The Government of Peru’s (GOP’s) focus on sound fiscal management and macroeconomic fundamentals contributed to the country’s region-leading economic growth since 2002. The COVID-19 pandemic caused a severe economic contraction of over 11 percent in 2020, but Peru recovered with 13.3 percent GDP growth in 2021. Recent political instability (Peru has had four presidents since 2020) is restricting near-term growth, with consensus forecasts calling for approximately 3.0 percent GDP growth in 2022, and 2.9 percent in 2023. COVID-19 health costs and an economic stimulus package strained Peru’s fiscal accounts somewhat, but the deficit stabilized to 2.6 percent of GDP in 2021. The surge in spending, however, continues to impact Peru’s debt, which increased from 26.8 percent of GDP in 2019 to 36.1 percent in 2021. Net international reserves remain strong at $78.4 billion. Global price pressures moved inflation higher, to 4.0 percent in 2021, a significant spike from the 1.8 percent in 2020. Inflation continued in 2022, with Peru’s 12-month rate through March reaching 6.8 percent.

Along with recent political instability, corruption, and social conflict negatively impact Peru’s investment climate. As of April 1, 2022, President Castillo had appointed four cabinets since taking office in July 2021. Allegations of corruption plague the current and previous administrations. Transparency International ranked Peru 105th out of 180 countries in its 2021 Corruption Perceptions Index. Peru’s Ombudsman office reported 157 active social conflicts in the country as of February 2022. More than half of them (86) occurred in the mining sector, which represents 10 percent of Peru’s economic output. Citing political instability, including contentious relations between the administration and congress, and governance challenges, the three major credit rating agencies (Fitch, Moody’s, and S&P) downgraded Peru’s sovereign credit ratings since Castillo’s inauguration. All three, however, maintained Peru at investment grade.

Peru fosters an open investment environment, which includes strong protections for contract and property rights. Peru is well integrated in the global economy. Peru’s investment promotion agency ProInversion seeks foreign investment in nearly all areas of the economy, particularly to support infrastructure. Prospective investors would benefit from seeking local legal counsel to navigate Peru’s complex bureaucracy. Private sector investment made up more than two-thirds of Peru’s total investment in 2021.