1. Basic Facts and key Economic Indicators

2. General Economic Situation and Recent Economic Performance

3. General Political Situation

4. Economic and Trade Policies

Peru is committed to a multi-lateral trading system, with a focus on actively engaging global and regional markets through trade and investment. Peru is fully committed to open and free markets to continually improve its competitiveness. Active in both the regional and international community, Peru has successfully negotiated 14 free trade agreements (FTA) that have entered into force including: Canada, Chile, China, Costa Rica, European Free Trade Association (EFTA), European Union, Japan, South Korea, Mexico, Pacific Alliance, Panama, Singapore, Thailand, the United States, and Venezuela. Peru concluded negotiations with Guatemala that have not entered into force, and it is currently negotiating FTAs with El Salvador and Honduras.

Additionally, Peru is actively committed to multi-lateral and regional participation. A member of the World Trade Organization since 1995, Peru is also a founding member of the Andean Community, has a free trade agreement with MERCOSUR and other agreements within the framework of the Latin American Integration Association (ALADI). In total, Peru has 17 regional trade agreements in force with 52 countries. Approximately, three quarters of Peru's total exports and imports was with trading partners with which Peru has regional trade agreements.

In hopes of becoming the South American hub for trade with the Asia-Pacific region, Peru has joined the Trans-Pacific Partnership negotiations since 2009 with eleven other countries to strengthen relations within the Pacific Rim. Another more recent agreement with Mexico, Chile, Colombia and Peru in June 2012 created the Pacific Alliance framework agreement, which just recently officially entered into force. More extensive than even TPP, the Pacific Alliance commits to establishing an area of deep integration resulting in the free movement of goods, services, capital and persons between the member countries.

Overall, import duty rates in Peru vary from 0% to 11%, with the average duty rate at 5.78%. Value-added tax is levied on imports at the standard 16%. In 2014, exports from Peru were $37.8 Billion, which is an 8.12% decrease from 2013 exports. Imports totalled $42.2 Billion, resulting in a trade deficit of $4.8 Billion.

Summary of Perus Trade Composition

Major Exports 2014% of TotalMajor Imports 2014% of Total

Mineral Goods41.0%Machine Goods25.4%

Precious Metals21.7%Mineral Goods15.0%

Metal Goods9.0%Cars12.3%

Foodstuffs7.2%Chemical Products9.2%

Leading Markets 2014% of TotalLeading Suppliers 2014% of Total

Mainland China16.7%United States18.7%

United States13.8%Mainland China18.3%

Switzerland10.8%Brazil6.0%

Canada7.5%Ecuador4.8%

Source: UN Comex database.

In general, foreign investors in Peru receive the same legal treatment as local investors pursuant to the Law on the Promotion of Foreign Investment and the decree-law #662 of 1991. Under the applicable laws a majority holding interest in the capital of a local company is legal in Peru. Investment incentives generally consist of tax exemptions and low-cost financing. Foreign capital can be invested in all sectors of economic activity without prior authorization, with the exception of a few sectors, such as the press, or implantations in border zones. Mining, finance, communications, energy, and industry sectors comprise roughly 85.9% of foreign contributions. Spain is the largest foreign investor in Peru, with the United States and Great Britain not far behind.

5. Bi-lateral Trade and Investment Between Hong Kong and Peru

Peru does not currently have a Free Trade Agreement in place with Hong Kong but in 2008 signed a Cooperation Arrangement on Trade and Investment Facilitation in order to facilitate and promote bilateral trade in areas including exhibition and trade fairs, financial services, investment, tourism, rail, maritime and logistics transportation, and other measures. Intellectual property rights, customs and competition-related matters, as well as technical assistance and capacity-building in areas of mutual interests were also included in the agreement.

While no tax treaty or FTA exists between Peru and Hong Kong, Peru remains one of the premier investment opportunities in South America as it has implemented several investment and trade friendly policies. Foreign investors retain the right to receive non-discriminatory treatment when compared to the national investor and possess the freedom to conduct commercial and industrial activities and to perform import and export operations. Furthermore, investors retain the right to remit abroad profits or dividends, after payment of the corresponding taxes, and are free re-exportation of invested capital, whether from a sale of shares, reduction of capital or total or partial liquidation of investments. The Peruvian government has removed all red tape allowing for unrestricted access to domestic loans, under the same conditions than national investors and foreign investors can subscribe to Legal Stability Agreements with the State over investment in the country.

In 2014, total exports to Hong Kong from Peru exceeded $157.4 Million. This amount accounted for only 0.41% of total exports from the country and Hong Kong ranks 37th among Perus trading partners. Despite the low 2014 export value, this is an 83.9% increase in exports from 2013. Furthermore, this is contrasted by the relatively low amount of imports from Honk Kong to Peru. Peru is Honk Kongs 83rd ranked trading partner and in 2014 accounted for 0.04% of imports, totalling $16.8 Million. Overall, between 2010 and 2014 imports from Hong Kong have decreased by nearly 25.6% and between 2013 and 2014 by 11.7%. The chart below shows the resulting trade balance between Hong Kong and Peru over the four-year period.

Peru Merchandise Trade with Hong Kong, 2010-2014 (in Million US$)20102011201220132014% Change

2010/142013/14

Imports22.6 15.820.618.916.8-25.66%-11.11%

Exports 78.991.996.585.6157.499.49%83.88%

Trade Balance56.376.175.966.7140.6149.73%110.79%

Source: UN Comex database.

Perus principal imports from Hong Kong in 2014 included electrical machinery and equipment of HS Chapter 85 (US$3.05 million, or 18.19% share), printed books and newspapers of HS Chapter 49 (US$3.03 million, or 18.09% share), iron and steel of HS Chapter 72 (US$1.6 million, or 9.73% share) and plastics of HS Chapter 39 (US$1.4 million, or 7.77% share). However, of the top 10 imports 7 experienced significant percentage decreases.

Top Peruvian Imports from Hong Kong in 2014, in US$HS CodeCommodity Description20132014Change 2013/2014

85Electrical machinery and equipment 1,699,953 3,049,854 79.41%

49Printed books and newspapers 1,751,598 3,033,453 73.18%

72Iron and Steel 2,407,361 1,634,567 -32.10%

39Plastics 1,218,504 1,377,838 13.08%

84Nuclear reactors 766,468 748,846 -2.30%

83Miscellaneous articles of base metal 775,351 606,777 -21.74%

96Miscellaneous manufactured articles 941,824 584,583 -37.93%

48Paper and paperboard 847,394 564,068 -33.43%

91Clocks and watches and parts thereof 881,910 554,309 -37.15%

58Special woven fabrics 881,910 501,300 -43.16%

Source: UN Comex database.Despite import performance, Perus exports to Hong Kong have exploded in the past year. The most attributable was from high shipments of edible fruit and nuts of HS Chapter 8 (up by 134.29% to US$102.7 million), edible vegetables and certain roots of HS Chapter 7 (up by 785.77% to US$4.9 million), and zinc and articles thereof of HS Chapter 79 (up by 2249.80% to US$2.0 million).Top Peruvian Exports to Hong Kong in 2014, in US$HS CodeCommodity Description20132014Change 2013/2014

8Edible fruit and nuts 43,852,201 102,742,502 134.29%

3Fish and crustaceans 9,671,469 10,911,922 12.83%

61Articles of apparel and clothing 9,078,111 8,274,515 -8.85%

7Edible vegetables and certain roots 554,305 4,909,867 785.77%

85Electrical machinery and equipment 2,409,759 4,374,548 81.53%

74Copper and articles thereof 2,514,718 3,308,085 31.55%

41Raw hides, skins, and leather 2,008,799 3,160,752 57.35%

51Wool, fine or coarse animal hair 4,296,249 2,966,019 -30.96%

23Animal fodders 2,190,537 2,357,800 7.64%

79Zinc and articles thereof 85,470 2,008,370 2249.80%

Source: UN Comex database.6. Overall Trade Relations and Major Trade and Economic Issues of Interest Between Mainland China and Peru

Perus FTA with mainland China entered into force on 1 March 2010. Much of the impetus of the FTA was to meet Chinese demand for Perus vast minerals and other extractive resources which provide much-needed dynamism in local markets when other international markets are depressed. For China, Peru is an important source of minerals, primarily copper. The FTA also goes some way toward protecting sectors vulnerable to Chinese competition notably textiles and apparel goods which a valuable export for Peru. For Peru, increasing trade with China is a key way of diversifying the export economy toward an area of growing international and domestic demand. In 2011, less than one year after the FTA, China replaced the U.S.A. as Perus main trading partner. With the FTA duties on a range of mainland Chinese products were eliminated on the date of implementation or have since been reduced gradually over the five-year period since signing. The most notable reductions came with regard to: most fish and seafood; wood pulp; most toys and games; cellular phones; vegetable fibres, yarns and certain woven fabrics of HS Chapter 53; computers and parts thereof; certain electronic equipment; lighters; pencils; headgear; umbrellas; clocks and watches; urea; and laminated steel products. Duties on certain other mainland Chinese products, including pharmaceuticals and certain textile made-ups, are continuing to be phased out over a 10-year period. Peru was able to shield several sensitive products from any tariff elimination commitments, including: ballpoint pens, certain textiles, apparel and footwear and certain tools and miscellaneous articles of base metals. These sensitive products include a total of 592 tariff lines and account for about 10 percent of Perus total imports from the mainland. Likewise, mainland China did not provide tariff preferences to certain agricultural products and wood and paper products from Peru.Recently, China and Peru, in connection with Brazil, agreed to build more than 5,000 kilometers of railway lines which will connect the Atlantic and the Pacific with the aim of increasing the size and speed of trade with China. Furthermore, Peru is considered the leading location for Chinese mineral investment in Latin America, and Chinese firms hold around 30 percent of the countrys total mining investment portfolio. Chinese firms also have an important presence in Perus hydrocarbons and commercial fishing sectors, controlling roughly 40% of the production in Peru. These vast leaps forward are primarily due to the 2011 formation of the Association of Chinese Enterprises, with 43 members and support from the Chinese Embassy. In 2014, the Association had 61 members, and 120 Chinese firms were legally registered to operate in Peru, in mining and energy, telecommunications, machinery, agriculture, construction and commerce. China has been Perus most important trading partner in recent years, representing its single largest export market and second largest source of imports after the United States. Interestingly, since signing the FTA with China in 2010 Perus GDP has grown by nearly 67%. In 2014, Peru exports to China reached $7.03 Billion, or 18.57% of total export value from Peru. Peruvian exports to China remain largely primary goods, with four products copper, iron, lead, and fishmeal. Conversely, imports in 2014 reach upward of $8.92 Billion, which accounts for 21.14% of total imports.