Report on the Political and Economic Structures in Peru's Business

This report provides an analysis of the political and economic structures within the business environment of Peru. It begins with an overview of Peru's rich culture, history, and natural resources, highlighting its appeal to foreign investors and its status as a major tourist destination. The report then examines the country's economic growth, driven by mineral exports and private investment, and details the nature of the business environment, including tax regulations and the banking system. It also explores the legal framework, including investment guarantees, and identifies ethical challenges such as corruption and political instability. The analysis draws on various sources to provide a comprehensive understanding of the opportunities and challenges for businesses operating in Peru.

Political and Economic Structures of the Business Environment of Peru
Culture of Peru and Implications for business
Peru is a South American Country located on the west coast of South America. It has a
rich culture, history and diversity. The abundance of natural resources and minerals ranging from
copper, gold and steel helps the country to develop mining, refining and extraction. In recent
times a number of different investors and business houses have shown their interest to invest in
the country because of the ever increasing economic resources of the country (Harrison 2013).
Another main source of income for the country is it being one of the major tourist destination
centers of South America. The presence of a number of historical and ancient sites like Machu
Pichu is one of the main reasons behind the footfall of a large number of tourists of South
America. The government of Peru has opened up the markets for the foreign investors to analyze
and interpret the cultural dimensions of the country and also to present the opportunities for the
companies and industries to develop and implement their marketing strategies (Shehu and
Mahmood 2014).
Political and Economic systems of the country
According to the reports published by U.S Central Intelligence Agency the country has
seen an increase in the economic growth rate of 6.4% round the year. Most of the economic
growth is a result of the exports from minerals and the investment by a lot many private investors
(Cardoza et al. 2016).
 Exported Minerals accounted for around $47billion
 Imports accounted for around $ 41 billion

 The import and export balance is imbalanced but it has failed to hurt the cause of
economic growth
Nature of Business Environment in Peru
 Tax year starts from 1st January and ends in 31st December of the same year
 It is mandatory for the companies to present a balance sheet
 Accounts Certification have been made compulsory in 1974
 VAT standard is 18% (Cámara and Tuesta 2015)
 There is a consumption tax in the country
 Strategic HRM Policies are the most latest development of the country
Banking System in Peru
 The banking system in Peru is profitable and well capitalized
 There are private multiple banks, financial service companies, non bank financial
institutions and most notably two state owned institutions named Banco de la
Nacion and Banco Agropecuario (Harrison 2013)
 17 of the private banks enjoys the highest amount of deposits
 Four of the banks namely Scotiabank Peru, Interbank, Banco de credito del Peru
and BBVA intercontinental enjoys about 85% of the deposit rate.
Difference of Legal system in Peru and how it affects business
 The Government of Peru has established a judiciary branch that looks after the
laws and regulations of the country

 The general law for the growth of private investment, Legislative Decree all the
different process of reserving economic activities for the country were eliminated
 The constitutional and legal framework opens up the economy to private investors
 Investment guarantees have been started like the right to ownership freedom,
disposition of foreign currency (Kim 2015)
Ethical Challenges for the Business
 Corruption is one of the main problems for Peru as it ranks 83 out of 177 in
transparency index
 The more the market has turned out to be liberal the more is the risk of
protecting the natural resources of the land (Carneiro and Brenes 2014)
 Peru is notorious for cocaine and narcotics and there is no signs of
improvement in the recent future
 Last but not the least political instability is one of the major challenges behind
the growth of the business in Peru

References
Cámara, N. and Tuesta, D., 2015. Factors that matter for financial inclusion: Evidence from
Peru. Aestimatio, (10), p.10.
Cardoza, G., Fornes, G., Farber, V., Duarte, R.G. and Gutierrez, J.R., 2016. Barriers and public
policies affecting the international expansion of Latin American SMEs: Evidence from Brazil,
Colombia, and Peru. Journal of Business Research, 69(6), pp.2030-2039.
Carneiro, J. and Brenes, E.R., 2014. Latin American firms competing in the global
economy. Journal of Business Research, 67(5), pp.831-836.
Harrison, A., 2013. Business environment in a global context. Oxford University Press.
Kim, A.E., 2015. People's Participation in Decision Making in Mining in Peru: Exploitation or
Opportunity? (Doctoral dissertation, The Ohio State University).
Shehu, A.M. and Mahmood, R., 2014. Influence of entrepreneurial orientation and business
environment on small and medium firm performance: a pls approach. Advances in Management
and Applied Economics, 4(4), p.101.