Agribusiness to Peru

(Last updated: 09 May 2008)

Trends and opportunities

The market

Peru is divided into three main geographical areas; the arid coast, the Andes highlands and the Amazon basin. The coast is the agribusiness centre.

Peru has become major exporter in asparagus and an important player in other crops such as avocados. Labour and fertilisers are becoming costly and water is becoming scarce. Opportunities exist for Australian companies providing machinery, cost-effective fertilisers and irrigation solutions.

Crops such as artichokes and canola are now being grown in the Andes at altitudes of 3000m.

Aquaculture is also growing. Prawns, scallops and tilapia fish are being exported and trout farms are developing in the Andes but facilities can be greatly improved.

On the livestock front, traditional camelid species such as vicuna, alpaca, llama and guanaco require technical and technological assistance to improve the quality of their fleece. Protocols were recently approved for the import of greasy wool and alpaca fibre from Australia.

Peruvian farmers are also interested in importing Australian cattle and sheep for breeding purposes, as well as to develop their milking herd. (Sanitary protocols are being negotiated.)

There is room to develop a hi-tech fruit industry (eg. mango, banana, papaya, passionfruit, pineapple, lemon, orange, tangerine, etc) on the western slopes of the Andes (bordering the jungle) and machinery, genetics, and know-how will be in demand.

In the jungle lower lands reforestation with Indian Cedar is beginning and presents opportunities for Australian investors and producers.

Opportunities

Peruvian exports of tropical fruits, asparagus and avocadoes are booming but the big export producers are lacking additional services such as:

• Water management
• Packaging
• Processing (labour is becoming short and more expensive)
• Enhanced seeds
• Management know-how
• Fertilisers and enhanced nutrients (manure)
• Livestock – Australian livestock and genetics free of contamination and diseases have a competitive edge over imports from USA, Canada and Argentina. Since the Peruvian coast is desert, some Australian cattle are better suited to it than their New Zealand counterparts.
• Forestry, using and produce species like Indian Cedar (a five-year crop) as well as endemic precious woods such as mahogany, local cedar, etc.
• Aquaculture – scallops, artemia (small prawns to feed other aquacultures), or developing specialised crops for endangered species like paiche (arapaima gigas).
• Trout farms – plan to develop the industry on Lake Titicaca (Peru’s largest lake).

Once traditional crops are flourishing again; there is a possibility of joint ventures in sugar cane (to produce ethanol as well) and cotton (long fibre). There is scope to set up production in Peru and export to the USA and other countries with which Peru has treaties.

Tariffs, regulations and customs

With very few exceptions tariffs are nil in the agribusiness area. Peru is trying to build capabilities and is thus providing an incentive to foreign companies to come to the market.

Peru has bilateral treaties with its Andean neighbours of Ecuador, Colombia and Bolivia. Chile, Brazil and Mexico have a preferential custom duties treaty for some importing sectors.

Thailand has an FTA with Peru. Last year the USA-Peru FTA was ratified and being implemented. There are FTAs with China, Canada, Singapore, Mexico and Chile. Peru is initiating a feasibility study for an FTA with Australia in 2009.

Insurance and freight (CIF) on an item of A$100 attracting a zero per cent custom duty would result in an in-store/customs-cleared value of A$120 with all duties, taxes and demurrage charges paid. A nine per cent custom duty would mean a value of A$130 approximately while a 20 per cent custom duty, would be approximately A$150.

Peruvian value added tax (VAT) of 19 per cent, comprising a two per cent municipal promotion tax, is levied on the duty-paid value. However, the amount paid by an importer or to their local vendors, becomes a credit on their future payment for this tax.

Industry standards

Every shipment imported is required to have:

• Invoice
• Bill of lading
• Packing list
• Proof of insurance
• Inspection certificate for consignments valued at US$5000 FOB or more

The National Agricultural Sanitary Service is part of the Ministry of Agriculture and controls and supervises the sanitary condition of animals, fresh vegetables, commodities and raw imported agricultural and animal products.

All exports to Peru must follow established protocols in force between AQIS and SENASA.

It is critical that exporters of agribusiness products obtain all the necessary clearances prior to shipping and to ensure that originals of inspection certificates are included with the shipping papers. Failure to do this could lead to significant delays clearing Peruvian customs.

Marketing your products and services

Market entry

Visit the market. Austrade can help organise a visit program with the key contacts. Start with twice a year visits.

Search for a local representative or partner. Agribusiness is the domain of Peru’s wealthy families and therefore hinges on relationships and connections. Consider the following when approaching a potential representative:

• Contacts and coverage in the market
• Financial solvency
• Infrastructure to store and deliver products in good condition
• Marketing and promotional efforts. Experienced representatives know the complexities of the market and can effectively advertise and promote products and services with technical teams.

Exporters may need to consider the use of freight consolidators during initial shipments, as orders can be relatively small to begin with. While this will increase costs initially, freight consolidation from Australia via New Zealand may be possible is the export protocol for living species or by-products permits it.

Exporters compete on the basis of free on board (FOB) price and quality, so Australian exporters in this sector will face some freight differential disadvantages with competitors from North America and Europe, particularly with regards to airfreight.

Links and industry contacts

Agribusiness-related resources

Association of Citrus Producers of Peru – www.procitrus.org
Lima Chamber of Commerce – www.camaralima.org.pe
Ministry of Agriculture – www.minag.gob.pe 
National Agricultural Sanitary Service – www.senasa.gob.pe
National Society of Industry – www.sni.org.pe
Peruvian Exporters Association – www.adexperu.org.pe
Peruvian Foreign Trade Association – www.comexperu.org.pe