Monthly Snapshots - October 2019: Peru Edition

Peru projects average economy growth of 4.4% over the next four years

The ministry of Economic and Finance (MEF) published the Miltannual Macroeconomic Framework 2020 – 2023 (MMM. In this report, GDP growth was predicted at 3% in 2019 with this number expected to reach 4.4% over the next four years. Peru is expected to continue to lead growth in Latin America.

The reason for this acceleration is due to the strengthening of public and private investment as well as economic policy measures aimed at improving the country's productivity and competitiveness. The private investment is visible with construction of infrastructure projects such as Line 2 of the Lima and Callao Metro as well as the continuity of large mining projects such as Quellaveco, Mina Justa and Toromocho. These investments greatly improve formal employment and family income as well as help to lay the foundations of sustainable economic growth in Peru.

Peru is trying to reach the standards of developed countries and this growth prediction is definitely a positive sign. These developments will improve the country’s competitiveness and productivity and boost medium to long-term economic growth. 

Approval given for US$1.4 bn Tia Materials project

The Peruvian Government has reportedly given the go-ahead for Southern Copper’s US$1.4bn Tia Maria project in the southern Islay province of the Arequipa region. However, the government has stated it would not go ahead with the project without the right social and environmental conditions being met.

Prime Minister Vicente Zeballos stated the government would not impose the US$1.4 billion project on the country, after it had earlier received the go-ahead with a construction license from Peru’s mining council. In August the government had suspended a permit for the project amid violent protests in order to allow officials to evaluate objections from local authorities in the Arequipa region where the plant would be built.

Tia Maria is expected to produce about 120,000 tons of copper per year which would play a large role in revitalising the country’s economy. Peru is currently the second largest producer of copper in the world and the mining sector accounts for 60% of its exports. It is key that in order to remain a competitive and growing economy, Peru keeps approving these types of projects. 

Peru commits to renewable energy to reduce emissions

Peru has committed to the development of renewable energy to reduce the country’s greenhouse gas emissions. The goal is to comply with the global commitments against climate change. They’re looking to achieve a 30% reduction in the emission of greenhouse gases. 

However, this is a long way to go. Conventional hydroelectric power represents 57% of the Peruvian energy matrix, while 38% corresponds to fossil fuels. Peru is the fifth most attractive Latin American country for renewable energy investment, behind Argentina, Chile, Mexico and Brazil, according to an EY report in late 2018. Last year, Enel Green Power opened the 132MW Wayra I wind plant in Ica region. In addition, Spain's Grenergy obtained US$40mn financing this year to build two 36.8MW wind farms in Chota, Cajamarca region. It is projects like this that will allow Peru to reach these climate targets and affirm themselves as a leading player in the fight against climate change.

Peru remains a top tourist destination for U.S. Citizens

Peru is attracting visitors from the United States at record rates. In 2017, nearly 600,000 American citizens visitied Peru. These international arrivals have grown by five percent each year since 2013. Tourism has been a top economic driver for the country for a while now. This has largely been down to marketing campaigns in the U.S. There have been lots of collaborations with media like the New York Times and Lonely Planet which have helped Peru lure in more foreign tourists.  On average, U.S. tourists spend around an average of US$1,500 per person during visits to Peru, compared to less than US$1,000 for tourists from other countries. This shows tourism from the U.S. as a great way to increase economic growth.