Peru country brief

Overview

As resource-rich countries bordering the Pacific Ocean, Australia and Peru enjoy a positive relationship which has expanded quickly in recent years.  The mining and energy sectors, education and people-to-people ties form the foundation of Australia’s relations with Peru.  The two countries are also engaged in a wide range of international bodies, including APEC, the Pacific Alliance and the United Nations.

Reflecting Australia's commitment to enhancing its engagement with Peru and with Latin America more generally, Australia re-opened its Embassy in Lima in September 2010. Australia had first opened an Embassy in Lima in 1968, but closed it in 1986. The Peruvian government established consular representation in Sydney as early as 1930 and an Embassy in Canberra in 1963. Peru now maintains an Embassy in Canberra and a Consulate-General in Sydney. Australia and Peru celebrated 50 years of diplomatic relations in 2013.

The Republic of Peru is a large country on the west coast of South America with an area slightly smaller than that of the Northern Territory. Peru is dominated by three main geographical regions: the arid coastal area, the high mountains of the Andes running down the centre of the country, and the low tropical Amazon basin in the east. Peru borders Chile in the far south, Bolivia in the south-east, Brazil in the east and Colombia and Ecuador in the north. The name Peru is believed to have come from one of the first encounters between the Spanish and indigenous peoples of northern Peru, who when asked what the area was called said ‘Virú’, which was pronounced ‘Peru’ by the Spanish. Peru’s capital is Lima.

Peru’s population is approximately 30.9 million (2013). Spanish, Quechua and Aymara are the official languages. The main ethnic groups are indigenous (45 per cent), mestizo (37 per cent), European (15 per cent) and a small population of African, Japanese and Chinese. Roman Catholicism is the main religion, making up around 80 per cent and Evangelical Christians around 12 per cent of the population.

Political overview

Background

From 1532-33, Spanish conquistadores led by Francisco Pizarro defeated the Incan empire that became part of the vice-royalty of Peru. The vice-royalty, the largest in Latin America, was created in 1542. Peru gained independence from Spain on 28 July 1821, following a proclamation by the leader of the independence struggle, Argentine Jose de San Martin. However, liberation was not completed until December 1824, when the Venezuelan Simon Bolivar, defeated a Spanish army in Junín and Venezuelan Marshall Antonio Jose de Sucre defeated a Spanish army at Ayacucho, ending Spain's rule in South America. Spain recognised Peru's independence in 1879.

System of government

Peru is a republic headed by a president directly elected for a five-year term. Under Peru's constitution, the president cannot stand for re-election for a consecutive term, but can do so at a later time. The next presidential elections are to be held in 2016.

The President, as head of government and head of state, appoints the head and members of a Council of Ministers, the country's principal executive body. The powers of the head, or president, of the Council of Ministers are similar to those of a prime minister.

The legislature consists of a single 130-member chamber and can be dissolved once during a presidential term. The chamber is headed by a President whose term lasts one year. Peru is divided into 25 administrative regions and 24 geographical departments plus the constitutional province of Callao. Regions hold political, economic and administrative autonomy. The metropolitan area of Lima, the capital city, is treated separately. It is governed by a mayor and is separated from the surrounding region which has the same name.

Regions and departments are divided into provinces, which are in turn sub-divided into districts. Provincial and district-level leaders are popularly elected every four years and can be recalled by referendum.

The judicial hierarchy includes provincial and departmental courts and is headed by the Supreme Court in Lima. There is a separate Constitutional Court which supervises the Constitution of the country.

Recent developments

In general, Peruvian politics is dominated by personalities rather than political parties.  This results in a colourful and fluid political environment with changing coalitions. This leads to instability in Congress, with the legislature often unable to reach agreement on important issues such as appointments to key bodies. 

President Ollanta Humala was sworn into office on 28 July 2011, following his defeat of centre-right candidate Keiko Fujimori in the second round of presidential elections in June 2011. Fujimori is the daughter of gaoled former President Alberto Fujimori.

President Humala (centre-left party, “Gana Perú”) succeeded Alan Garcia in 2011, who replaced Alejandro Toledo in 2006. Toledo had been elected President in 2001 following the conclusion of a provisional government, led by Valentin Paniagua. Paniagua’s government had lasted eight months following the flight to Japan of former President Alberto Fujimori after being charged with human rights and corruption offences.  

Alberto Fujimori was subsequently extradited to Peru in 2007 and is currently serving a 25-year gaol term. Despite ongoing political pressure, President Humala has refused to grant a pardon to Fujimori. Macroeconomic reform, market liberalisation and the implementation of policies designed to attract foreign investment began during the Fujimori era and marked the administrations of both Toledo and Garcia during the period 2001-2011. President Humala’s government has also pursued largely orthodox, liberal economic policies.

Following the 2011 elections, Humala's Gana Perú party held 47 seats in the 130-member Congress, followed by Keiko Fujimori's Fuerza Popular (36 seats). Until early 2013, Gana Perú relied on support from former President Toledo’s party, “Perú Posible”, to pass legislation. However, the number of Perú Posible members in Congress has since decreased and relations between the two parties have become strained, forcing Humala to rely on ad hoc coalition building to pass legislation.  In recent months members of President Humala’s party have separated, reducing Gana Peru’s numbers on the floor of Congress.

In Peruvian politics, cabinet reshuffles occur more frequently than in Australia.  President Humala and his Prime Minister, Ana Jara, undertook a further reshuffle in February 2015, naming a new Mining Minister, Rosa María Ortíz, amongst others.

Managing social conflict around mining projects has been, and continues to be, a key issue for the Humala government, as it was for previous administrations. However, foreign investment in the mining sector has grown steadily in recent years despite unrest. 

Peru’s strong economic recovery since about 2001 has sharply reduced poverty, which is currently around 23.9 per cent of the population, down from 42.4 per cent in 2007.  This is likely to continue in the years ahead as long as the economic consensus is maintained.  However, despite strong economic growth in recent years large regional disparities persist.

And some remnants of the Shining Path terrorist movement, which was responsible for a violent uprising throughout Peru in the late 1980s and early 1990s, still operate in remote areas, although the small numbers of adherents to the organisation are now more involved in drug-trafficking and other criminal activities. The government faces a growing challenge in combating narco-trafficking groups. Efforts to defeat these groups each year cost the lives of dozens of police and army personnel.

Foreign Policy

Peru shares its borders with Ecuador, Colombia, Brazil, Bolivia and Chile. On 27 January 2014, the International Court of Justice issued its final judgment over a longstanding maritime border dispute between Chile and Peru, ultimately requiring Chile to cede territory. Both countries have agreed to abide by the ruling, giving cause for optimism regarding bilateral relations between the two nations.

Peru's relationships with its neighbours are generally cooperative, increasingly so with those countries which are part of the Pacific Alliance (Mexico, Colombia and Chile in addition to Peru). Support for greater regional integration in Latin America is an important priority for President Humala. Peru has publicly supported Argentina's position over the dispute with the United Kingdom on the Falkland Islands. It has also mediated in the land-border dispute between Bolivia and Chile.

Peru participates in a wide range of international and regional fora, including the UN, the WTO, the Organization of American States (OAS), APEC, IMF, the World Bank, the Union of South American States (UNASUR) - which Peru is chairing in 2013, the Forum for East Asia and Latin America Cooperation (FEALAC), Andean Community of States, the Community of Latin American and Caribbean States (CELAC), and the Pacific Alliance.

Peru was a non-permanent member of the UN Security Council in 2006 and 2007. Peruvian diplomat Javier Perez de Cuellar served as UN Secretary General from 1981 to 1991. It will host APEC in 2016 after it did so in 2008.

The Peruvian government has good relations with the United States, which is Peru's largest trading partner. The United States and Peru signed a Trade Promotion Agreement [essentially a Free Trade Agreement (FTA)] in 2006 to boost economic and trade ties. This entered into force on 1 February 2009. Peru and the United States cooperate extensively on law enforcement issues, particularly in relation to narcotics. In 2012, Peru and Colombia successfully finalised the negotiation of AFTA with the European Union and this entered into force on 1 March 2013.

China and Peru established diplomatic relations in 1971. China is Peru's second largest trading partner. Bilateral trade was US$15.7 billion in 2013, with Peru's exports to China worth US$7.3 billion. Peru and China established a strategic partnership in November 2008. Since 1998, the two countries have hosted visits by high-level military officers and in November 2010, the two militaries took part in a humanitarian medical exercise in Peru. Presidents from both countries have also exchanged visits in recent years.

Bilateral relations

The relationship between Australia and Peru has expanded quickly since Australia re-opened its Embassy in Lima in 2010.  The key areas of interest include mining and energy, education, tourism and people to people links.

Both governments wish to work more closely together and after a period of few high-level visits, there are now regular exchanges at senior levels of government. 

In February 2015, Environment Minister the Hon Greg Hunt MP visited Lima for talks with his counterparts, while the Speaker of the House of Representatives, the Hon Bronwyn Bishop MP, led a parliamentary delegation to Peru in January 2015.

In December 2014, Australian Minister for Foreign Affairs, the Hon Julie Bishop MP, and the Australian Minister for Trade and Investment, the Hon Andrew Robb AO MP, visited Lima for the climate change Conference of the Parties (COP20) and a program of bilateral meetings. 

Australia and Peru work together in a number of international fora, including the United Nations.  In the WTO, the Cairns Group and APEC, Australia and Peru cooperate to promote greater liberalisation of trade and investment and to enhance regional integration. Australia hosted APEC in 2007, Peru in 2008. Peru will host APEC again in 2016.  Both countries are part of the group of twelve APEC members who are negotiating the Trans Pacific Partnership Agreement. Australia and Peru are members of the Forum for East Asia Latin America Cooperation (FEALAC), and Australia is an observer to the Pacific Alliance.

Australia and Peru also have had a bilateral Investment Promotion and Protection Agreement since 1997. The Australian Bureau of Meteorology has an MOU with its Peruvian counterpart, the National Meteorology Service, to facilitate cooperation on research into the El Niño climatic phenomenon, among other things.

In November 2011, Australia and Peru signed a Memorandum of Understanding (MOU) to promote Bilateral Consultations and Cooperation. In April 2012, Australia and Peru signed an MOU on Development Cooperation. An Air services Agreement between the two countries is almost ready for signature and a MOU on Air Services has been finalised.

In 2001, the Australian Government established the Council on Australia-Latin America Relations (COALAR) which aims to enhance commercial, political and cultural relations between Australia and Latin America. Since its inception, COALAR has been active in promoting business, education, tourism and cultural links between Australia and Latin America. For updates on COALAR activities and information on the annual grants program, follow COALAR on Facebook.

People to people links

In 2013-14, over 15,393 Australians visited Peru (the great majority for tourism).  This number caps impressive annual increases, averaging over 10 per cent per year over the past four years. The figures reflect the growing business and tourism ties between Australia and Peru.

Peruvians have been in Australia from at least the late 1800s, with the 1901 census indicating 28 Peruvians in Australia at the time. Migration from Peru to Australia remained low until 1986, from when numbers emigrating from Peru to Australia grew into the hundreds-per-year. Australia's Peruvian community consists of around 8,440 Peru-born persons (2011 Census). More information can be found at the Department of Social Services Community Information Summary page.

In 2006 Australia and Peru signed an MOU on cooperation in education. Institutional educational ties are strong and growing. Many Australian Universities (including Edith Cowan, Griffith, Canberra, Tasmania, Queensland, Adelaide, Macquarie and La Trobe) have agreements with their Peruvian counterparts.

Australia was selected in 2012 to be the first country to host post-graduate Peruvian students sent abroad on full scholarship by Peru’s National Scholarship Agency, PRONABEC. Since 2011, Peru has participated in the Australia Awards Fellowships Program. A total of 22 professionals in local government have had the opportunity to receive training in Australia on planning and implementing public private partnerships (PPPs), water resource management and sustainable mining. 

In 2014 there were 1047 Peruvian students studying in Australian Educational institutions.

Development assistance

From 2010 to 2014, Australia provided $100 million in official development assistance to Latin America, including 254 Australia Awards scholarships. Peru received 19 Australia Awards Scholarships and 38 Australia Awards Fellowships (including the current round).

Australia’s regional aid program has now ended, though some activities that have already been funded will continue until 2017. To support sustainable economic development in Peru, Australia contributed $2 million toward the SALTA project that provided 100,000 female micro-entrepreneurs with information on financial literacy and business development. The project was implemented in partnership between the Australian Government and the Inter-American Development Bank.

Economic overview

At a glance

For the latest economic data refer to the Peru economic fact sheet [PDF 32 KB]

Economic outlook

Since the 1990s, successive governments have sought to restructure Peru's economy, dramatically improving the government's fiscal position. Peru is currently enjoying its longest expansion on record, with low inflation, a solid external position and declining indebtedness ratios.

Public expenditure has been reduced through the abolition of subsidies and the privatisation of state-owned companies. Trade barriers have been cut, direct subsidies to exporters and domestic producers have been eliminated and equal treatment has been granted to foreign and domestic investors.

Peru’s GDP has expanded at an average annual rate of  6.5 per cent over the  ten years to 2013. 2013 saw a slight slowdown in GDP growth to 5.8 per cent.  Many analysts estimate that GDP growth bounced back to around 3.6 per cent in 2014.

Higher economic growth has been largely supported by mining and construction activity. Hence, easing the social unrest surrounding large-scale resource projects is seen as key to confirming Peru as a strong investment destination for new mining projects. Diversification into non-traditional exports, investment growth, strong consumer confidence and rising employment rates have also supported growth.

President Humala's government is pursuing similar economic policies to those that have facilitated impressive economic growth over the last decade, including fiscal discipline, inflation targeting, a managed exchange rate for the currency and investment in infrastructure, albeit with more emphasis on social inclusion expenditure.

China, the United States, and Switzerland are Peru's largest export markets, and its economy will continue to be affected by economic conditions in these markets. Minerals and fuels account for 42 per cent of total merchandise exports, exposing the economy to global commodity price fluctuations. While a slowdown in the US economy can constrain exports, rising demand from Asia, which is now the destination for almost 30 per cent of Peru's exports has been an important factor in Peru’s economic success.

Over the last decade, Peru has been very active in engaging the global economy through regional integration and a commitment to pursuing bilateral FTAs. Peru has concluded negotiations on FTAs with Chile, the United States, Singapore, China, Korea, Japan, Mexico, Panama, Costa Rica, Canada and the EU.  It also has a protocol on acceleration of the liberalisation of trade in goods and trade facilitation with Thailand. Peru is a member of the Andean Community Customs Union and has signed partial preferential trade agreements with Cuba, Argentina and Brazil.

Peru, along with Australia, New Zealand, Brunei, Chile, Singapore, Malaysia, Vietnam, the United States, Canada, Mexico and now Japan, is negotiating an expanded Trans-Pacific Strategic Economic Partnership (TPP) agreement. The agreement is seen as a potential pathway to advancing broader Asia-Pacific regional economic integration.

Peru has been a strong driver in the development of the Pacific Alliance, a trade liberalising pact between Peru, Chile, Colombia, Mexico, and soon, Costa Rica, which is in the process of becoming a full member. Australia was admitted as an observer to the Pacific Alliance in 2012 and attended the May 2013 Summit in Colombia. Peru will host the Pacific Alliance Summit meeting in early July 2015.

Bilateral economic and trade relationship

Australian investment is the most important feature in Australia's commercial ties with Peru. Australia's commercial presence in Peru has increased significantly with 88 Australian companies now with a presence in Peru.  Bilateral trade is modest but continues to grow steadily – this would likely be enhanced should the TPP be concluded.

In 2013-14 merchandise trade between Australia and Peru totalled approximately

A$166 million. Merchandise exports to Peru totalled A$63 million and included specialised machinery and parts, civil engineering parts and equipment, prepared additives for mineral oils, and measuring and analysing instruments.

Major merchandise imports from Peru to Australia totalled A$102 million and included animal feed, vegetables, animal oils and fats. Trade in services has improved significantly, totalling A$185 million in 2013-14, up from A$62 million in 2007.

Peru's open investment regime, stable government and abundance of natural resources make it an attractive investment destination, particularly in the extractive sectors. The expanding tourism sector has also seen Australian investments.  Education is another area which Australian institutions are targeting.

However, for now, the majority of the Australian companies with offices in Peru are involved in the mining and energy sector. Australian investment in Peru sits at some A$5 billion, which places Australia as the fourth or fifth largest investor in Peru’s mining sector.

Trade and Investment

Australia's Trade Commissioner in Lima is responsible for Austrade's activities in Peru, Ecuador and Venezuela. In addition to assisting Australian companies successfully invest and expand in Peru, Austrade helps companies take advantage of opportunities to export goods and services to Peru.

Austrade trade and investment priorities for Peru are mining, water, infrastructure, oil & gas, education, agribusiness and sports. Australian companies in some of these sectors are already investing and doing business in Peru through a subsidiary or stake in a project. Austrade is also working to promote investment opportunities in Peru to attract new Australian players in these sectors.

For information on doing business and opportunities in Peru please see the Austrade Peru Market Profile.

Mining

Mining is vital to Peru’s development and is a significant contributor to its GDP and reducing its poverty rates from around 42.4 per cent to around 23.9 per cent over the last ten years. Peru is in the top five rankings globally for production of important minerals and metals including lead, silver, zinc, tin, gold and copper. It holds fourth place in global mining exploration investment, which is estimated to account for 5 per cent of the global exploration market. New projects valued at more than US$30 billion are expected to proceed over the next five years.

Australian companies are playing important roles in the provision of goods and services and increasingly as investors. While larger miners such as BHP Billiton and Glencore (formerly Xstrata Copper) have been involved in Peru for many years, Australian ‘juniors’ are establishing project offices in Peru. Examples of companies such as Latin Resources, Metminco, Minera Gold, Laconia Resources and Minera IRL are present. Australian global engineering firms such as Worley Parsons, Ausenco and SKM have also opened offices in Peru. In addition, numerous Australian technology companies have recently established a presence to target the mining industry. Educational institutions such as University of Queensland’s Sustainable Mining Institute are actively developing relationships with Peruvian counterparts.

Former Queensland Premier, Peter Beattie led a high-level mining services business mission to Peru in April 2012.  Peru has sent its Minister and Vice Minister for Mining to the Latin America Down Under mining conference over the past few years, held in Sydney. 

Every two years Peru hosts a major mining Expo and Convention - Extemin and Perumin. 25 Australian companies participated in the Austrade managed Australia pavilion at Extemin in September 2013.

Agribusiness

Australian companies can now export both refrigerated and frozen beef to Peru following the 2004 decision by the Peruvian quarantine agency, SENASA, to approve the import of Australian beef to Peru. A protocol between Peru and Australia on kangaroo meat has also been agreed; as has an agreement on beef serosa. Ovine genetics can also be exported to Peru from Australia.

High level visits

In February 2015, Environment Minister, the Hon Greg Hunt MP, visited Lima.

In January 2015, the Australian Speaker, the Hon Bronwyn Bishop MP, led a parliamentary delegation to Peru.

In December 2014, the Australian Minister for Foreign Affairs, the Hon Julie Bishop MP, and the Australian Minister for Trade and Investment, the Hon Andrew Robb AO MP, visited Lima.

In May 2013, the Peruvian Mines and Energy Minister Jorge Merino visited Australia, and Peruvian Vice-Minister for Mining Guillermo Shinno visited Australia in May 2012 and again in May 2014. A delegation of seven Peruvian parliamentarians also visited Australia in May 2014 hosted by the Australian Parliament.

During 2008 when Peru last hosted APEC, a number of Australian ministers and senior officials visited Peru for meetings, including then Prime Minister, the Hon Kevin Rudd MP, then Foreign Affairs Minister, the Hon Stephen Smith MP, then Trade Minister, the Hon Simon Crean MP and then Parliamentary Secretary for Early Childhood Education and Childcare, the Hon Maxine McKew MP.


Last Updated: 1 August 2014