Peru has actively restructured its hydrocarbon segment, with a focus on increasing transparency. Nevertheless, the approvals process is still an arduous process and involves a number of disparate unconnected processes. While there is a long way to go, the Outlook remains buoyant, hence the Outlook Positive.
May 18, 2021
Americas - South
Oil and gas exploration and production (E&P) activities are conducted under license or service contracts granted by the Government of Peru. The Government guarantees that the tax law in effect on the agreement date will remain unchanged during the contract term.
Corruption continues to negatively affect Peru’s investment climate. Transparency International ranked Peru 101st out of 180 countries in its 2019 Corruption Perceptions Index. In 2016, Brazilian company Odebrecht admitted it paid $29 million in bribes in Peru, leading to investigations involving high-level officials of the last four Peruvian administrations and halting progress on major infrastructure projects, which continued through 2019. Odebrecht agreed in December 2018 to pay Peru $180 million in civil reparation. As of December 2019, the Brazilian construction company had paid $24 million in civil reparation. Social conflicts adversely affect the extractives sector in Peru, which accounts for over 15% of Peru’s GDP. According to the Ombudsman, there were 137 active social conflicts in Peru as of March 2020, of which 65 were in the mining sector. Extractive industries are a key draw of foreign investment. According to Peru’s Private Investment Promotion Agency (ProInversion), 23% of Foreign Direct Investment (FDI) in 2019 went to the mining sector, 20% to the communications sector, and 18% to the financial sector. Other destinations for investment included energy (13%) and industry (12%).
Source: ESRI, Heritage Index, HMG Foreign & Commonwealth Office, US Department of State, International Trade Administration, International Law Review, Ernst & Young, Wood Makenzie & OGA data.
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