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 and Trade Office in Sydney.

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 32.1 million (2016). Spanish, Quechua and Aymara are the official languages. Roman Catholicism is the main religion, making up around 80 per cent and Evangelical Christians number around 12 per cent of the population.

Political overview

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 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 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. Regions hold political, economic and administrative autonomy. The metropolitan area of Lima, the capital city, is governed by a mayor, separate to the surrounding region.

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 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.

On 23 March 2018, former Vice-President Martin Vizcarra was sworn in as Peru's President. In his acceptance speech to Congress, Vizcarra said his priorities would be to work with the Congress to focus on education, health, security, regional and infrastructure development and fighting corruption.

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 isolated areas in the Southern Highlands, including San Martin, Huanuco, Pasco, Junin, Ucayali, Huancavelica, Ayacucho and Apurimac.

Foreign policy

Peru shares its borders with Ecuador, Colombia, Brazil, Bolivia and Chile. 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). However, Peru and Chile have been in dispute over territory. 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. In 2015, Chile and Peru entered into a new territorial dispute for a triangle of desert north/north-east of Punto Concordia, Chile. The case is yet to be resolved in The Hague.

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 (which Peru hosted in 2008 and 2016), IMF, the World Bank, the Union of South American States (UNASUR), the Forum for East Asia-Latin America Cooperation (FEALAC), Andean Community of States, the Community of Latin American and Caribbean States (CELAC), and the Pacific Alliance, for which Peru was the July 2015-July 2016 pro-tempore President. 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.

The Peruvian government has good relations with the United States, which is Peru's second largest trading partner. The United States and Peru have had a Trade Promotion Agreement [essentially a Free Trade Agreement (FTA)] in force since February 2009. In March 2013, the Peru-EU FTA entered into force.

Peru has FTAs with many countries including Australia, Chile, the United States, Singapore, China, Korea, Japan, Mexico, Panama, Costa Rica, Canada and the EU. Peru is a member of the Andean Community Customs Union and has signed partial preferential trade agreements with Cuba, Argentina and Brazil.

China and Peru established diplomatic relations in 1971 and a strategic partnership in November 2008. They have had a free trade agreement in force since March 2010. China is Peru's largest trading partner. Chinese investment is particularly growing in Peru's mining sector. Chinese-owned and Australian-managed mining company, MMG Ltd, operates the Las Bambas copper project in Cotabambas, located in the Eastern Andes (Apurimac region) of Peru. Over its anticipated 20-year mine life, Las Bambas will also produce gold, silver and molybdenum.

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. 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. Peru hosted APEC in 2008 and 2016. Australia and Peru are members of the Forum for East Asia-Latin America Cooperation (FEALAC).

On 30 June 2017, the Hon Steven Ciobo MP, the Minister for Trade, Tourism and Investment, announced the commencement of FTA negotiations with Peru as a member of the Pacific Alliance (Chile, Colombia, Mexico and Peru).

On 24 May 2017, Mr Ciobo and Mr Eduardo Ferreyros, Peru's then Minister for Foreign Trade and Tourism, announced the commencement of Peru-Australia Free Trade Agreement (PAFTA) negotiations. On 12 February 2018, Mr Ciobo and Mr Ferreyros signed PAFTA, which will eliminate tariffs on 99 per cent of Australian goods within five years of the Agreement’s entry into force.

In May 2017, Australia and Peru signed an Air Services Agreement and a Work and Holiday MOU. The Work and Holiday program started on 1 October 2017.

Australia also cooperates with Peru in the areas of water management (2017 MOU) and climate forecasting. 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 topics.

In 2011 Australia and Peru signed an MOU on political consultations and cooperation. In 2012 the two countries signed an MOU on development cooperation, in 2016 an MOU on education cooperation, and in 2017 an MOU on water cooperation.

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

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, when numbers emigrating from Peru to Australia grew into the hundreds-per-year. Australia's Peruvian community consists of around 8,500 Peru-born persons.

Institutional educational ties are strong and growing. Many Australian Universities (including Griffith, Canberra, Tasmania, Queensland, Adelaide, Macquarie, La Trobe and Edith Cowan) have agreements with their Peruvian counterparts. In 2017, there were 1,142 Peruvian students in Australian educational institutions. 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. Australia is now the most popular English-language destination for these scholars.

Peruvian students are eligible to apply for Endeavour Fellowships and Scholarships. To date, five scholarships and fellowships have been awarded to Peruvians to study in Australia. In 2018, 16 Australian students have been offered an Endeavour Mobility Grant to undertake a study experience in Peru, taking to 79 the number of grants since 2008.

Development assistance

Peruvians are eligible for Australian Award Fellowships. To date 54, fellowships have been awarded to applicants from Peru, which have given them practical training in Australia on a range of topics, including planning and implementing public private partnerships (PPPs), education policy, water resource management and sustainable mining..

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. 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. Australia's regional aid program has now ended, though some activities that have already been funded will continue until 2018.

The Australian Embassy in Lima manages a Direct Aid Program (DAP), which provides financial support to a broad range of projects in Peru, including community development projects and those designed to address challenges in vulnerable communities. In 2016-17, there were five DAP projects in Peru with a total value of $126,540. These projects focused on areas such as water and sanitation, assisting victims of family violence, and increasing self-employment amongst women.

Economic overview

At a glance

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

Economic outlook

Peru has been one of the fastest growing economies globally over the last two decades, substantially reducing poverty and income inequality through attracting international investment and promoting international trade. In 2017, Peru recorded a growth rate of 3.5 per cent, a slight decrease from 3.9 per cent in 2016. Unemployment has remained steady at 6.7 per cent and inflation dropped slightly from 3.6 per cent in 2016 to 3.1 per cent in 2017.

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 nearly 90 Australian companies now represented in Peru.

Australia and Peru’s total (two-way) merchandise trade was $435 million in 2016-17.  Australian exports totalled $58 million (including $11 million of prepared additives for mineral oils) and imports totalled $378 million (including $250 million of other ores and concentrates). Total trade in services was $211 million in 2016-17, including the export of education-related travel of $45 million. Australia’s investment in Peru totalled $563 million, primarily in mining, in 2016.

With PAFTA now concluded, Australia is currently negotiating with Peru as a member of the Pacific Alliance.

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 is estimated at $5 billion. Australia is the fifth largest foreign investor in Peru's mining sector.

Trade and investment

Australia's Trade Commissioner in Lima is responsible for Austrade's activities in Peru and Ecuador. Austrade helps companies take advantage of opportunities to export goods and services to Peru and assists Peruvian companies interested in investing in Australia.

Austrade priorities for Peru are mining, water, infrastructure, oil and gas, education, agribusiness and sports. Australian companies are already investing and doing business in Peru in some of these sectors 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 website.

Mining

Mining is vital to Peru's development and accounts for 12 per cent of Peru's GDP, 57 per cent of its total exports and 24 per cent of all foreign investment in Peru.

Mining revenues have largely financed the reduction in Peru's poverty rate from around 42.4 per cent to around 22.7 per cent in the seven years from 2007-2014. In 2015, Peru was the seventh largest mining producer in the world. It is currently the world's third largest producer of copper, zinc and tin and the fifth largest producer of gold. Peru has the world's largest reserves of silver and leads Latin American reserves in lead and zinc, second for copper and molybdenum.

Australian companies are playing important roles in the provision of goods and services and increasingly as investors. While larger miners such as BHP 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 (SMI) are actively developing relationships with Peruvian counterparts. SMI was instrumental in the establishment of Peru's Mining Centre for Excellence.

Peru's demand for energy is supplied by its abundant thermal and hydro resources, sourced from well-developed operations throughout the country. Peru will be seeking investment to further harness its hydrocarbon wealth to expand energy exports. In parallel, it will continue to develop its current low-base of non-conventional renewable energy projects.

Peru's gas sector is less well developed compared to the mining sector. There are a handful of Australian companies active in Peru's gas sector, including Karoon Gas and Woodside. Karoon has investments in offshore oil exploration activities. It is planning to conduct Peru's first ever deep water drilling exploration program and has identified potential resources which could contain up to 3 billion barrels of oil equivalent. Woodside owns a 35 per cent interest in an onshore block which is currently undergoing exploration activities. Last year, Woodside's partner Pluspetrol concluded seismic surveys in the Block.

Peru has sent its Minister and/or Vice Minister for Mining to Australia in the past few years to attend the Latin America Down Under (LADU) mining conference, held in Perth each year in May.

Every two years, Peru hosts a major mining Expo and Convention - Extemin and Perumin. 14 Australian companies participated in the Austrade-managed Australia pavilion at Extemin in 2017.

Agribusiness

A protocol between Peru and Australia on kangaroo meat is in place; as is an agreement on beef serosa. Ovine genetics can also be exported to Peru from Australia.

High-level visits

In February 2018, Peru's Minister for Foreign Trade and Tourism, Mr Eduardo Ferreyros, visited Canberra and signed the Peru-Australia FTA with the Minister for Trade, Tourism and Investment, the Hon Steven Ciobo MP.

In May 2017, Peru's Minister for Foreign Trade and Tourism, Mr Eduardo Ferreyros, visited Australia. During his visit Mr Ferreyros, met Australia’s Minister for Foreign Affairs, the Hon Julie Bishop MP, and the Minister for Trade, Tourism and Investment, the Hon Steven Ciobo MP.

In 2016, Prime Minister Malcolm Turnbull attended the APEC Economic Leaders' Meeting.

In July 2015, the Minister for Foreign Affairs, the Hon Julie Bishop MP, visited Paracas to represent Australia at the Pacific Alliance Leaders' Summit.

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

In January 2015, then Speaker of the House of Representatives, 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 then 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.

Last Updated: 4 April 2018