Peru- A surprising opportunity for Israeli companies.

A political turmoil history

In 2000, the Peruvian people chose Alejandro Toledo, to become their President. His wife, Eliane Karp, born in Paris to a Belgian mother and a Polish father. During her youth, she volunteered different kibbutz, and in 1971 she moved to Israel, where she studied for her BA at Hebrew University, also becoming an Israeli citizen.[1]

In 2001, Toledo’s Presidency started with the mandatary taking pro-market measures. During his period, Peru’s economy experienced 47 consecutive months of growth with an average rate of 6% per year, and inflation averaged 1.5% (very low to Latin America standards) and with a 25% reduction in poverty[2]

After finishing his term, Toledo went to the US to become a visiting professor in multiple academic institutions as Stanford University and Brookings Institute. He also was a much-requested speaker at conferences, speaking about policies against poverty[3]. In 2011, he tried to be reelected for President but failed [4].

In the term of 2006-2011, the Presidency was held by Alan Garcia, who also was President for the period, 1985-1990[5]. Regarding his foreign affairs policies, Garcia worked mainly in the regional sphere and signed a Free Trade Agreement between Peru and the US[6]. Afterward, Ollanta Humala Tasso (2011-2016), and Pedro Pablo Kuczynski (2016-2018) were chosen Presidents, but they finished their terms without achieving any significant success.

In 2016, the Lava Jato investigation revealed an elaborate scheme of bribes implemented by Odebrecht, a Brazilian construction company, to pay politicians and parties in the region. According to the investigators, Oberdercht paid 29 million USD in bribes in Peru during the years 2005-2014 (Toledo, Garcia, and Humala presidencies).[7] In 2017, the Peruvian Government requested the extradition of Toledo, who was back then at the US and purchased a plane ticket to Israel. The Israel Ministry Foreign Affairs publish back then that Toledo won’t be allowed at the country until “his matters are settled in Peru” [8]. Finally, he was detained in 2019 in California [9]. In April 2019, the local police tried to arrest the former President Garcia, also accused of bribery in the case, but he suicide before the arrival of the policemen [10]. The last two presidents of Peru were also detained in this case, accused of money laundering. Humala was arrested in 2017 , and Kuczynski (who was the Finance Minister of Toledo’s Government) was arrested in April 2019, [11].  

Israel and Peru Relationship

Peru and Israel have signed multiple bilateral agreements. For example, in 1962 and 1963, cultural and technical cooperation agreements were signed. In 2005 both countries signed a technological cooperation agreement. And every five years, a meeting between Israel and Peru MFA officials is held to evaluate the status of the relationship [12].

In 2003, Toledo visited Israel in the framework of a regional visit, which also included Jordan. He was welcomed by the President Kazav and PM Ariel Sharon and was a special guest at the Knesset. The purpose of the visit was to promote the Peru exportations to the country and to bring to Peru, Israeli technology mainly in agriculture [13]. He was one of the few Latin American leaders (including the Presidents of Chile and Uruguay) to visit Israel during that period.

In the photo, PM Ariel Sharon (L) meets with the Peruvian President Alejandro Toledo, during his visit to Israel in 2003. Credit: GPO

In 2006, the Peruvian Government declared the November 29th as the Israel-Peruvian friendship day[14]. Since then, every year, during the month of November, multiple events are carried to strengthen this friendship, including the promotion of bilateral academics programs [15].

In 2014, President Humala visited Israel and met with President Peres and PM Netanyahu. At their meeting in the PM residency, Netanyahu highlighted the cooperation in water and infrastructure ,and President Humala expressed his willingness to expand it to areas such as agriculture, education, etc.

During that year, 2014, Israel was accepted as an Observer State at the Pacific Alliance, a regional group conformed by Colombia, Chile, Mexico, and Peru. Following this, Israel opened two trade offices in Santiago de Chile and Lima[17]. And the economic relations prospered: in the last decade, the Israeli exports to Peru grew by 44%[18]. In 2018, Israel exported 79 million US dollars to the country. On that year, the Israeli import of Peruvian products is only 12 million dollars, but it rose by 41% from 2017[19]. Both sides expressed their interest in signing a Free Trade Agreement that, without doubt, will help to improve even more the bilateral relations [20].

Doing Business in Peru

Despite the political turmoil, the economy of Peru continued to show its good health. Since 2014, the average rate of growth is about 4%. The GDP, of the over 225 billion USD, is expected to become 298 billion by 2024 (it’s been growing around 2% each year) [21]. The country also enjoys a low unemployment rate (2.8%) [22] and inflation, which remained at 2% for the last years [23]. These numbers are promising, and Peru can be at the beginning of a revolution.

Lima, Peru
Credit: Hector Becerra [CC BY-SA (https://creativecommons.org/licenses/by-sa/3.0)%5D

Peru became one of the best countries to do business according to the Doing Business ranking for 2020. For example, at trading among borders, Peru scores better than the regional average (71.3 vs. 69.1). Still, the border compliance is costly (630 USD to export, 700 USD to import), even compared with other neighbor countries. But it does have a good credit system and an efficient property registration system [24]. 

Since 2016, the country has unique tax incentives for projects regarding technological development and innovation, giving over 100% of the return of the expenses. There are also special benefits for the development of agriculture, aquaculture, fishing ,and tourism at the Peruvian Amazon[25].

Opportunities for Cooperation

In 2013, the Peruvian Minister of Agriculture met and signed with the Israeli counterpart a declaration of interest to strengthen cooperation in agriculture projects [26]. In 2016, the Minister of Production Bruno Giuffra Monteverde discussed together with Israeli officials the possibility of forming a binational group to develop the technology and innovation field in Peru and to send some delegations to learn about the local ecosystem [27]

In this regard, and after following the Chilean model, in 2014, Peru opened Innovate Peru to help the development of a local innovation industry. The program formed different communities of startups, incubators, angels, and VCs. each year; the agency realizes a summit to promote the startups [28]. And during last year’s event, a special place was given to a speaker from Israel who spoke about the keys characteristics of the innovation ecosystem. 

 Most of today’s exports of the country are cooper related (around 25% of exports), and agriculture products (20% of exports) and there is a strong need for diversification. Israel can undoubtedly help Peru in multiple areas. For example, the Peruvian Government has already expressed its interest in Israeli technologies on water management, anti-desertification, and health technologies [29]. Other areas of cooperation and be clean energy, communication, disaster management, food tech, fintech, tourism, and many others.

The Peruvian economy is expected to blossom in the next years, and there are lots of opportunities for Israeli companies to join this success. For more information about them, do not hesitate to contact me at urielhiskin27@gmail.com

References

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