PERU - Economy
Executive Director & CEO, AmCham Peru
Aldo R. Defilippi is a PhD candidate in Economics at Boston University. He earned two MAs in Economic Policy and in Economic Development. He studied Economics at the Universidad del Pacífico in Lima, and attended the CEO’s Program at Kellogg’s Graduate School of Management at Northwestern University, Chicago. Since 2002, he has been Managing Director of the American Chamber of Commerce of Peru (AmCham Peru). He is Chairman of the Peruvian Cancer Foundation (FPC) and the Association of Binational Chambers of Commerce of Peru (ACCB), and a member of the board of directors for several private companies.
Peru’s development stems from certain factors. In the past we had a period of high inflation, strong devaluation, fiscal deficit, a dearth of foreign reserves, a balance of payment deficit, and very unstable macroeconomic figures. It was very difficult to predict what was going to happen. The country was characterized as a closed economy. In the 1970s the government owned almost every major productive activity, and there was a lot of protectionism, which led to consumers experiencing high prices and a lack of quality. In the 1990s the government began to change these conditions, introducing a stronger emphasis on stabilizing the economy. Secondly, it began to open up the economy. After that process began, no matter what government was in power, policies were stable and all the governments since that time have tried to maintain good macroeconomic indicators. Today, inflation is low compared to the rest of the world, especially compared with neighboring countries, and has stood at between 2 and 3%. Today, Peru has an open economy, with the opportunity of choosing between domestic or foreign goods. This has improved not only the quality of life for the consumers, but also the productivity of the country. The producer has the opportunity to import capital goods, technology, raw materials, and other inputs, to add value and export to the rest of the world in a competitive way. Over the past 30 years, Peru has started competing with other countries and exporting, which was not possible in the past. It is also interesting that, with the opening up of the economy, Peru started signing trade agreements with several countries, beginning with a free trade agreement with the US. After that, it signed agreements with Canada and the EU, EFTA, China, and more. I would say that 85% of Peruvian trade is covered by free trade agreements. Now it is part of the Pacific Alliance, which is a great initiative, and also the Trans Pacific Partnership (TPP) and APEC.
The consequence of macroeconomic stability and the openness of the economy has been predictability, which has been important for trade and investment. AmCham Peru has 5,000 representatives from 580 companies from all over the world, 30% from the US. For the Chamber, all companies operating in Peru are Peruvian companies. Some have US capital, others Peruvian capital, but all of them share the same environment, the same stakeholders, the same problems and benefits, and the same overall situation. They share good practices and experiences at the AmCham and we work with them toward the solution of some common issues. First of all we foster trade and investment, and we try to defend the interests of our members. In that sense, during the process of the negotiation of the first free trade agreement, we realized 18 missions to the US Congress and visited 351 Congressmen, Senators, and Representatives. On every trip, we took with us the general managers of US companies operating in Peru to visit their representatives and they let them know that the TLC was good for the US, for Peru, and for companies operating in Peru, American or Peruvian. The information that we brought with us was related to the import requirements or potential exports of their state, as well details on their companies that were operating in Peru in order to demonstrate that both parties could benefit. Today, we undertake about nine to 10 missions to fairs in the US, helping SMEs because, sometimes, they do not have the right knowledge regarding visas, customs, or language capabilities to set up appointments with potential buyers. In that respect, AmCham Peru is happy to help. AmCham Peru also receives missions from the US, covering all the segments of the economy.
The main challenge is to learn the country, the culture, and the availability of good or services. You do not usually engage in business immediately when you go to a country. The first step is getting to know the potential partners. The second challenge is to improve the institutions and to reduce the bureaucratic procedures, help businesses, investors, producers, and consumers. We have to make things easier. Third, we still lack a lot of infrastructure—Peru clearly needs more airports, ports, and roads. The country has developed greatly over the past 20 years, with an expanding middle class and reduced levels of poverty. However, as the country grows, it also needs better infrastructure, institutions, services, and qualified people. In summary, the country has developed, but still faces a long process with many challenges. It still has to fight to reduce poverty even further, but with stability and openness of the economy, we will be able to attract investment and create more jobs. It is a difficult process, but the results will be rewarding. The country has to continue doing the right things. Sometimes, politicians forget that the best way to fight poverty is by attracting investment.
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