Country Risk Analysis - Peru

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SWOT analysis

Strengths:
Peru is a country blessed with natural resources. In 2010 its exports reached some 23 billion GBP, which was mainly made out of minerals, petroleum and agricultural products. Its mining industry is the largest in Latin America, accounting for 7,7 billion GBP of its total exports in 2010. The climate is also favourable for agriculture, representing 13% of GDP, and employing 30% of the population. In addition, sites like Machu Picchu, Cuscu and Sacsayhuaman make Peru a popular tourist destination for millions of people every year.

Weaknesses:
Although an advantage when the business climate is favourable, Peru’s heavy dependence upon natural resources and agriculture can prove to be an Achilles heel. Volatile commodity prices and low productivity and fragmented land ownership in agriculture makes the economy susceptible to economic fluctuations. What’s more the country lacks vital infrastructure such as high quality roadways, bridges and flight routes. And as with so many other Latin American countries, high unemployment* threatens the economic and political stability, which in turn affects investor confidence.

*Despite a fairly low unemployment rate of 7,9%, the underemployment rate is above 40%, which causes similar effects.

Opportunities:
In the period between 2000 and 2005 the number of visiting tourists to Peru doubled, and the figure has grown by approximately 11% annually, a trend that is expected to continue. Enforcing the rise in tourism is the announcement that there will be eight long weekends in Peru in 2012, generating some 500 million GBP in extra tourism revenue this year. In 2005, the US and Peru signed a free trade agreement enabling a non-barrier trading relationship between the two countries, which is a huge opportunity as the U.S accounts for 16.3% of Peru’s exports, and 19.5% of its imports annually.

Threats:
Almost 50% of Peru’s population is poor. This is mainly caused by the extraction industry,...
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