productivity and technological innovation. In addition, currently, two industrial parks are under development, the Parque Industrial Ancón (Lima) and the Parque Industrial la Libertad (la Libertad).

Innovation sectors and technology

Peru has not yet developed dominant innovation and technology sectors. Since 2015, the government launched an STI plan that focuses on development of technology-driven service sectors. Among those sectors are ICT, electronics, engineering consultancy and franchises. Since international competitiveness and profitability of the agricultural sector has declined, the government of Peru launched the National Agricultural Innovation Programme. The programme is expected to facilitate adoption of sustainable and environmentally friendly technologies and thereby to boost the agro-industry.

Several regions of Peru started to develop production specialisations to stimulate regional growth and competitiveness. Hence, the level of technological advancement of a particular sector varies significantly across the country. Currently, the largest research institutes in the country are focusing on development of biotechnologies, ICTs and nanomaterials.

Innovation culture and practices

In Peru, entrepreneurship is widespread, in part, due to a lack of employment opportunities and a large informal sector. Despite a large number of SMEs and startups, few companies invest in R&D or develop innovative products/services, as risks are considered too high in contrast to expected returns. Among the major disincentives for innovation is the presence of complex regulatory procedures and administrative burdens for startups that are developing products with high added value.

The private sector tries to stimulate the culture of entrepreneurship and innovation through formation of business associations and organisation of business events. These events have proved to be effective in fostering collaboration between scientific and business community, and in raising interest of youth towards technologies and innovation. Although Peru has the lowest rates of young people who are not in education, employment, or training in Latin America, the technical education is unpopular among youth. This potentially might lower scientific and technological development in the country.

This page highlights major economic sectors and iconic products, shows business trends and explains how easy it is to do business in Peru. In addition, you will find the list of websites, which provide some hands-on information.

What is the country known for?

Sectors

The biggest sectors: mining, fishing, metal fabrication, petroleum extraction and refining, natural gas, agriculture, food processing, construction and textiles. The fastest growing sectors are mining and infrastructure.

The service sector represents 56.1% of GDP in 2017, while industry accounts for 36.3% and the agricultural sector for 7.5% of GDP.

Iconic products

Silver, petroleum, natural gas, copper, gold, zinc, asparagus, fish, coffee, cement, machinery, artichokes, grapes, avocados, mangoes.

How easy is it to do business in Peru?

Based on the World Bank ranking:

	Peru	EU average	Emerging markets average
Overall - ease of doing business	58	30	83

Peru offers a better business climate than many other emerging markets. The processes to obtain a construction permit or a credit are relatively simple. However, among major challenges for doing business in the country is to start a company - Peru ranks 114th in that category, which is below the average of emerging markets. Starting a business is a highly bureaucratic affair, despite the fact that since 2003 the amount of days necessary to open a business has declined by roughly 75% (currently, it takes about 27 days and seven procedures to start a business). Most time is consumed in signing the deed of incorporation before a notary public, in filing it at the Public Registry of Commerce, and in obtaining a Municipal license from the District Council. When the company has foreign shareholders this process is even longer.

Doing business in Peru may also lead to difficulties in finding suitable workers, paying taxes, protecting intellectual property. The judicial system in Peru is quite slow, therefore any legal disputes require significant time for resolving.

Business trends in Peru

Although still relatively small, between 2010-2016 the ICT sector in Peru grew by about 88 mln. Eur. The increased investment currently focuses mostly on hardware, and not yet on software and services.

The SMEs in Peru are gradually turning towards the use of cloud computing and the sale of services. Servitisation is one of prevalent trends in small manufacturing companies in the country.

Smart phone and e-money use is expected to triple, therefore the finance sector in Peru is introducing many innovative instruments.

Most foreign investment occurs in the sectors of mining, communications, industry, finances and energy, particularly due to low wages and favourable policies. The government is actively encouraging public-private partnerships.

More hands-on info

ProInversion (in 2018: https://www.proinversion.gob.pe/modulos/LAN/landing.aspx?are=0&pfl=1&lan...)
Contact the local Enterprise Europe Network member (in 2018: https://een.ec.europa.eu/about/branches/pe/lima)
Invest in Peru (in 2018: http://www.investinperu.pe/)
Lima Chamber of Commerce (in 2018: http://www.camaralima.org.pe/)
Ministry of Economy and Finance of Peru, Investors Relations Office (in 2018: https://www.mef.gob.pe/en/investor)
National Portal of Peru (in 2018: http://www.peru.gob.pe/)
Peru Commercial Guide (in 2018: http://www.iberglobal.com/files/2016/peru_ccg.pdf)

Bibliography

Level 1:

The Innovation Policy Platform. (2018). Peru. Retrieved from: https://www.innovationpolicyplatform.org/content/peru
OECD. (2016). Public Government Report: Peru 2016. Retrieved from: https://www.oecd.org/gov/public-governance-review-peru-highlights-en.pdf
BBC. (2018). Peru country profile. Retrieved from: https://www.bbc.com/news/world-latin-america-19928905
Peru Report. (2017). Peru invests in innovative technology for natural resources. https://perureports.com/natural-resources-agrotech/5571/
Statista. (2018). Peru: average age of the population from 1950 to 2050 (median age in years). Retrieved from: https://www.statista.com/statistics/459425/average-age-of-the-population...
Peru Report. (2018). Poverty and inequality. Retrieved from: https://perureports.com/poverty-inequality/
BizLatin Hub. (2017). What are the opportunities in the Peruvian construction and real estate sector? Retrieved from: https://www.bizlatinhub.com/what-are-opporunities-in-peru-construction-s...
Societe Generale. (2018). Peruvian market: consumer. Retrieved from: https://import-export.societegenerale.fr/en/country/peru/market-consumer
OECD. (2016). Towards higher economic diversification and productivity in Peru. Retrieved from: https://read.oecd-ilibrary.org/development/multi-dimensional-review-of-p...
Ministry of Foreign Affairs. (2018). Peru’s potential as a seafood exporter. Retrieved from: https://www.cbi.eu/market-information/fish-seafood/peru-potential-seafoo...
InPeru. (2018). Peru. Retrieved from: https://inperu.pe/wp-content/uploads/2017/08/inPERU_Asia15_Jose-Antonio-... /
OECD> (2017). Government at a glance: Latin America and the Caribbean. Retrieved from: https://www.oecd.org/gov/lac-peru.pdf
Oxford Business Group. (2018). Peru tourism sector capitalises on variety. Retrieved from: https://oxfordbusinessgroup.com/overview/new-routes-leveraging-country’s-variety-leading-new-tourism-products

Level 2:

Global Economy. (2018). Peru: R&D expenditure. Retrieved from: https://www.theglobaleconomy.com/Peru/Research_and_development/
The Innovation Policy Platform. (2018). Peru. Retrieved from: https://www.innovationpolicyplatform.org/content/peru
Oxford Business Group. (2018). Government bodies promote innovation in Peru. Retrieved from: https://oxfordbusinessgroup.com/overview/igniting-industry-government-bo...
Oxford Business Group. (2018). Peru maintains stable economic growth, unlike other countries in the region. Retrieved from: https://oxfordbusinessgroup.com/overview/going-strong-unlike-other-count...
UNICEF> (2018). Improving education in Peru. Retrieved from: https://www.unicef.org/innovation/innovation_91024.html

Level 3: