Given the physical distance, the language barrier and other impediments to trade between India and Peru, the Peruvian market had for long been ignored by the Indian business community. However, since the mid-1990s, buoyed by economic changes in both countries, Peru rapidly emerged as an important target country. As a result, bilateral trade increased by leaps and bounds and this trend is continuing. A series of high-level visits, signing of several political and commercial agreements, efforts by the Government of India like the "Focus LAC" programme, etc also played its key role by helping in bridging the information gap and increasing business interaction.

India enjoys a significant amount of goodwill in Peru. Moreover, there is steadily increasing awareness of India's capabilities and products, both in terms of quality and price. These factors can be transformed into actual business opportunities with some perseverance, pre-visit preparation, thorough market analysis and visits. This section gives a brief overview as well as some specific information for the use of potential business.

Nature of the market

The Peruvian market is very customer oriented. Though Peruvian market has its share of indigenous products, imported goods form the biggest chunk of the market. Due to a liberalised economy since the early 1990s, international quality goods as well as foreign collaborations exist in all product categories. One can find most international brands, which makes it a highly competitive market. Hence, in order to succeed, there is need to sustained research work, including market surveys, market trends of specific products, information on competitors and similar products, etc through frequent visits as well as possible hiring of local consultants / partners. The Embassy has some data on the above but a sustained effort is required from the exporter / potential investor for specific data.

While it is difficult to generalised competitors across product groups, China and other south-east Asian countries are essentially India's main competitors. However, though inexpensive Chinese items have flooded the market in many areas, quality goods do command their price and Indian exporters may find it more fruitful to compete more on quality than price against Chinese goods. In other categories, India naturally enjoys a price advantage and it is the quality that needs to be maintained in such areas.

Import regime

The import regime in Peru is very liberalised and imports into Peru are hardly subjected to any restriction, although some labelling and packaging restrictions do apply on some goods. In terms of restrictions, the importation of used clothing and shoes is prohibited, although imports of donated used clothing and shoes are exempt from the prohibition. Import of some insecticides, fireworks, and toxic waste is also restricted. Imports of used cars more than five years old and used trucks more than eight years old are prohibited. Imports of most used tires are also prohibited. For considerations of security and public health, the import of certain goods is not allowed, particularly in the agricultural sector, where imports in general are difficult due to photo-sanitary requirements.

The import duty structure is divided into three parts. There is an ad-valorem basic duty (which is around 12% for most goods but can vary between 4% and 20%) plus a value added general sales tax (IGV) or VAT of 19%, which is also levied on all domestic sales and purchases. In addition, several items designated as luxury goods are subject to a special Selective Consumption Tax (ISC). Exports from Peru are not subject to taxes of any kind, though duty drawback facility on imports (CIF value) is available not exceeding 50% of FOB value of exports.

Overall, Peruvian import tariffs are higher than that of neighbouring countries like Chile. However, as part of the Andean Community, Peru is harmonizing its tariffs with other Andean countries and has reduced taxes over the years. A Common External Tariff for the Andean Community is also expected to be in place by 2003. On December 16, 2003, Colombia, Ecuador y Venezuela adopted a Free Trade Agreement with MERCOSUR. The agreement named Economic Complementation Agreement Nº 59 (ECA) is in force since July 01, 2004. The ECA is an agreement to release the trading of goods, with the purpose of establishing a legal and institutional context of cooperation and economic and physical integration contributing to he creation of an expanded economic area to facilitate de free circulation of goods and services and the full use of the productive factors. Furthermore, its objective is to form a free trade area by expanding trade and eliminating the tariff and non-tariff restrictions affecting reciprocal trade.

Trade enquiries

Trade Enquiries, when sent to a Peruvian importer, should be specific, giving credentials of the exporter, production capacity, supply level, price lists etc. Mere trade enquiries offering large number of products without giving specific details, should be avoided as they will certainly not fetch any response from the Peruvian importers, who are flooded with such communications. Peruvian importers prefer direct imports from the manufacturers instead of trading companies. The language of enquiry should preferably be Spanish.

Trade documentation

All imports into Peru are required to be accompanied by an invoice, bill of lading, packing list and proof of insurance. In cases where imports are worth US$ 5,000 or more, a certificate of inspection, issued prior to shipment is also required. For imports of pharmaceuticals, a certificate of quality is essential and a Phitosanitary Certificate is required for agricultural products. If the imports are from one of the Andean Group countries (Columbia, Venezuela, Ecuador or Bolivia), a certificate of origin is required to be eligible to get tariff preferences.

Industry Associations

There are many industry associations and business organizations which can also give useful information to business visitors from India, prominent among them are Lima Chamber of Commerce, International Chamber of Commerce and Industry, Association of Exporters and Importers, National Society of Industry, etc. Their postal and e-mail addresses, telephone and fax numbers etc.

Special zones

Peru is keen to attract investment in various sectors of the economy. To promote investment and trade, Peruvian law provides for the setting up of special zones for industry, tourism, export promotion, etc. Peru has a free trade zone in the southern city of Tacna. In addition, there are three special industrial / export processing zones called CETICOS [Centres for Export, Transformation, Industry , Commercialisation and Service] at Matarani (Arequipa), Paita (Piura) and Ilo (Ilo) since the mid-1990s. Sales to any of these zones counts as Peruvian exports.

Opening of Branches

Indian companies interested in establishing branches in Peru are required to register with the Commercial Registry, called CONASEV, the National Commission for the Supervision of Companies and Services, which maintains the Public Registry of Securities and stock brokers, located at the place of business. For tax purposes, branches of companies domiciled abroad are considered to be domiciled within Peru only to the extent of their activities in Peru. These branches operating in Peru are subject to the same accounting and reporting requirements that are applicable to companies incorporated in Peru. Credit is allocated on market terms and the banking industry in Peru is generally considered to be very competitive in offering services to business customers. Foreign investors can obtain credit on the local market once they have established a favourable track record here.

Investment Protection

Foreign investors in Peru are protected against inconvertibility, expropriation, political violence and other non-commercial risks through access to the corresponding multilateral conventions such as the Multilateral Investment Guarantee Agency (MIGA). Also Peru has joined the International Convention for Settlement of International Disputes (ICSID) as an alternative to settle disputes arising between investors and the government. For settling disputes relating to trademarks and other intellectual property rights, there is a powerful organization commonly called INDECOPI (National Institute for the Defence of Competition and the Protection of Intellectual Property). Trademarks should be registered with INDECOPI to obtain protection.

Indian exports' share in Peruvian imports / Major potential export areas

Despite the increased Indian exports to Peru, Indian exports constitute only around 0.6% of total Peruvian imports. However, in some sectors, Indian exports already account for a much larger share of imports. These include:

• Pharmaceuticals and Chemicals (vaccines for humans, antibiotics, organic dyes, hypochlorites / hybobromites, silicon)
  
• 2 /3 wheelers (motorised 2/3 wheelers and their parts, truck tyres, bicycle tyre tubes)
  
• Metal products (iron and steel laminated sheets, stainless steel bars, metal carpentry tools, stainless steel utensils, etc)
  
• Textiles (cotton yarn and fabric, jute, discontinuous synthetic fibre yarn and fabric, home furnishings like bed sheets, curtains, etc, carpets, non-knitted garments, silk)
  
• Engineering goods (carbon electrodes for ovens, high voltage switches, transformers, induction coils, small electric motors)
  
• Leather garments
  
• Handicrafts of wood and metal
  
• In addition to the above, some other items also have high potential. These include bulk drugs, buses / utility vehicles and their parts, textile machinery, medical / surgical equipment, iron / steel for the construction sector, foundry items, hand tools, ceramicware, gift and decoration items, etc.

Moreover, certain newer areas also present opportunities yet to be exploited by Indian businessmen. Such areas might require joint ventures or other forms of cooperation. These include:

Software - While specially developed software application usage is still nascent in Peru, there is an increasing potential to exploit this for Indian software exports that can interface in the Spanish language.
Mineral exploration / exploitation - Peru is a country with vast mineral resources. There are potential opportunities in mining, petrochemical, and fertilizer industries, perhaps only at a sub-contracting level in the initial stage.
Aqua-culture / Fishing - Peru has a very well developed fishing industry and is one of the largest in the world. Possibilities exist (perhaps through joint ventures) for using Indian technology in areas like breeding of fresh water fish, prawns, etc as well as in fishing technology.
Geophysics / Seismology / Satellite mapping - There is potential to use Indian technology in geological mapping, seismological risk evaluation, search for natural resources, etc.
Non-conventional energy - Potential for export of Indian technology in non-conventional energy sources. The Peruvian institution CONCYTEC is a key contact in this field.
Agriculture - Potential for joint projects in plant and animal breeding, water management and irrigation, protection of nature zones, biotechnology, etc.
Line of credit

In order to support Indian exports, the Government of India has offered a line of credit to the Government of Peru, which can be utilised even by private Peruvian importers subject to a sovereign counter guarantee to the importer. For further details, please contact the Embassy.