Path of reform: Cause for cheer amid headwinds in Peru

Optimism was a word seldom used to describe emerging economies in 2016, but this looks set to change in 2017 – at least to some extent. In Latin America, a number of the countries that boomed in the 2000s are making clear efforts to return to the right track. One of these, without a doubt, is Peru.

Many business leaders there remark that, as with the spectacular local cuisine, only a few ingredients are needed to ensure a remarkable result: increased private investment (both local and foreign) combined with reforms in the public sector, should be enough to ensure GDP growth of more than 3%.

What we might call a cautious optimism was clearly evinced in OBG’s Business Barometer: CEO Survey, conducted in Peru during the last quarter of 2016, in which more than 40 top-tier CEOs shared their sentiment with us on an anonymous basis.

The survey showed that 90.2% of CEOs have “positive” or “very positive” expectations for local business conditions over the next 12 months, a forecast that chimes with most analyses by local and international media. 

Already nicknamed "the star of the region", Peru aims to make the most of measures advanced by the government of President Pedro Pablo Kuczynski, elected in June 2016 and who aspires to make the Andean country more business friendly. Kuczynski has already changed the structure of the public sector by reforming the Law of Transparency and Fiscal Responsibility.

For Peru, the path to growth passes necessarily through efforts to raise the level of private investment. In addition to restructuring the state and its fiscal system, the series of infrastructure mega-projects that are planned for this course anticipate disbursements worth more than $15bn. It is no accident, therefore, that 61% of companies surveyed in our business barometer said they are likely to make significant capital investments in 2017. 

At the international level as well, the outlook in Peru invites optimism. The vast network of commercial treaties that the country has agreed with partners from all over the globe is a compelling attraction for investors. Such global connections will be vital in reaching the expected levels of foreign direct investment, aimed chiefly at infrastructure projects, together with a new thrust in the mining sector.

The country’s infrastructure deficit – including significant needs in both roads and telecommunications – will only be solved by allocating every dollar invested directly to its final destination. This implies improvements in transparency, thus preventing investments from getting lost along the way. The business sector is counting on the Kuczynski government to fulfill this thorny but unavoidable task.

Few would deny that 2016 has been a tricky year for emerging markets. A context of global uncertainty, joined by a downtrend in commodity prices and the rise of populist governments and anti-trade sentiment in the US and across Europe, constrained investment and jangled nerves at times. It is against this backdrop, then, that the results of OBG’s Business Barometer become so enlightening: they reflect a buoyant, optimistic, proactive sentiment. And such a level of optimism, enduring in such a context, is already great news. 

OBG Business Barometer: Peru CEO Survey Copyright (c). All rights reserved.

This survey has been designed to assess business sentiment amongst business leaders (Chief Executives of equivalent) and their outlook for the next 12 months. Unlike many surveys, the OBG Business Barometer is conducted by OBG staff on a face-to-face basis, across the full range of industries, company sizes and functional specialties. The results are anonymous.

OBG Business Barometer is based on data from companies with revenue within the following parameters, among others:

• 98% of companies surveyed were private
• 63% of companies surveyed were international
• 24% of companies surveyed were local
• 12% of companies surveyed were regional

The data generated allows for analysis of sentiment within an individual country, as well as regionally and globally. Additionally, comparisons can be drawn between both individual countries and regionally. The results are presented statistically within infographics and discussed in articles written by OBG Managing Editors.

OBG provides this survey, infographics and accompanying analysis from sources believed to be reliable, for information purposes only. OBG accepts no responsibility for any loss, financial or otherwise, sustained by any person or organisation using it.

For further information on the content of the survey, please contact: Jaime Pérez-Seoane de Zunzunegui, Americas Regional Editor, at jperezseoane@oxfordbusinessgroup.com.

Should you wish to reproduce any element of this survey, infographics and accompanying analysis please contact mdeblois@oxfordbusinessgroup.com. Any unauthorised reproduction will be considered an infringement of the Copyright. For further details about OBG and how to subscribe to our widely acclaimed business intelligence publication please visit www.oxfordbusinessgroup.com